Cows hero
10 July 2015

Opinion: Mystery of the milk price

The question of whether we pay too much for milk is back.

That infernal question of are we paying too much for milk has come up again. On the face of it we are. Last week you could buy a 2-litre bottle of milk from Coles or Woolworths in Australia for $2.24 and in the UK for $2.01. Here the online price for the same 2L of milk at Countdown was $3.19 ($2.77 excluding GST).

Prime Minister John Key argued the price war in the UK was causing high prices at home. There’s been a price war on milk in Australia for years. But does that really account for the significant price differentiation?

Consumer NZ tried in 2011 to uncover the cost chain from farmer to household. This was off the back of a survey that showed Kiwis thought we paid too much for milk and other dairy products.

We know the farmer hasn’t been getting paid more from selling milk at the farm gate for the past 12 months – the price is published regularly. It’s public knowledge the international prices at auction have been dropping for nearly 12 months. What remains deeply murky are the next steps.

Dairy giant Fonterra collects the majority of milk produced in New Zealand. It provides milk to its biggest competitor, Goodman Fielder and other processors. There are rules supposedly to make Fonterra more competitive but it’s doubtful they have much effect. It sells milk under the Anchor brand. Goodman Fielder sells milk under the Meadow Fresh brand.

We, among other organisations, asked the Commerce Commission in 2011 to look at the milk price to see if there was any gouging. The commission said then there was no need for a further probe into the milk market after it did a “preliminary analysis”. But that didn’t mean much as it only has a narrow set of circumstances in which it can look at the price.

The other players with a significant role in pricing are supermarkets. Fonterra and the two big supermarket chains, Foodstuffs and Progressive, blame each other. The consumer is left in the middle, none the wiser but paying high prices.

This is a shame as milk products are a staple part of our diet. As Labour consumer spokesman David Shearer pointed out, Coke is now cheaper than milk. That means someone is creaming it!

About the author:

Sue Chetwin has been our Chief Executive since April 2007 after more than 25 years in print journalism. She was formerly the Editor of Sunday News, Sunday Star Times and the Herald on Sunday. She says there are strong parallels between consumer advocacy and journalism.

Sue oversees all of Consumer’s operations and is also the public face of the organisation. Sue is a director of the Banking Ombudsman Scheme, an alternate on the Electricity and Gas Complaints Commission and a member of the Electricity Authority Retail Advisory group.

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