Arm yourselves, it’s a milk war
Put the shopping basket down and step AWAY from the dairy aisle. Admit it. You were about to buy the $1 milk weren’t you?
Why? Well, as the insidious Coles jingo bleats: “Because We All Buy Milk!” You were about to save a whole 75 cents a litre.
But you were also falling for one of the dirtiest tricks in supermarket history – a trick which is possibly threatening the viability of a major Australian industry.
It all started, ironically, on Australia Day, but let’s look at the aftermath.
South Australian Dairyfarmers’ Association president David Basham says anecdotal evidence suggests sales in generic supermarket milk have jumped 20-30 per cent in recent weeks.
Meanwhile, full-priced branded milk sales have slumped in equal proportions. But convenience store sales have fallen by as much as 60 per cent, no doubt because consumers believe low, low milk prices are worth a little inconvenience.
In the long term, what could this mean? Put crudely, it means the cow-poo could well and truly hit the fan.
Convenience stores will likely suffer and potentially close their doors, because milk is one of their biggest drawcards (“We All Buy Milk!”). Independent delivery companies will probably take a hit, because there’s no milk to deliver (Coles and Woolworths, of course, have their own truck fleets).
This in turn could hurt regional communities who rely on these smaller vendors for their deliveries.
But what about the dairyfarmers themselves, now the subject of a Senate inquiry into the milk war and its consequences?
In SA there are 306 dairyfarmers (down from 1730 in 1980, although total herd numbers have remained steady at around 100,000).
They supply four major milk processing companies. Two of those companies, National Foods (Pura) and Parmalat Australia, have the SA contracts to supply Coles and Woolworths.
Woolies and Coles insist farmers are protected from the price war because the major chains are copping the losses (insiders say it could be costing Coles as much as $60m, although you’d have to be naive to think they weren’t recouping these losses elsewhere).
And true, most farmers are currently protected by long-term contracts with processing companies which guarantee the price they receive (around 38c a litre).
But Mr Basham says crunch time will come in July, when many SA contracts come up for renewal.
That’s when the major processors (who, remember, are now suffering a major dip in demand for their branded products) could seek to rectify their profit margins by shaving the price paid to farmers.
And get this. World export prices are currently so healthy that farmers might simply start selling their milk to companies with large offshore contracts. Even in the short-term, this could result in milk shortages in Australia.
If world prices dip, the results will also be dire. Farmers hit with ever-lower prices for their product will go broke and, again, more milk shortages will ensue.
One federal politician has even suggested that Chinese milk processors (who have been buying our heifers to sate growing demand in China) could be waiting for a shortage before selling milk products back to us from our own cows.
The rich choice of milk brands we enjoy today will dwindle. Rural communities will feel the ripple effects as farmers walk off the land.
OK, so maybe this is all conspiracy theory stuff peddled by weary farmers and fretting politicians.
Maybe the band of British executives hired by Coles to claw business from Woolworths really are acting in the best interests of consumers and will ensure that primary producers are not collateral damage in this slimy supermarket war.
But I wonder if the 75 cents a litre you’re saving on home-brand milk today is worth the risk? And I wonder if you understand that one outcome is guaranteed…
Coles and Woolies, who already suck up 75 cents of every supermarket dollar spent, will one day be able to charge whatever they damn well want. Why? Because We All Buy Milk!
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