Major Australian supermarket chains, including Coles, Woolworths, and Aldi, have cut their store-brand milk prices, sparking fears of a renewed “milk war” reminiscent of the 2011 price-slashing battle. The reductions have raised concerns among dairy farmers about their already tight profit margins, prompting industry leaders to voice apprehension about the sustainability of the dairy market amid growing scrutiny of supermarket pricing practices.
Major supermarket chains in Australia, including Coles, Woolworths, and Aldi, have recently slashed the price of their store-brand milk, reigniting concerns among dairy farmers about a potential resurgence of the infamous “milk war” that took place in 2011. This marks the first price reduction in over a decade, with Coles and Woolworths reducing their generic one-litre milk price by 5 cents to $1.55 per litre, while Aldi has matched this price, having previously set it at $1.60.
The price cuts have raised alarm among dairy farmers who fear that this strategy could further squeeze their already tight profit margins. Mark Billing, President of Dairy Farmers Victoria and operator of a 400-head dairy farm in Larpent, southwest Victoria, has voiced his concerns. He expressed that such pricing practices devalue dairy products and could lead many farmers toward financial ruin.
Both Coles and Woolworths assert that the reductions reflect savings passed down from milk processors rather than cuts to the farmgate milk prices they pay directly to farmers. A Woolworths spokesperson explained that any changes in farmgate milk prices directly influence the price they pay processors. Coles has echoed this sentiment, highlighting their direct sourcing model, implemented in 2019, which aims to ensure competitive and guaranteed prices for farmers.
However, the dairy farming community is wary that supermarkets are once again positioning milk as a “discount leader,” using it as a heavily discounted product to attract shoppers. In addition to the one-litre price cut, two-litre bottles have dropped from $3.10 to $3.00, and three-litre bottles from $4.50 to $4.35.
Australian Dairy Farmers, the industry’s peak representative body, has expressed deep concerns about the long-term impacts these price cuts may have on farmers, who are already struggling with tight margins and a challenging production environment. Billing has described the situation as “extremely frustrating,” emphasizing that these price drops add undue pressure to farm management and sustainability.
These price reductions come amidst growing scrutiny of supermarket pricing practices. The Australian Competition and Consumer Commission (ACCC) has recently launched legal action against Coles and Woolworths, accusing the retailers of misleading consumers with false discount pricing claims across numerous products. A recent ACCC report highlighted widespread consumer distrust regarding supermarket “sale price” claims, raising questions about the motives behind the current milk price cuts.
As these supermarkets maintain their commitment to “passing on savings” to customers, many farmers view this trend as part of a broader pattern of pricing instability that has plagued the dairy market since the $1-per-litre milk war began over a decade ago. Currently, dairy production in Australia is at its lowest level in 30 years, with an increase in imported dairy products further complicating the industry’s struggles.
Reflecting on the challenges presented by these pricing dynamics, Billing noted that while farmers are resilient, there are limits to how much they can endure. The ongoing devaluation of their products can be profoundly disheartening.
With the number of Victorian dairy farms having dwindled from over 7,400 at the start of the century to fewer than 2,800 today, the industry is at a critical juncture. Last year, 8% of Victorian dairy farmers exited the sector entirely, highlighting the increasing pressure on those who remain.
As Australia’s dairy farmers brace for what could be a revival of another milk price war, many are left questioning the sustainability of these supermarket pricing strategies and their potential impact on the dairy industry’s viability.
