Consumer behaviour experts on why milk prices are so scrutinised

The extra dollop Esme on the Pauls Smarter White Milk ads is well remembered, but the variety of milk brands is causing headaches for consumers.

One of Australia’s best-known milk advertisements was first broadcast on commercial television in 2004.

And its comedic message is still recited by generations of shoppers into 2024.

You may remember it – a gormless-looking bloke walks into his local milk bar.

The shopkeeper, a woman who resembles Esme from A Country Practice, draws a deep breath and recites her timeworn list of lactose offerings.

“Low fat, no fat, full cream, high calcium, high protein, soy, light, skim, omega 3, high calcium with vitamin D and folate, or extra dollop?”

The befuddled shopper says: “Ahhh, I just want milk that tastes like real milk.”

Milk bar Esme hands him a bottle of Pauls Smarter White Milk and the rest is advertising history. Or is it?

Two decades from its original broadcast, the choice of milk types the Pauls ad parodies back in 2004 is if anything multiplied in supermarket refrigerators nationwide.

Dozens of milk types – including low fat, no fat, full cream, high calcium and high protein – mean there’s more variety than ever before.

But some of Australia’s leading consumer behaviour experts say that branding variety may be the key reason why so much attention is paid to the price of milk.

Data released by the Australian Bureau of Statistics last month confirmed Australians were paying less for milk in 2023 in real terms than they were in 1973, adjusted for inflation.

An analysis of ABS numbers by The Weekly Times shows spending on food dropped from 32 per cent of household expenditure in 1960 to 21 per cent by 1980, to finally settle at just 17 per cent today – mainly due to agricultural advancements.

A litre of milk that sold for 27 cents a litre in 1973, including delivery, which the ABS said should cost almost $3 a litre today due to inflation.

But supermarkets have cranked their house brand prices back to $1.60 a litre, some of the cheapest prices paid for milk in the western world.

Paul Harrison is a senior lecturer and unit chairman of consumer behaviour in the Department of Marketing at Deakin University’s Business School.

Dr Harrison told The Weekly Times that several factors are at play behind consumer concern over the price of milk, one of which is the dollar-a-litre era between 2011 and 2018 gave consumers unrealistic expectations of how much they should pay for milk.

But another factor he cites is variety of milk options available.

“Yes, milk is priced at $1.60 or $1.70 a litre and that is very cheap, compared to the 1970s or I’m sure, the time before the dollar-a-litre pricing,” Dr Harrison said.

“But the consumer just doesn’t see the cheapest priced milk in the fridge, they see all the prices that are on offer.

“The milk brands and types available in 1973 was far more limited than today. There was just full cream and possibly skim. Now, there are a huge range with added protein or it’s organic or it’s lactose free or it’s specially sourced.

“So the price window starts at $1.60 a litre but can be upwards of $3 or $4 a litre at the premium end and if you were buying a premium brand before and your cost-of-living pressures are growing, then you revise down what you’re willing to pay for milk.”

A supermarket survey of milk prices conducted by The Weekly Times in December 2023 found two litre milk bottles were priced from a minimum of $3.10 to a maximum of $7.30.

The cheapest two litre bottles on offer were Aldi, Coles and Woolworths generic milk bottles – all at $3.10.

At nearly double the price were nutrition-specific milk products such as Norco Organic ($6.00), Norco Pure Jersey ($6.00), East Coast Sustainable Dairy ($6.45) and Hunter Belle Unhomogenised ($6.60).

Ironically, given its long-running advertisement satirising specialty milk, Pauls had several of the highest priced two litre bottles on the market with its Zymil Low Fat and Zymil Gluten and Lactose Free both priced at $6.80.

The milk brand with the highest price has arguably been one of the most successful marketers in recent years – New Zealand processor A2 – with it's Light Milk priced at $6.90 and its Lactose Free topping $7.30.

All three supermarkets noted a variety of milk types offered Australian shoppers the option of buying at a price point that was convenient to them.

An Aldi spokeswoman said: “In over 20 years of operation in Australia, we have consistently delivered on our ambition to provide Australian shoppers with high-quality groceries at affordable prices.”

A Coles spokesman said: “At a time when cost of living pressures are mounting for many customers, Coles is committed to help Australians with a range of value campaigns to support customers in tough economic circumstances.”

A Woolworths spokeswoman said: “Australian consumers are savvy and shop across multiple retailers to get the best deal. We will continue to compete vigorously on value to attract and retain customers.”

Dr Harrison said while the basic grocery basket of 1973 may have been cheaper, the extraordinary variety on offer to the average Australian shopper meant the price spectrum was far wider than a generation ago.