Executive Summary • The University of Connecticut Food Marketing Policy Center has checked retail milk prices annually since 2002. This report summarizes findings; however, it focuses mostly on the most recent price check for November 2006. • The survey area includes the three southern New England states, the Hudson river valley from Albany to the New York city line and suburban Long Island. • Leading brand and private label milk prices are checked in four different channels, supermarkets including Wal-Mart Supercenters, convenience stores, wholesale club stores and limited assortment stores. A total of 192 stores were checked in November 2006. • Since supermarkets account for approximately 75% of retail fluid milk sales this report focuses on that channel; price information for the other channels is in Appendix A. • Dairy Technomics, a well known and reliable source that evaluates processor costs for supermarket milk buyers, has provided processor margins by brand and distribution costs to retail stores. These allow us to decompose retail prices into the amount kept by the retailers–their dollar or percent gross margin, the amount kept by the processors and the amount paid by processors to farmers or their cooperatives. This breakdown of channel revenues is very detailed. One has prices and margins by types of milk–whole, 2%, 1%, and skim–for each brand of milk including private label, in each of the stores surveyed. • The top three supermarket chains capture 63% of supermarket sales in Connecticut. Stop & Shop dominates with 45.4%. Then one has Big Y with 9.5% and Shaw’s with 7.7%. • Wal-Mart is the seventh largest supermarket chain in Connecticut with four stores and 2.8% share. • The average all milk retail price across the top three chains and Wal-Mart (65% of the state’s supermarket sales) in November 2006 was $3.83 per gallon. • These four retailers kept $1.81 for in-store costs and profits. This dollar gross margin is 47% of the retail price. The Food Marketing Institute reports that the average gross margin for all products in U.S. supermarkets is 27%. The 47% reported gross margin on milk in Connecticut is excessive. Since milk is a very high turnover item its percent margin should be lower than the average percent gross margin. • Examining individual chain percent gross margins in Connecticut one finds the dominant firm, Stop & Shop, captures 49% of the retail price. Big Y captures 45% and Shaw’s 47%. In contrast, Wal-Mart sells milk with a 27% gross margin. • In-store costs including a competitive return, based upon research in Maine and Pennsylvania were approximately 60 cents per gallon in November 2006.