The Milk Wars: do I stand by my principles or my purse?

Frankly I’m appalled at the bum deal Aussies get on their groceries. I’m astonished that there isn’t more public outcry and that government hasn’t intervened to introduce some real competition and break the stranglehold of the Coles-Woolworths oligopoly. Australians are getting taken for a ride just buying a loaf of bread because, well, the Big Two can get away with it. Where else are the punters going to go?

In the UK there are the Big Four (sounds like some kind of 1970s IRA style terror cell or possibly a disco group): Tesco, Morrisons, Sainsbury’s and Asda. They vary in style and both real and perceived quality but they have one thing in common – fierce competition on price. I talked a little about this briefly in my very first piece for this blog, ‘Leaving London: 10 things I’ll miss about Blighty’.

Just to illustrate the point I did some quick online comparisons between Sainsbury’s, where I shopped in London, Coles and Woolies (incidentally, Coles and Woolies could really up their online game – crap user interface guys!). This isn’t scientific and I chose tomatoes, yoghurt and mince because a) I always buy them and b) two are fresh so must be made in-country and one is not so can be imported:

Home brand tinned tomatoes are 74c at Coles, 81c at Woolworths but 52c (33p) at Sainsbury’s.

Homebrand 500g plain yoghurt is $3.15 at Coles, $3.21 at Woolworths but $1.78 at Sainsbury’s (£1.12) AND it’s certified organic. Non organic yoghurt is 79c (50p). Neither of the big Australians even offer a homebrand organic option.

Homebrand 500g beef mince is $3.95 at Coles, $4.54 at Woolies and $1.54 (97p for 400g) at Sainsbuy’s, which doesn’t take into account the organic options available at Sainsbury’s nor the regular “two for…” reduced price offers.

I know, I know, this isn’t scientific or thorough and the Aussie dollar is charging away making mince meat out of the pound, so using the exchange rate is a bit iffy. But. But, it is true that groceries are disproportionately more expensive here in the Land Down Under.

Coles seems to be taking a leaf out of the UK’s book, which may be down to the fact that, as this Sydney Morning Herald article outlines, the three recently appointed management head honchos are Brits. Their opening salvo in what may be a wider price competition was the $1 Milk War.

However, I am rather torn between my general outrage at the dodgy pricing in Australian supermarkets and my food principles. I like to shop locally and seasonally and specifically aim to support smaller producers. So what to do: stand by my principles or my cruelly abused purse? It wasn’t this much of a dilemma in the UK, where I could buy British, organic and well priced groceries.

The reaction to the Milk Wars is divided between one group of consumers pleased with the saving and, in the other camp, producers, some politicians and another set of consumers concerned at the longer term impact on the milk industry in Australia. I like the saving and also agree with the concern about the milk industry. I don’t want to only be able to get UHT milk in a decade because Coles and Woolworths slugged it out back in 2011.

The same concern about the Big Four bullying producers and cutting their margins to unsustainably unprofitable levels has been had in the UK; even Prince Charles weighed in at one point.

It is perhaps unfortunate that milk has been made the sacrificial lamb (to mix metaphors). As that article in the SMH sets out, Australia is seen as something of a cash cow by some manufacturers and, even despite our low population, expansive geography and isolation, are apparently making more of a margin out of us than they are in densely populated Europe.

“I am a firm believer still that many of the multinationals today are still using Australia as a cash cow,” Durkan says. ”I have little doubt, when I look at the prices on the shelves of some of the big proprietary brands, and I look at the margin we make as a company, it can’t just be the cost of production and the geography of Australia. It can’t be … they make more margin out of this part of the world than they do out of Europe. You have got to ask yourself why would that be the case.”

So, it may well be morally wrong to use milk as the basis of a price war, given the potential damage that could be done to an important industry and its role supporting regional livelihoods, but I’m more than a little bit suspicious that we are being taken to the cleaners by our grocers. A full scale price war could be what’s needed to make sure Australian supermarket customers aren’t being taken for granted.

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3 Responses to The Milk Wars: do I stand by my principles or my purse?

  1. mimi says:

    at business school they said much better to have a regulated monopoly than unregulated oligopology and in Coles and Woolies case – duopoly! Supermarket prices in Oz are shocking and not surprised that we are paying higher margins. Interesting article, thanks for referencing that; seems like Oz is in trouble, price war or not.

  2. Thanks Mimi, glad to know I’m not the only one outraged!

  3. Here’s an interesting article on the impact of supermarkets in the UK. Brings in another element – the impact on independent stores
    http://www.guardian.co.uk/commentisfree/2011/may/03/supermarkets-kill-free-markets-communities?&CMP=EMCSOCEML657

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