Cheap Milk Prices: Get Us Through the Door to Charge Us More

1 June 2016

You've heard the expression "don't judge a book by it's cover". Well, this same logic should be applied to supermarkets and the price of their milk. Let me explain. The recent milk situation in Australia was as a result of the large supermarkets battling it out to win market share by selling milk at prices sometimes cheaper than what it cost to buy. Woolworths has been taking a financial hit of late and milk pricing has been one of its key methods in trying to coax more customers through its doors.

Although this trick means that we the customers are paying less and saving a little bit more on each shop, it has a hidden agenda that many aren't aware of. This is a marketing tactic that is used globally to try and convince customers that their store is cheaper in general than the competition. The theory is that customers won't remember the price of everything in store, but competitively priced milk (being a very common purchase with each shop) is an item we're far more likely to remember. This allows supermarkets to lure us in through their doors in the belief that most of their other products are likely to be cheaper too. This same pricing principle can also be applied to other regularly bought products e.g. bread, bananas, apples etc.


The reason that milk stands out so much is that it's one of the most products, where the differences between the various brands are minimal, similar to petrol. This is why milk is one of the ideal products to cut prices on, because generally we are happier to buy the cheaper alternative since there isn’t much perceived difference between the more expensive option (similar to petrol again).

However, the effect in our minds is more persuasive as it encourages us to remember how cheap the milk was at that particular store, therefore unwittingly creating a mental bias that their other products must also be as cheap. Once retailers have us thinking in this way, they use this false sense of "cheapness" to maximise their profits. Items we buy less often are where the profits are then made, because who really knows if $12 is too much for the occasional purchase of 50 extra wide garbage bags?

Coles vs Woolworths supermarkets

Could this really work? Well, it has been working for large retailers for decades and it’s what you'll see Woolies and Coles resorting to right now in response to increasing competition from ALDI. This profit-generating tactic is actually what Coles has employed over the past decade. Previously the country's supermarket underdog, always finding itself outperformed by Woolworths, thanks to some clever marketing and strategically pricing its milk, Coles has gone from underdog to top dog and currently dominates Woolworths.


ALDI store sells products cheaper than other Australian supermarkets

Their price of milk playing a large role in that success. Cast your mind back to 2011 and you may remember the big campaign Coles used to convince us that it was the cheaper supermarket, despite all the success that ALDI had achieved since 2001 when it entered Australia. As a matter of fact, they are cheaper than both Woolworths and Coles and not just by a bit.

The reality is that ALDI are considerably cheaper, hence why Woolies and Coles are having to rely heavily on marketing tactics in order to get us through their doors (only to charge us more). Below is a table that I completed in a previous article that exemplifies this cost saving. However, ALDI’s cheapest prices don’t always appear to be sticking in our minds, because if all Australians went supermarket shopping and rationally evaluated all prices, ALDI would already be dominating Australia in every state.






Sea Salt Kettle Chips

$2.49 – 200g ($1.25 per 100g)

$4.55 – 185g ($2.46 per 100g)

$4.50 – 185g ($2.43 per 100g)

Own Brand Free Range Eggs – 12 Pack

$4.69 – 700g ($0.67c per 100g)

$4.90 – 600g ($0.82 per 100g)

*$4.99 – 700g ($0.71 per 100g)

Free Range Chicken Breasts – 1kg

$14.99 – 1kg ($14.99 per kg)

$11.65 – 650g ($18.48 per kg)

*$14.39 – 960g ($14.99 per kg)

Dry Dog Food with Real Beef – 8kg

$8.99 – 8kg ($0.11c per 100g)

$23.10 – 8kg ($0.29 per 100g)

*$18.49 – 8kg ($0.23 per 100g)

Fabric Softener – 2L (Own Store Brand)

$2.99 – 2L ($1.50 per Litre)

$3.25 – 2L ($1.63 per Litre)

$4.29 – 2L ($2.15 per Litre)

Penne Pasta – 500g (Own Brand)

$0.89 – 500g ($0.18c per 100g)

$1.00 – 500g ($0.20 per 100g)

$0.70 – 500g ($0.14 per 100g)

Toilet Paper – 12 pack (Own Brand)

$3.79 – 12pk ($0.12c / 100 sheets)

$4.18 – 12pk ($0.35 / 100 sheets)

$4.09 – 12pk ($0.13 / 100 sheets)






You may not have noticed, but milk is always at the back of the supermarket too - beyond the chocolate, tea, frozen food etc. This is no coincidence, supermarkets know that milk goes off reasonably quickly so we need to purchase it more often compared to other products. Positioning milk at the back of the store gets customers to walk past a variety of other products that the supermarket owners hope you see and buy.

This is why going to the supermarket with the cheaper milk could actually put you in a position where you are exposed to spending more money. Milk may be cheaper at Coles compared to ALDI, but plenty of other products which you regularly buy may be more expensive. Try to spot these marketing tactics elsewhere and you may be able to save more money by avoiding getting pulled into a shop or store simply because of the illusion of cheap pricing based on one or two commonly purchased items appearing to be sold at below-market-prices.

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