Cheese price war: Discount battle hits dairy farmers

A NEW front has opened up in the dairy discounting war, with supermarkets selling tasty cheese for $6 a kilogram, equivalent to 60 cents a litre for each of the 10 litres that goes into its production.

A NEW front has opened up in the dairy discounting war, with supermarkets selling tasty cheese for $6 a kilogram, equivalent to 60 cents a litre for each of the 10 litres that goes into its production.

While dairy farmers have railed against $1-a-litre milk sales, the latest battle is dragging local cheese suppliers into a spiralling discount war.

“We’re in the middle of a war zone,” one industry insider told The Weekly Times.

Woolworths is selling its own “phantom” house brand cheese — Hillview Tasty — for $6/kg, which it confirmed is sourced from New Zealand.

It takes 10 litres of milk to produce one kilogram of cheese, to which manufacturing, storage, shipping, packaging and retail margins must be added. The same 10 litres also produce an additional $1 of butter, whey and buttermilk powder. Big-name brand Bega has been forced to cut its tasty cheese price from $13 to $11 a kilogram and Australia’s iconic Coon tasty has been driven down to $9.90/kg.

Meanwhile, Coles is selling its Smart Buy cheddar for $6 a kilogram and its Australian Tasty for $7.50 a kg.

Murray Goulburn, which started supplying Coles house-branded cheeses last month, has discounted its own blocks of Devondale Tasty to $9/kg in Coles stores.

A Woolworths spokesman said its Hillview Tasty cheese had been specially developed and produced for the supermarket chain.

The Weekly Times asked Woolworths whether it made a profit on its Hillview cheese, but the retail giant declined to comment, simply stating the brand “represents great quality and value, and has been proving popular with customers”.

A Coles spokeswoman said: “We want to support Australian-produced cheese by making it more affordable for Australian families.

“Coles is investing millions of dollars in lowering prices by working with our suppliers and also working more efficiently to reduce our own costs throughout our business to invest in better value and service.”

Undera farmer Bart van Ruiswyk said the supermarkets were “crooks” for selling cheese so cheaply.

“Supermarkets have a lot to answer for,” Mr van Ruiswyk said. “You’ve got to ask is there a future for us?

“We’ve already had seven or eight farmers in my area who have stopped. Two or three because of age, others because of the low prices and mental stress.”

Farmer Power spokesman Alex Robertson said $6 a kg cheese made “$1-a-litre milk look positively generous”.

“We’ve been hoodwinked into the argument that supermarkets are not the problem, but clearly they are,” he said.

Even shredded cheese is being discounted. Both Woolworths and Coles are selling their shredded cheese brands for the equivalent of $6.79 a kilogram. Coles 700g tasty shredded and Woolworth’s Hillview tasty shredded are selling for $4.75 a packet.

A tonne of table-grade tasty cheese sells for about $5000-$5400 a tonne on the­ ­international market, to which freight, cutting, packaging and retail distributions and margin must also be added before it hits supermarket shelves.

A Murray Goulburn spokesman said retailers controlled retail pricing.

“MG supplies private label cheese to Coles and Devondale branded cheese to all retailers at margins which are acceptable to it,” the Murray Goulburn spokesman said.

“As can be expected, there is a swing to private label on the lower private label prices in the total market, however Devondale continues to hold volume in the branded market.”