Inefficiencies in the Dairy Market Are Set to Churn the Branded Milk Players Essay

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Assignment Task: Critically analyse the motive(s) behind the milk price war started in Australia in 2011 and its impacts on the stakeholders using methods drawn from the microeconomic section of the unit. Guide to Essay: As a starting point, read the press article from the Sydney Morning Herald (below) which provides a comprehensive report on the situation a year after “war” broke out. In your essay you should explicitly state the stakeholders involved and how their interests are reflected, or not, in your analysis. Choices are important and you should not attempt to cover everything. While the work is to be presented as an essay it is expected that appropriate use will be made of chosen diagrams, tables and illustrations which enable you to concisely demonstrate your line of reasoning. Inefficiencies in the dairy market are set to churn the branded milk players On 26th January 2011 in a media release ‘BECAUSE WE ALL BUY MILK’ COLES CUTS THE PRICE TO HELP SHOPPERS SAVE (Coles, Consumer Media 2011), Coles announced that would cut the price of milk to $1 a litre as part of its ‘Down Down’ campaign. The dairy industry, the suppliers of fluid milk were quick to retort. They believed that $1 [per litre] milk was unsustainable for the industry and took the matter before the Australian Competition and Consumer Commission (ACCC) and into the Australian media. The event became known as the ‘milk wars’. This paper will critically analyse the motive(s) behind the milk price war from a microeconomic perspective. The paper will examine the impact on the consumer groups: consumers and the supermarkets, and suppliers of milk: dairy processors, dairy farmers and the Australian Dairy Farmers Industry group. Why did a milk price war begin in the first place? Hauser (2012) suggests that the price war was an “accident waiting to happen” and was a “perfect storm” of: *

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