Aggressive price competition on four-pint bottles of milk has been a staple of the supermarket milk price war for years. But last week, Sainsbury’s opened a new front, choosing to cut prices on its one and two-pinters while keeping the price of its four-pinters unchanged.
It lowered the price of one pint of milk from 49p to 45p, and the price of two pints from 89p to 75p. The move was swiftly followed by Tesco, which this week also cut to 45p and 75p on its own-label one- and two-pinters.
It brings to end a long period of stability on prices of one and two pints of milk. Prior to the moves by Sainsbury’s and Tesco this week, prices in the supermarkets on one and two pints had not moved for more than two years. At the time of writing, Asda, Morrisons and Waitrose were still selling at 49p and 89p, respectively, though they have in the past tended to follow their rivals and experts believe further milk price cuts are likely. Wholesale milk prices have slumped recently (see below) and “the retail price can’t be fully divorced from the wholesale price,” says Hamish Renton, MD of consultancy HRA. A recent survey by Mintel suggests shoppers are prepared to pay as much as £1 for two pints, Renton adds, “but what shoppers do and what they say are different things”.
Indeed, Andy Clarke, Asda CEO and guest editor of The Grocer this week, says despite improvements in the economy, many families remain under financial pressure. “Shoppers are looking for products such as milk to be great value and we want to have as competitive as possible a price on milk. The price moves by other retailers over the past week show just how competitive things are.”
With prices at 45p and 75p, one and two-pinters in Sainsbury’s and Tesco are now in line with prices in the discounters. Iceland cut its two-pinters from 90p to 75p in October, Lidl cut from 79p to 75p in January and Aldi has been selling two pints at 75p since last November [Brand View].
While some have questioned whether low milk prices really drive footfall for the mults, Clarke insists following the discounters on four-pinters made a big difference to Asda.
“What we could see after discounters dropped their prices on milk is a drift in traffic, so for us being competitive on these KPIs is really important. We’re a value retailer.”
However, some experts have questioned Sainsbury’s rationale in lowering prices on one and two pints, which drive much less volume than four-pinters. “Is it what their customers are asking for?” says one. “It’s a really funny one. I’m not sure they’re saying the most important thing is the price of one and two pints of milk.”
This latest round of retail price cuts comes as farmgate prices continue to tumble, with Arla announcing a price cut price on Monday (29 June), followed by Müller on Wednesday.
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