Relations sour over prices for own-brand milk
A serious power struggle has erupted between milk processors and the country's leading supermarkets over the price of own-brand milk.
Both Lidl and Tesco have rowed back on a decision to increase the price of their own-brand milk to 169c for a two-litre container.
Lidl have cut the price of their two-litre own-brand milk to 149c, while Tesco are now offering a pair of two-litre packs for €3.
The price of own-brand milk was increased to 169c for a two-litre pack by three retailers – Lidl, Musgraves and Tesco.
However, this move was undermined when Aldi and Dunnes Stores held at 149c.
With Tesco and Lidl having moved back down to 150/149c, there is mounting speculation that Musgraves – who own SuperValu and Centra – will also cut their own-brand price.
Industry sources described the relationship between the processors and retailers as "poisonous" at the moment.
It has been suggested that Glanbia threatened to stop supplying Musgraves if they didn't receive an increase in the price paid for milk supplied for the retailer's own-brand label.
However, both Musgraves and Glanbia declined to comment on the matter. While any move by Musgraves to cut its retail milk price will be viewed with concern by processors, there is an acceptance that a cut is inevitable. Individual owners of Musgrave and Centra outlets are understood to be putting their parent company under intense pressure to cut milk prices.
"You can be out of line on the price of some of the fancier stuff but you can't be 20c off the mark when it comes to milk or bread," one dairy processor admitted.
He described the latest spat between the processors and retailers as "a pure power play", adding that the retailers had won this round "hands down".
One farmer source said the milk processors were really exposed at the moment.
"They are paying a premium for milk this summer because of the high manufacturing milk price but their margin is being eroded on the other side by the retailers," he explained.
Meanwhile, in other dairy sector news, Town of Monaghan Co-op has confirmed that it is holding at 37c/l (including VAT) for manufacturing milk for June supplies.
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