Morrisons has angered farmers by offering four pints of milk for just 98p. The move follows Walmart-owned supermarket chain Asda dropping the price of four pints of milk from £1.18 to £1.
Morrisons is now selling milk at 2p lower than Asda. Rivals Ocado,Tesco, Sainsbury’s, Waitrose and The Co-operative have not dropped milk prices following the price war between Asda and Morrisons. All are offering four pints of milk for £1.18. Tesco and Sainsbury’s have a two for £2 offer on 1% fat milk.
Asda’s new ‘everyday low price’ replaces its previous promotion, ‘linksave’ offered two four pint bottles of milk for £2; this campaign ran for the past two years. The price decrease will not be passed on to suppliers – the retailer announced a 2p per litre rise to the price it already pays them – this measure brings the premium to 3p per litre. Asda recently introduced the low price strategy with some bread and butter products selling for £1.
The below competitor price monitoring image shows price comparison for four pints of semi-skimmed milk using Profitero pricing intelligence service: Ocado, Sainsbury’s and Tesco are all selling the product for £1.18. The three retailers are selling four pints of organic semi-skimmed milk for £1.69.
Asda’s farmers were recently informed of a 2p per litre price cut from Arla, the supplier of Asda’s own-brand fresh milk. There were angry reactions from dairy farmers on hearing of Arla’s price cut a fortnight ago. Farmers For Action have called for a reversal of the milk price cuts.
Morrisons currently pays dairy farmers 1p a litre above the price paid by Arla and Dairy Crest for fresh milk. The grocer had announced that it was reviewing its existing model as a result of the milk crisis. When the news broke, Morrisons was criticised by consumers and dairy farmers for not taking into account variations on farm costs of production, which impacts on farmers’ profits. The news of the 98p offer is sure to anger farmers further. Tesco and Sainsbury’s pay a price linked to dairy farmers’ costs.
© Profitero 2012
Other Profitero stories on supermarket low pricing:
Grocery Retailers Embrace The Pound Shop Pricing Strategy
El Corte Inglés Announces Low Pricing Strategy
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Pricing intelligence company Profitero works with retailers and manufacturers to help them increase sales and maximise their profits by using competitor price, promotions and stock information at scale. For more information on Profitero price intelligence and competitor monitoring, visit www.profitero.com or email email@example.com.