Milk wars

The Herald reports on a developing milk war:

The boutique grocery store that dropped the price of its milk to make a point has sold thousands of bottles at $1 a litre - and is now promising to keep milk cheaper than in supermarkets for the rest of the year.

Nosh Food Market chief executive Clinton Beuvink said he had an "amazing response" to his decision to drop the price of 2L bottles of milk yesterday by more than half, making them just $2.

"We have had so many emails coming through supporting our position...Twitter has been alive with people saying 'well done' and in terms of realtime sales we have probably sold twenty times more milk that we would normally sell," he said.

Mr Beuvink said he was making a loss of "well in excess of fifty cents" on each bottle of milk sold but was determined to keep prices at $1 a litre at least until the end of the month as a matter of principal.

"The more I see the more I lose but it's ok. I'm hoping I can sit down with our milk supplier before the end of the month and work out how I can get closer to that magic mark of a dollar a litre and keep to it. I'm committed to it.

I'm hoping in a year's time when we are still discounting milk hard that (the supermarkets) are compelled to really dig in - they are just ripping people off and it's just bad business."

Shelves had to be constantly refilled yesterday to keep up with demand at all six stores and Mr Beuvink was expecting the trucks in early today to restock.

"The guys at Goodman Fielder who supply us have just been brilliant. The guys who look after us are coming in twice a day to make sure we can satisfy all the customers are coming in."

This is a fantastic initiative by Nosh. And we doubt that the publicity being generated will hurt the emerging business at all.

And Nosh has some support; read on:

Mr Beuvink said he sold thousands of bottles of milk yesterday, giving him confidence smaller retailers could force supermarkets to chance their stance and drop their prices too.

"We are not a big player in the market place so if we can get those sorts of volumes...I just hope other smaller retailers chip in because I'd rather the customer goes and supports the smaller retailer and forsakes the supermarkets who have been ripping them off for ages."

And it appears other smaller stores are following suit, while some have already been offering cheap milk.

The store manager for discount supermarket Urban Surplus, Vanessa Terewi, said the Papakura outlet has been selling two-litre milk for $2, supplied by Goodman Fielder, since it opened about three weeks ago.

A smaller supplier had declined to supply milk to sell at a discount, she said.

"(They) won't supply us because we didn't agree to sell their milk at $2.90. It [discounting] undermines their pricing structure."

Undermining the dairy companies' pricing structures on milk seems to be just the prompt that they are needing. We doubt that it will be long before Foodstuffs and Progressive follow suit, even if it means that they have to cut their margins. But Nosh has thrown down the gauntlet to the supermarket duopoly.

We'll be making a few trips to Auckland during the course of the year. You can bet that we'll be working out where the nearest Nosh outlet is, and rewarding them with our patronage.