Gwyn Jones, NFU dairy board chairman, held urgent talks with Tesco on Friday (15 August) to express concern at its decision to launch Fresh 'n' Lo milk at £1.06 for a two-litre carton. The supermarket's move sparked a price war among its competitors, with Asda slashing the price of its two-pint cartons to just 50p over the weekend. Other major retailers followed suit, but Mr Jones said he was unconvinced by their strategies and by claims that they, rather than farmers, would absorb the price cuts.
Mr Jones said: "You only have to cast your mind back a few years to see the devastating impact retail price wars have on farmers' margins.
"Tesco denies that this move will have any impact on the farmers supplying milk through its Sustainable Dairy Group (TSDG) and, in the short term, that may be the case. But more concerning is the impact this move will have on farmers' confidence and the prospects of a price increase this autumn."
News of the price war made the front page of The Times where Mr Jones first voiced his concerns. Trade press also picked-up on the story, with chief dairy adviser Hayley Campbell-Gibbons quoted. You can read more on their interviews here.
Mr Jones continued: "This time, however, the industry will be ready. Farmers have to protect themselves. The NFU has long been calling for better contracts in the dairy industry, which offer greater clarity, transparency and stability for dairy farmers."