The retail dairy market has been characterised over the last decade by an increased movement to own-label products combined with below-cost selling or loss-leading across the dairy aisle. The long-term impact of this pricing strategy has been to squeeze dairy margins to the bone, while undermining the nation’s bone health.

Liquid milk is an example of a product where 100% of the food and nutritional value is provided by the farmer and processor.

Of course, the processor also provides and pays for the in-store shelving and refrigeration of liquid milk.

Yet, the retailer controls the category and gets a large share of any profit on the product.

This abuse is not defined as dominance

The retailer also squeezes milk processors to provide “supplier supports” and increased own-label offering over time.

The impact is the replacement of the supplier’s brand with the retailer’s brand and an ever lower margin. Failure to comply means delisting or restricted listing.

This abuse is not defined as dominance, however, because a single supermarket chain is not dominant as defined by competition law.

The Competition Authority view this process as driving efficiency or supply-chain consolidation.

Jobs

Meanwhile, jobs are lost, value is destroyed and, ultimately, access to nutrition is undermined.

The substitution of liquid milk by plant juices, which have 20% of the nutritional value but retail for four times the price, amplifies the problem.

These products are introduced into a liquid milk chill (even though they are ambient products) which has been paid for by the milk processor and dairy farmer.

The retail liquid milk market in Ireland is currently valued at €550m

Over time, as these products displace dairy (because the supermarket will replace low-margin products with higher margin substitutes), the consumer will pay four times the price for 20% of the nutrition.

The retail liquid milk market in Ireland is currently valued at €550m.

This assumes that through substitution, consumers will pay at least €2.2bn to switch to plant juices for 20% of the nutrition and then spend even more money on nutrient supplements.

On top of this, the dairy sector is being asked to incur more compliance and certification costs at a time when this pricing policy is being carried out by retailers.

If supermarket buying power and dominance continues in an unregulated fashion, both access to nutrition for consumers and access to the most climate-friendly sources of nutrition will continue be undermined.

The current pricing regime does not provide a return on investment to processors or farmers

Under this strategy, not only will new climate change-assured products be sold below cost, a cheaper supermarket own-label version will soon undermine any success the new product has had.

Clearly, the current pricing regime does not provide a return on investment to processors or farmers.

Nor is it capable of delivering on consumer demand for climate-friendly sustainable food production.

A serious approach to climate change and nutrition requires a change in direction and a recognition that a regime dominated by below-cost selling and loss-leading is not fit for purpose in terms of action on climate change or access to nutrition.