Archive: Is the price comparison between milk and water hiding a bigger point?

Published 22 January 15

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As farmgate prices continue to come under pressure and with the on-going ‘retail prices wars’, many have been comparing the price retailers are selling milk to water. However, is the price comparison between milk and water hiding a bigger point?

A large number of the figures quoted exclude the vast majority of both markets as they usually are comparing branded water with 4 pint non-branded milk. Comparing prices in this way can be misleading. As the graph shows, if we take the branded and non-branded weighted average prices for both water and milk sold by retailers we can clearly see that, in both cases, milk is sold for more than water.

Milk/water comparison 01.15

Leaving price to one side, the comparison between retail prices for milk and water (sometimes also with fizzy drinks, juices and even alcohol) could also be misleading due to the nature by which these products are consumed. Milk is largely purchased for pouring on cereals, having with tea/coffee, as an ingredient or to quench thirst (mostly at home). Water purchased from retailers, on the other hand, is primarily used as a convenience product to consume ‘on the go’ or as a substitute for tap water.

The bigger point

However, if we distance ourselves from the price comparison is there something the dairy industry can take away from the water market? Companies have been successful in branding water, a product consumers can readily get from a tap. The branded water market share is around 40% and has been increasing over the years. Branded milk however, accounts for only 15% and has been falling. Brands are one way to add value to a product and allow the company (and farmers) to push a particular message to consumers. In a number of surveys, some consumers have said they are prepared to pay more for milk if that means farmers see a better return. Is there a better, more effective way of doing this - e.g. processors working with farmers to create recognisable brands or innovating products that add value to an already great product? However, building a brand does take time and investment meaning it cannot be viewed as a short-term solution.