A thirst for information

Published 31 March 15

The AHDB Market Intelligence team has seen an upsurge in media enquiries since milk prices started falling, says Senior Analyst Luke Crossman. But while it’s important to encourage media interest in the current issues, we must not sacrifice accuracy for a good headline.

Many media enquiries can arrive with a preconception attached – that the situation under discussion has developed because of a single factor. Or will lead to a single inevitable outcome.

As most of us know, life’s not like that. As with the dairy markets, there are usually complex underlying factors – such as those that have led to the current ‘perfect storm’. For example, common misconceptions at the moment include that retailer power is wholly responsible for today’s milk price or that the exit of some dairy producers will lead to all British dairy cows being housed as it’s the only way farmers can make money. It’s important ‘pre-packaged’ stories based on the wrong premise are challenged robustly and the correct context provided.

However, it is good to know that we’re increasingly the data and market commentary provider of choice for many of the media outlets and as such, are in a position to make sure there’s clarity and accuracy. We are also providing facts and figures for information leaflets, to other industry organisations such as the NFU and to organisations that lobby or deal with policy such as the Dairy Supply Chain Forum. Other activities, for example, with the International Farm Comparison Network, give us global farm-level data and our annual survey work provides an insight into farmers’ attitudes and intentions – all of which is very helpful in today’s situation.

Do low retail prices increase sales?

As mentioned above, supermarkets are receiving much focus at the moment and a recent piece of analysis we carried out looks at whether the low retail prices for milk in many outlets has led to increased volume sales.

Major retailers started to drop milk prices in March 2014, which ‘appears’ to have prompted an upturn in milk sales. On the surface, this could be viewed as a positive move, in that more milk is being consumed. However, previous evidence suggests that growth in retail milk sales is predominately the result of population growth and that consumers do not buy more milk as a direct result of lower prices. 

Thirst

This can be seen from the last supermarket ‘price war’ in 2010-11, which did not lead to any significant additional growth in retail milk sales.

Closer examination of the picture in 2014 shows three key areas which have contributed to the faster growth:

  • The frequency of milk purchases has increased, in line with the general trend in grocery shopping towards more frequent trips to high street convenience stores
  • Whole milk sales rose by 4% in the 52 weeks ending 12 October 2014, which is likely to have been driven by the growing proportion of young children in the population
  • Volumes of skimmed milk sold rose 8.5% over the same period, with a 24.7% rise in the volume consumed by the ‘pre family’ age group.

So, milk is a fairly inelastic food and lowering prices will not increase sales. But as part of a basket of groceries, it is a staple that almost every household purchases and so it is vulnerable to being used in retail price wars and could lead to shoppers ‘switching’ retailer.