A speciality grocery retailer's decision to slash the price of milk to $1 a litre has been praised by Federated Farmers for "kicking off a supermarket price war" - at least in one location.
Nosh Food Market, which has stores in Auckland, Matakana and Hamilton, lowered the price this week to raise awareness of high milk prices.
The price of a two-litre container of Cow and Gate Milk dropped by more than half to $2 and will be fixed in all six stores until the end of February.
Milk was a basic household commodity and should be available to all New Zealand consumers, not just those who could afford it, the company's founder and director Clinton Beuvink said.
Reports that one Pak'n Save supermarket had joined Nosh in selling milk for the same price supported Federated Farmers' view that attention needed to focus on supermarket margins, Federated Farmers dairy chairman Willy Leferink said.
Mr Leferink hoped it would be the first step in a wider retail milk price war between Foodstuffs, whose brands include New World, Pak'n Save and Four Square, and Progressive Enterprises, which operates Countdown, Woolworths and Foodtown supermarkets.
Nosh was doing more to open up competition at the retail end "than any narrowly focused inquiry" could ever achieve, Mr Leferink said.
"If Nosh's milk was priced in Australian dollars and didn't have the GST our milk attracts, it works out to be equivalent to A68c. Even Karori New World in Wellington is selling two litres of its budget milk for $2.99, as long as you spend $25 in-store.
"If you remove our GST and price that milk in Australian dollars, then it works out to be equivalent to $A1.01 per litre.
That's only one Aussie cent more than what Coles is selling its milk for in Australia. Milk Coles is spending a lot of money each week underwriting.
"But if you go to another New World in Wellington that same bottle will set you back $3.65. That's not only 22% more, but tells me that margins at the retail end are pretty healthy," he said.
People needed to support those outlets that were selling cheap milk. "The big supermarkets rely on being convenient but convenient doesn't make them the cheapest."
"The focus really needs to be on the supermarkets because if dairies can sell milk cheaper and a small supermarket like Nosh can sell it as a loss leader, surely Foodstuffs and Progressive can do the same."
Foodstuffs called the move by Nosh a "gimmick", saying lower-priced milk would mean the grocer would have to increase prices on products like meat and vegetables, TV3 reported.
Last year, Parliament's commerce committee, then chaired by Lianne Dalziel, launched a broad-based inquiry with an overarching question of whether people were paying too much for milk and whether the market was operating effectively at all levels, The New Zealand Herald reported.
According to Statistics New Zealand, the average price of a standard two litre bottle of milk in December was $3.67 - up 1.7% on December the previous year but 15.4% higher than in the same month in 2009.
The commerce committee of the new Parliament is chaired by Todd McClay and has until February 29 to decide whether to readopt the inquiry.
"The committee has not had the opportunity to consider the work programme as yet. We need to consider the advisability of pushing ahead with the inquiry at the time when the consultation and legislation is pending," Mr McClay said.
Submissions on the Government's proposed response to reviews of Fonterra's farm gate milk price setting and the raw milk regulations close on February 24.