Sainsbury’s follows Tesco in cutting price of milk by 5p a pint

Sainsbury’s has followed Tesco in cutting the price of milk by 5p a pint as supermarkets take advantage of a spring boost to production amid lacklustre demand.

Tesco, the UK’s biggest supermarket, cut the price of milk to 90p for a pint or £1.55 for four pints – a reduction of 10p – for the first time since 2020 this week.

Sainsbury’s quickly followed suit on Thursday in the latest example of how retailers have been trying to win over price-conscious shoppers with deals on popular items.

The price cuts will raise hopes of a slowdown in food inflation, as Tesco said on Thursday that the price of grain and cooking oils was also falling, although proteins and rice continued to rise.

A Sainsbury’s spokesperson said: “With costs going up, we are working hard to keep prices low, especially on the everyday essentials people buy the most.”

Industry insiders said the retail price reductions came after large wholesalers cut their prices by an unprecedented 5p a litre as the “spring flush” – when cows naturally tend to produce more milk as they are let out into fields – had led to oversupply.

A recent report from the Agriculture and Horticulture Development Board (AHDB) said that dairy farm yields had increased in the autumn partly thanks to higher prices paid to farmers last year, while the size of the UK milking herd fell by just under 1% in January compared to a year before, the smallest decline since 2018.

The easing of supply bottlenecks has come as demand has faltered.

Higher dairy prices and the increased cost of a basket of groceries led many shoppers to switch from higher-priced brands to cheaper own-label butter and cheese. Dairy alternatives such as oat or almond milk have also become more popular.

Further supermarket price cuts could be on the way as the National Farmers’ Union is predicting that farmgate price will fall to less than 40p per litre next month, from 48p in February, according to the Office for National Statistics.

Global energy and commodity prices have come down in recent months, but the NFU’s Dairy Board chair, Michael Oakes, has predicted a “challenging springtime” for dairy farmers as the price paid falls below the cost of production.

A spokesperson for Arla, the UK’s biggest dairy processor, said: “The cost of living squeeze means consumers are putting less in their baskets so demand is changing. At the same time, milk supply is growing, creating a change in the supply and demand of milk which is having a negative impact on the global value of milk.

“This is reflected across the dairy industry in the price being paid out to farmers. We are doing all we can to continue supporting our owners as costs remain high and ensure we keep milk on the supermarket shelves.”

The supermarket price cuts come after milk and dairy products have been at the head of hefty food price inflation, which soared to 18% last month, according to the Office for National Statistics (ONS). Just over a year ago the big supermarkets were charging £1.15 for four pints of milk – so even with this week’s cut, Tesco and Sainsbury’s are charging a third more.

Official figures show the inflation rate for milk, cheese and eggs reached 31% in the year to January, the fastest annual rise since comparable records began in 1989. The wholesale price received by farmers climbed to the highest level on records dating to 1970, hitting 51.5p a litre in December.

However, since then prices have fallen back just over 7% to about 48p a litre in February according to the ONS before further cuts were announced.