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The Mad Butcher Dunedin owner and operator Tony Coulston said the retail meat chain had been selling a litre of milk for $1 since Monday.
In the first four days of the promotion, more than 2000 litres of milk had been sold from the Dunedin store, he said.
''It's absolutely amazing - it's huge.
''It's been going really, really well.''
The store was losing money on the promotion, he said.
''It is a significant loss leader for us, but our thoughts are that milk is a significant staple that all New Zealand families need.
''You hear on the news that [the price for] milk solids are down but it doesn't filter through to the consumer, so we are thinking 'Let's take a hit on it and let New Zealand benefit','' Mr Coulston said.
Mad Butcher stores around New Zealand are running the promotion.
The offer, for Cow and Gate 2-litre milk only, is valid until tomorrow.
Customers are limited to two 2-litre bottles per family per day.
Normally, a 2-litre container of milk at the Mad Butcher retailed for $3.65, he said.
Federated Farmers Otago dairy chairman Stephen Crawford said with a high payout price for milk solids, dairy farmers were paid 70c a litre of milk produced.
The recent forecast payout would result in farmers getting 50c a litre, he said.
''The high prices consumers pay in supermarkets are not going into the farmers' pockets.''
The milk price war was positive because it made milk more affordable for consumers, he said.
Foodstuffs public relations director Antoinette Shallue said some Foodstuffs stores had reacted to the competitive milk pricing, but the company had not taken a national position.
''We know that at $1 per litre we would be losing money, as it is well below our wholesale cost,'' she said.
Foodstuffs' brands include Pak'n Save, New World and Four Square.
A Countdown spokeswoman said some Countdown supermarkets in regions with Mad Butcher stores had matched the meat retailer's milk prices.