I’ve been perplexed about something I’ve seen at the grocery store over the past few weeks.  I generally buy organic milk when I go grocery shopping and it is usually 2 or 3 times more expensive than the regular white liquid that goes by the name of milk.   For the past few weeks, the grocery store has had deep discounts, in-store coupons and even offering free milk with the purchase of an item like cookies.

I’m perplexed about how the grocery store is making a profit on milk and I came to the following conspiracy theory regarding their milk dilemma.

Theory 1 – The grocery store might have signed a large contract for a large quantity of milk on the expectation that it would be able to sell it for a higher margin/premium a few months (maybe year) ago.    When the credit crisis hit and consumers balked at paying $6/gallon for organic milk, the store was left holding the bag and needed to come up with a way to dump milk (coupons, freebies, etc).

Theory 2 – Organic milk producers are desperate to sell their organic milk wares that they have partnered with the stores to provide discounts and freebies although this doesn’t make much sense to me because if the milk is too expensive for the consumer, they simply need to reduce the price or find cheaper ways to produce it.

Theory 3- My wife suggested that by offering milk for free with the purchase of cookies, the store was trying to encourage greater consumption of milk.  This makes perfect sense except for the fact that the milk is the more expensive item and is being given away for FREE.  It would make more sense to get free cookies with the purchase of milk than free milk with the purchase of cookies.

Ultimately, I think organic milk producers are going to be in a world of hurt if the economic crisis continues as I rarely see anyone pick up organic milk these days.   I’ve actually noticed a surplus of milk at the grocery store lately and the price for non-organic milk (and eggs) have been drastically dropping over the past few weeks.

Deflation continues to hit the grocery store as today I saw Dreyer’s Ice Cream being offered at $1.75 discount right off the top!