Independent retailers fear getting dragged into the supermarkets’ price war on milk, following a week in which the multiples sought to outdo each other in a race to the bottom.
Last week started with Tesco slashing four pints of milk to £1 and ended with Nisa announcing a ‘two for £2 deal’ on 2ltr of own-brand milk in a bid to ensure its retailers “remain competitive and deliver on consumer expectation”.
All operators have pledged to fund the price cuts themselves rather than transfer them to their suppliers, although the NFU has warned that the price war could undermine the value of milk.
Nisa retailer Saki Ghafoor, who owns two stores in the North East, said the latest price war had taken him by surprise because he had expected the discounters to raise their milk prices. “It’ll make a big difference so we’re going to have to follow suit,” he said. “We’re stuck in the middle of a price war and all we can do is get involved. I don’t know who’s going to make any money out of it, though.”
He said the Nisa deal would make a difference with margins, although he had already implemented the pricepoint at his Ashington store. “We’ll start doing the Nisa deal at Gateshead, too.”
Spar retailer Peter Sichel, who owns two stores in Buckinghamshire, said he would have to reduce milk prices if the situation became “ridiculous”, but was reluctant to do so at the moment.
“If we react we’ll just watch our margins disappear on our most profitable product. We can’t afford to make that decision. But I’ll have to think again if everyone’s doing it,” he said. “If four pints for £1 becomes standard, it’ll have a big effect on milk volumes, plus our customers will think ‘this is ridiculous’ and transfer their loyalties.”
He said the multiples were fighting among themselves because they were losing business. “Online and convenience stores are the only profitable areas now,” he added.
Tristan King, who owns three Londis stores in Nottinghamshire, said: ”These are worrying times, especially as suppliers are putting up prices. I was quoted £1.12 for 2ltr units - I can buy it cheaper from a multiple. Now we can’t compete and have no margins.”
But Harj Dhasee, of Nisa Mickleton, Gloucestershire, said he thought the price war was a “flash in the pan”.
“I don’t think the price war will last long, though, as it’ll cost the supermarkets too much,” he added.
He said he didn’t plan to introduce the Nisa deal as “we don’t want to upset our local supplier”.
Race to the bottom
Sainsbury’s followed Tesco in cutting the price of four pints of milk to £1, while The Co-operative Food cut the price of one and two pints of milk from 50p to 45p and from 89p to 85p respectively. Morrisons then slashed its 2ltr milk from 97p to 84p, the equivalent of 24p per pint, although the price cut will not apply to its M Local stores.
The Co-op said it would “not be asking our British milk producer group to contribute to the price reduction”, while Tesco said its price cut would have no impact on the price it pays to the farmers in its Tesco Sustainable Dairy Group (TSDG).