Supermarket chain Coles has decided to increase the price of its two and three litre milk by 10 cents per litre and says the benefits will go directly to dairy farmers.
The new price will be effective from March 20.
"Coles will increase the price of 2 litres of Coles Brand milk to $2.20 and 3 litres of Coles Brand milk to $3.30 in most Coles supermarkets from tomorrow [Wednesday] morning, with the new pricing to be rolled out across all stores in coming days," the company said in a statement.
The company said it will ensure that the benefits of the price increase go directly to dairy farmers.
"Coles sources 100 per cent of our Coles Brand fresh milk from Australian farmers, many of whom are struggling as the impact of drought compounds ongoing challenges in the dairy industry," Coles Group chief executive officer Steven Cain said.
The company said it is currently paying dairy processors the highest farm gate milk prices in four years, without passing on the added expense to customers.
Coles' decision came close on the heels of its supermarket competitor Woolworths announcing last month that it will not sell $1 per litre milk to help farmers.
Minister for Primary Industries Niall Blair welcomed Coles' move.
"This is a great start for dairy farmers who have been struggling with the impacts of $1 a litre milk since 2011 and who are now facing added pressures due to the severe drought," Mr Blair said.
"When Woolworths was the first to increase prices from $1 a litre, I called on Coles and Aldi to follow suit and was disappointed with their response and resistance."
Mr Blair said the small price increase isn't a silver bullet, but it's a good start.