The Coles Supermarket inspired milk price war seems to have captured the attention of the Federal Parliament as well as the media. $1 a litre for home brand milk and all of a sudden the dairy industry is up in arms about how much money this could cost them. Really? Its not like Coles or Woolies actually own any cows and they ain't going to import the milk.
The major suppliers of milk to the supermarkets need to pull their head in. Particularly when you understand that they just negotiated a generous 3 year deal with the supermarkets. Prices for dairy farmers aren't being squeezed. What is being squeezed is the fat margins the suppliers have enjoyed on their own branded products. With a move to home branded products, that leaves the skinny milks and the REV's losing market share. Remember that the same people who make the branded products also make the home brand being sold for $1 a litre. So if you have a problem guys, don't make it. Problem solved.
Meanwhile Coles claim that their $1 milk isn't a loss leader - a product sold at a loss to get you in store to purchase other items with strong margins. Id be surprised if it isn't a loss leader, but even if not, with all the advertising the margins would have to be very small.
At the same time, while we are all looking elsewhere, Coles and Woolworths/Safeway have raised the prices on other items. Ive personally seen a number of my regular purchases go up in price in the last 2 months. Some small, some as much as 30%. So while they claim that "down down prices are down", it only applies to some items. And "staying down"? Yeah, until when? Whats the end game strategy when prices go up - and they will. These supermarket wars will end at some stage.
And then we have product range. Anyone else noticed how limited the range is at Coles these days? By all accounts they have slashed the range of products on offer by more than 25% in the last year. An item i purchased there 2 weeks ago - an Arnott's product no less - was not available a couple of days ago. Shelves are being stacked full but the range is much less. So bad it was almost like shopping at a milk bar. So far as i can tell, Woolworths haven't followed their lead. Time will tell.
About Just Grumpy
3 comments
All power to Coles.. keep pushing suppliers hard and get a better deal for consumers. For to long consumers in Australia have been help to ransom by big business like National Foods who made a profit this year of $99m. We need lower prices and greater competition. The fact that we have one 1 national milk distributor in Australia is a shame and hence we need Coles to push the consumers angle.
Coles and Woolworths will temporarily cut costs, bankrupting their competitors, then raise costs higher than before, minus competition. This is a net loss to consumers, but for short-term thinkers, it looks good.
Agreed James C. Until we find a way to break free from the monopolies that plague AUS, this will be a constant problem.
C.
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