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Woolworths Group Limited (ASX:WOW) announced that it has decided to remove its least expensive offering of milk, $1 per litre fresh milk, from sale across the entire nation with effect from 19 February 2019. According to the company, this decision has been taken to restore the Australian dairy farmersâ viability and for the long-term sustainability of the entire dairy industry. This move has been described as a âgame changerâ by the dairy industry.Â
The price cuts had been introduced in the recent past where supermarket major Coles had cut down its own branded milk price to $1 per litre, igniting a price battle in the industry with Woolworths following the same path in order to stay in the game by offering $1 a litre milk.
The dairy industry was blaming the cheap milk for many years for the devaluation of its milk products which also lead to many dairy farmers going out of business. Â After the consultation with Industry bodies including Australian dairy farmers association, its state members and NSW Dairy Connect, the management came to know the extremely tough outlook that dairy industry might face in the near future across the country. After realising the damage that is being done to the dairy industry due to a relatively low pricing, Woolworths has taken a step to improve things for the dairy farmers and the industry as a whole.
In its pursuit of doing good, the company has also increased the pricing of their two offerings of fresh milk each by 10 cents. Now the new pricing is $2.20 per 2 litres of fresh milk and $3.30 for 3 litres of fresh milk. According to the Woolworths, it will be passing on the entire benefit of 10 percent to the farmers who are supplying milk in that category. This price increase would benefit around 450 dairy farmers who supply the milk to Woolworths. This is not the first time when Woolworths has realised its corporate social responsibility and acted upon it. Earlier in September 2018 Woolworths launched a special range of their home branded milk âDrought Reliefâ which included an additional 10 percent farmers levy that has so far raised $5.8 million in a few months. It helped the farmers who were hit by the drought which reduced the profitability by increase in the cost of inputs such as feed and water.
However, the Woolworths Groupâs CEO Brad Banducci also seemed equally sensitive towards the customers of the companyâs home branded milk and stated that âthis decision wasnât taken lightly, with customer budget pressures a consideration for Woolworths.â He also acknowledged that mere 10 cents are affordable and in fact less than the inflation. Moreover, considering the customers in mind, he confirmed the companyâs decision to not rule out another price rise in the near future.
In todayâs trading session, Woolworths is trading at higher levels as the stock price has edged up by 0.364% to trade at $30.350 on 19 February 2019 (12:29 PM AEST). Further, the stock has shown slightly positive performance in the last 6 months with a gain of 2.82%.
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