News

On Friday, Lidl reduced the prices of its own-brand milk range, claiming to be the first grocery retailer in Ireland to cut the price of the product since 2023.

It’s not a major reduction, one litre of Lidl’s milk is now 6c cheaper, with the price of a two litre container coming down by 10c.

The move was repeated the following day by fellow German retailer Aldi (€0.06 on one litre of milk, €0.10 on two litres).

All of the major supermarkets watch each other extremely closely when it comes to price and adapt quickly to any adjustments by a rival.

So, it was no surprise then when yesterday Tesco confirmed an almost identical price drop on its own-label milk products.

Bringing the price of two litres of milk down from €2.45 to €2.35 isn’t going to send shoppers into a frenzy and create massive queues in the chilled goods aisle, but it is symbolic.

Questionable short-lived promotional tactics aside, all we’ve seen in recent years is food prices going up and up.

Latest figures from the Central Statistics Office last week showed food-price inflation in the year to September rose by 4.7% (well above the general inflation rate of 2.7%).

Outside of meat (+11.2%), dairy products such as milk (+13.5%) have seen some of the biggest price jumps in the last 12 months.

As have other popular consumer items like chocolate (+14%) and coffee (+10.5%).

The retailers know the hikes are hurting consumers, but ultimately any price changes will likely be driven by the businesses’ bottom lines.

And the traditional supermarkets (Tesco, Dunnes Stores, and SuperValu) are all too aware of a trend of their low-cost rivals eating into their long-established market shares.

Industry figures from September compiled by Worldpanel suggest Dunnes Stores and Tesco are still the dominant players in the market – each with a share of just under 24%.

SuperValu is next on 19.5%.

Then comes Lidl with a 14.2% market share, but the figures indicate the German retailer has the fastest growth of any supermarket (9.5% in the 12 weeks to 7 September).

Aldi holds a 11.6% market share (up 4.7%), while at the same time Worldpanel says Dunnes’ sales growth is slowing year-on-year.

Clearly the sustained increase in inflation has changed shoppers’ habits and more of us are shopping at Lidl and Aldi than in recent years.

And the Germans are talking a big game regarding more potential price drops.

Lidl said lowering milk prices is “part of a wider series of price reductions coming into effect on everyday essential items”, while Aldi said it will “continue to review the market on a daily basis to ensure it remains the best value retailer on price”.

If they do end up making more products cheaper, the likes of Tesco’s ‘Aldi Price Match’ promotion would likely see many of those moves matched.

The potential for a price war among retailers can only be good for consumers, but with margins tight across the entire supply chain it will be worth keeping an eye on who’s paying for any reductions. Will the supermarkets absorb them and sacrifice some of their profit margin, or might they squeeze suppliers instead?

In the case of the milk-price reductions, they come amid strong global milk supply that has seen co-ops reduce the amount they are paying dairy farmers per litre.

So, it’s questionable how much of a hit the supermarkets are taking when reducing their own milk prices.

Nonetheless, all eyes will now be on the other major grocery retailers – notably Dunnes Stores and SuperValu – to see if they follow the lead of the others and make their own milk a little cheaper.

The hope is this might trigger battles on price across other essential food staples that aren’t just short-term promotions but become long-standing reductions.

Article Source – Have the low-cost retailers fired the opening shots of a grocery price war?

Copyright and Related Rights Act, 2000