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Auckland-based specialty grocery retailer Nosh has signed a bottling agreement with organic dairy farm Green Valley.
Nosh hit the headlines in February when it slashed the price of milk to $1 a litre to protest against what it described as excessive industry mark-ups.
Last month, Nosh founder and director Clinton Beuvink said it was time for Nosh to think about bottling its own milk and the company was actively looking for a business partner to do that for the chain.
On Wednesday, the company announced Mangatawhiri-based Green Valley would bottle milk under the Nosh Essentials own-brand label.
It will be available at all six Nosh food market stores from April 16, retailing for $2.49 a litre.
Green Valley produces a wide range of milk, including organic milk.
It is the largest privately owned organic dairy farm in New Zealand.
In a statement, Mr Beuvink said milk was finally more affordable for New Zealand consumers on an ongoing basis.
Nosh initially reduced the price of milk to $2 for two litres until the end of February, later extending it until the end of March, after receiving wide consumer support.
The company's decision to sell two litres of milk for $2.49 exposed supermarket "home brand" milk margins of well over 40%, Federated Farmers dairy chairman Willy Leferink said this week.
"I know of two Wellington supermarkets selling two litres of the same "home brand" milk for $2.99 and $3.65 respectively.
Using Nosh's permanent pricing reveals margins of between 20% and 46%.
"Business people need to make a living and supermarkets are no exception. But it really irks farmers to get the blame for high retail prices, when the supermarket margin on a litre of milk is almost what I get paid for producing it in the first place," the Ashburton dairy farmer said.
The focus of the primary production select committee investigating milk prices needed to look wider at why farmers often got the smallest proportion of the final retail price, Mr Leferink said.
"Nosh admits $2.49 for two litres is basically at its break-even point. At that price, though, farmers make a living and so does the independent milk processor involved.
"While Nosh doesn't turn a profit at $2.49, its pricing provides a yardstick by which to judge what margins other supermarkets run," he said.
Nosh deserved to be congratulated, as the company had focused attention where it had been lacking - supermarket margins and not the farm gate, Mr Leferink said.
• Prices of dairy products on Fonterra's online auction this week lifted 1.5%.
Average whole-milk powder prices fell 2.8% to $US3227 ($NZ3938.30) a metric tonne.