Woolworths Ltd, Australia’s largest retailer, has defended its decision to switch own-label milk supplies in New South Wales, insisting it was not due to the fierce competition with rival Coles in the sector.

The company has moved the supply of own-label milk under the Woolworths Fresh and Woolworths Home Brands labels in the state from National Foods to Parmalat.

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Competition in Australia’s own-label milk sector has increased in recent months. Last month, industry body Australian Dairy Farmers struck out at what they described as Coles “down-down” pricing strategy on milk and dairy products and called on Wesfarmers, the retailer’s parent, to “rein in” the business.

In January, Coles cut the price of its own-label milk by a third and was immediately followed by Woolworths.

However, a Woolworths spokesperson told just-food that the retailer’s decision to switch suppliers in New South Wales was not driven by a move to make up for the cost of the price cuts.

“Woolworths did not approach this tender process to recoup the cost of the price cut on private label milk,” the spokesperson said. “The call for tenders occurred before the 26 January 2011 price cut announcement by Coles. The costs of Woolworths decision to match Coles price on private label drinking milk will continue to be absorbed by Woolworths.”

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The spokesperson added: “The recent tender processes and outcome has been very similar to the tender processes and outcome in previous years. Woolworths considered a range of factors considered in deciding the final outcome including changes to the way milk is delivered to Woolworths in New South Wales (changing from direct-to-store to delivery to the distribution centre).”