The supermarket is selling MG’s Devondale brand and the Warrnambool Cheese and Butter brand, Great Ocean Road, in two litre containers for $1.50.

The price undercuts Coles’ own private label milk, which sells for $1 per litre. Coles private label milk has been supplied since the start of this month by MG under a new 10-year contract. MG distanced itself from the price cutting, stating that Coles was responsible for its own retail pricing.

A co-operative spokesman said the low pricing came about because of an excess of Devondale milk during the supermarket’s transition to Murray Goulburn’s supply contract.

“During the transition of milk supply arrangements there was a short term over supply of Devondale branded milk, which Coles was clearing through over the weekend with their milk special,” a company spokesman said. 

“This will not have any significant impact on returns to Devondale Murray Goulburn suppliers. Coles did not buy the Devondale brand milk at a reduced price.”

Coles offered a contradictory explanation to Carpendeit farmer Donna Edge, who contacted the supermarket earlier in the week via social media and was told it was an introductory offer for the brands.

However, by yesterday Coles was in lock step with Murray Goulburn, offering the same oversupply explanation.

“The opening of the new Devondale Murray Goulburn factory led to a temporary oversupply of Devondale and Great Ocean Road milk last week,” a spokeswoman said.

“We bought additional milk from WCB to ensure there was sufficient during the transition to the new arrangement. Coles did not buy the Devondale Murray Goulburn and Great Ocean Road milk at a reduced price.”

WCB was asked for reaction but did not respond.

Mrs Edge said the promotion was “a slap in the face to Australian farmers”.

“Who’s going to be making any money out of that — somebody’s going to miss out. Economics 101 is that everyone has to make some money,” she said.

Winslow farmer and Murray Goulburn supplier Jock O’Keefe called for an explanation of why the company allowed its brand to be devalued in this way.

“It just encourages customers to pay less and puts pressure on processors to pay farmers less,” Mr O’Keefe said.

“This must be below the cost of production. I think this is something the ACCC (Australian Competition and Consumer Commission) should look at. Selling milk at this price must be uncompetitive behaviour and it should be looked at.”