Added value or added cost - the great milk price debate

It’s no secret that milk has become a key battleground in the price war; prices have plummeted by 23.4% over the last five years from an average price of £1.28 to 98p for four pints [Kantar Worldpanel].

It’s surprising then to hear that more than half of consumers are willing to pay more than £1 for four pints of milk, according to research released by Mintel this week. In fact, the 1,270 milk drinkers surveyed claim they are willing to pay £1.28 – the same price they paid five years ago.

This begs the question: is it realistic for retailers to remove themselves from the price war, on this commodity at least, and raise prices?

I’m not convinced. What shoppers say and what they do are very different. Sure, in an ideal world we’d pop down to our local farm shop to pick up sustainably sourced produce at a fair price from a rosy-cheeked farmer’s wife, but in the real world consumers are after convenient products at low prices. And the supermarkets know this.

In short, when it comes down to it, I doubt consumers are willing to put their money where their mouths are. Not for bog standard milk anyway.

The Grocer’s own research – released last week as part of our ’10 things you need to know…’ series – suggest shoppers are much more reticent about spending more on milk. Some of us are indeed prepared to pay more for milk on the provision that it has been fortified with vitamins, minerals and other functional ingredients.

Our exclusive poll, conducted by Harris Interactive, found that 44% of consumers polled would be interested in buying such products and a staggering two thirds would be willing to pay more than they do for standard milk – but not that much more.

Only 1% would consider paying 50% more (around £1.33 for four pints based on current selling prices of 89p) but promisingly a quarter of respondents would cough up 10% more (making it 98p) for enhanced milk while 37% would pay 5% more (93p).

However, just over a third claim cheap prices and good deals would encourage them to buy added value milk. It’s worth noting that Arla’s Big Milk, added-value milk for toddlers, is currently retailing at £2.25 for 2l.

While brands and retailers might be able to charge more for added value products, I’m not betting on an end to rock bottom milk prices any time soon.

You can read our full Dairy Report here.