The Korn Group

  • Cheap milk is the Achilles heel of grocery chains

    • February 26, 2019
    • Neer Korn
    "The reality is that milk at $1 per litre is such an alluring proposition that it forces consumers into a moral dilemma."

    Let’s face it, perceptions of our two largest supermarket chains have never been enthusiastically positive. This is largely to do with resentment borne out of a duopoly having so much power and endless gripes about customer service, although these have diminished somewhat in recent times as store improvements have been made. The negative perceptions also have to do with their business practices and a sense that these huge corporations treat their suppliers, especially the little guys, very poorly.

    In any discussion of grocery shopping the topic of milk invariably arises. Australians have heard much about the plight of the Australian farmer and they have a soft spot for them. Stories and images of drought-stricken families forced off land they have held for generations or being treated in a heavy-handed manner by the banks – while financially vulnerable – tug at their heart strings. Of greatest concern and eliciting most sympathy are dairy farmers whom they believe to be screwed by the supermarket chains.

    The reality is that milk at $1 per litre is such an alluring proposition that it forces consumers into a moral dilemma. On the one hand there’s this incredible saving and a feeling of having won and beaten the system by paying so little for a staple. But on the other there’s the imagery and narrative about the farmers and how tough they are doing and how they cannot make a living with a price so low.

    Some consumers are adamant about buying branded milk allowing them to feel good for doing their part to assist the farmers and avoid a sense of doing wrong. Their consumption is guilt free. “I would be more inclined to buy branded milk to support Aussie farmers, but that’s only come about because of negative press about Coles and Woolies underpaying them,” said one participant. “I would rather pay $2 more for the pack of milk to support the local farmers,” said another.

    While consumers will readily express their ideals, concern for farmers and intent to incorporate ethical decision making in their grocery shopping, the truth is that not many of them do. There is an innate tendency to exaggerate positive behaviour and minimise the negative. It’s not outright lying but rather an internal mechanism to make us feel better about ourselves.

    While they will talk about buying Australian made, for example, it becomes clear that many consumers do care, just not enough to put their money where their mouth is. Other criteria are ultimately more important, like quality, taste, convenience and, of course, price. And for most consumers, other than those who seek out specialised brand, milk is milk, and any brand, or no-brand, will do.

    For those brands consumers hold in great regard negative stories are simply avoided. Out of site is out of mind. “Sometimes I do want to be in denial and be in my own little bubble and just pretend I’m not trashing the world with every purchase that I make,” said one young woman.

    Overall the segment of consumers that do care and are willing to pay more for ethical considerations is growing. Issues such as sustainability or treatment of employees hold greater interest. Much depends on how prominent an issue becomes and how much publicity it gains. Purchasing free range eggs, for example, has become the norm for many consumers, who could no longer imagine buying caged eggs. They are driven by a combination of imagery of chickens housed in unconscionable conditions and a self-consciousness about being seen to purchase caged eggs. Palm oil consideration is close to reaching a tipping point if it has not already. Those pictures of orangutans surrounded by a logged forest have had impact.

    Woolworths’ decision to raise milk prices in order to support the farmer is one consumers will wholeheartedly support, even if it involves a small personal cost to them. But there are two significant issues for Woolworths to overcome. Firstly, consumers will view their declarations of concern for dairy farmers rather cynically considering all that has transpired in the past few years. Secondly – and this is to raise consumer ire – is Woolworths decision to charge consumers for this sudden generosity to farmers and pass on the price increase to the consumers. The public consider that Woolworths makes enough profit and pay their executives too much money in any case and so they should bear the cost of their goodwill and not force the consumer to do so.

    For Coles and Aldi to hold out and not follow suit will not be a good look. It will remain true that the $1 sign in the diary section will reinforce the message of lower prices for both brands. But it will be tainted by the moral dilemma, and ultimately leave consumers not fully at peace with the choice they make.
    How long do you think it will be before Aldi and Coles follow the lead?