Cost of milk slashed in Britain over Supermarket price war - Cowsmo

Cost of milk slashed in Britain over Supermarket price war

A price war between Britain’s biggest supermarkets looks set to break out with Tesco today firing the opening salvo by slashing the cost of milk.

According to today’s Daily Telegraph, the country’s biggest supermarket chain is cutting the cost of four pints of milk from £1.39 to £1 in a move that will increase the already fierce competition between the UK’s “Big Four” food retailers.

The reduction means Tesco is breaking ranks with Sainsbury’s and Morrisons on the staple’s price, and is joining Asda, which has sold milk at £1 for more than a year.

Tesco denied that the reduction was the start of a price war and said the cut was the latest part of its campaign to “focus on everyday low prices on the products that matter most to our clients”.

Last week, it reduced the price of carrots, tomatoes, onions, peppers and cucumbers. Tesco calculates that with the addition of making milk cheaper, many customers will save £100 a year on their grocery bill.

The price cut is part of the £200m Tesco chief executive Philip Clarke is investing to win back shoppers after the supermarket last week revealed it was abandoning its industry-leading target of a 5.2pc profit margin. In a presentation to investors and the City, Tesco said the industry’s pricing had been “too volatile for too long” and that it wanted to move away from confusing promotions to simply offering lower prices.

Tesco said that cutting the cost of milk in its stores would have “no impact” on what it pays to 650 dairy farmers who supply the business.

However, the prospect of a price war has caused fear in the wider dairy farming industry, with concern that major buyers could apply pressure.

James Badman, a Farmers for Action regional co-ordinator who has a herd of 150 Holstein Friesians at his farm near Wells, Somerset, said: “I’m worried. Milk is a staple, perishable product that gets consumers through a supermarket’s doors, so although they say this won’t affect producers, I’m sure supermarkets will all be looking at their margins.”

He added the cost of milk has failed to keep pace with other products – a factor which contributed to farmers blockading milk plants two years ago.

“It wasn’t that long ago a loaf of bread, a pint of beer and a pint of milk all cost the same,” Mr Badman said. “Now look at the difference.”

The National Farmers’ Union has been campaigning for dairy farmers to be paid more and is concerned by Tesco’s price cut.

“Dairy farmers get paid about 17p a pint at the farm gate,” said an NFU spokesman, adding that many dairy farmers have been producing milk at a loss for several years. “Over the past 18 months or so we’ve seen the gap between what farmers get paid at the farm gate and what the cost of producing milk is closing, which has been encouraging. This [Tesco’s price cut] is not good news for the industry.”

Source: Smallholder

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