According to DairyCo, the per-litre price of a four-pint bottle of own-label organic milk has fallen by 10p and now stands at 66p per litre on promotion the average price that standard milk was sold at before the price war.
Because of cuts on standard milk, organic milk has also maintained its price premium over standard milk 50% at present.
This had left organic producers between a rock and a hard place, said DairyCo senior analyst Julie Macleod. Earlier this year, a report by organic producers' association Omsco had identified high price premiums as a key barrier to consumers buying organic.
At the same time, producers needed to be paid a higher price than standard milk in order for the organic model to stack up.
"The market dynamics have changed very quickly and it's not yet clear where organic milk goes from here," she added.
Omsco sales and marketing director Richard Hampton agreed premium over standard milk was important but added many consumers tended to overestimate it. "Continuing to build consumer awareness will be crucial," he said.
Beyond organic, the premium typically commanded by flavoured milk brands has been eroded through recent offers that have brought brands into line with own-label flavoured milk. For example, Tesco has been running 2-for-1 on 500ml bottles of Frijj (normally £1.10 each), selling the Dairy Crest drink at close to the same unit price as its own-label flavoured milks (100ppl). There have also been significant price cuts at Asda, which has reduced its price for Frijj to 55p per 500ml bottle a ppl of 110 [mySupermarket.co.uk].
"What seems to have happened is that the focus in the price wars on ordinary milk seems to have spread," said Macleod.