Woolies and Coles winning the milk war

The discount strategy has hurt branded milk sales.

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The latest data on customers’ purchasing habits for milk is in, and according to the survey conducted by Roy Morgan Research Woolworths (ASX: WOW) and Coles, owned by Wesfarmers (ASX: WES), are winning the milk war.

Woolies and Coles, which both now sell home-brand milk for around $1 per litre, have snared a significant share of the milk market at the expense of branded milk suppliers, particularly Lion-owned Dairy Farmers and Pura.

On Roy Morgan’s numbers, 44% of the milk sold over a four-week period in March-April this year was Coles and Woolies home-brand. That 44% was split equally between the two supermarkets.

Taking a look back to 2009, Dairy Farmers has seen its market share of milk sales decline from 22% to 16% and Pura has declined from 15% to 8% – these are alarming falls for parent Lion.

Over the same four-year period Pauls, owned by Parlamat, has gained 1% to 10% market share while new entrant A2 Milk, which is partly owned by Freedom Foods (ASX: FNP), has managed to snare 6% of the market.

While the Roy Morgan release didn’t single out Warrnambool Cheese & Butter Factory’s (ASX: WCB) market share, the dairy firm has an exclusive relationship with Coles to provide the Great Ocean Road Milk brand which could be working in the dairy firm’s favour given Coles’ improved market share of milk sales.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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