The owners of a small raw milk company have defended their product following the death of a three-year-old in Victoria.

The child recently died on the Mornington Peninsula after drinking unpasteurised milk marketed as a cosmetic product and labelled "bath milk", the Victorian Health Department said.

Unpasteurised milk, or raw cow's milk, is illegal to sell for human consumption in Australia, but the product consumed by the child was classed as cosmetic so was allowed on the shelves.

The product made by Mountain View Farm was packaged and labelled in a similar way to normal milk.

Vicki Jones, the owner of Mountain View Farm, said she drank the milk herself, but her product was clearly labelled as not for human consumption.

"We label it as bath milk, for cosmetic use only, not for consumption. It's quite bold, so it's easy to see," she said.

"I drink it, but it is a raw product, I can't say that it's safe to drink."

Four other children, aged between one and five recently became ill after drinking raw milk.

The incidents have led Victorian health authorities to issue a warning about the dangers of drinking the product.

Victoria's Chief Health Officer said the child died from "a condition called haemolytic uraemic syndrome, which affects the kidneys and the bloodstream".

She said she was worried unpasteurised milk was intentionally being given to children despite being labelled not for human consumption.

"There are two issues that concern me - one is the movement out there that people think that something raw is wholesome and better for you, which is clearly not the case," Dr Rosemary Lester said.

"Secondly was the potential for confusion with milk that really is for human consumption, given these products are being sold alongside milk for human consumption."

It was not clear whether the child in this particular case was intentionally given the raw milk.

But Ms Jones said the company would change its labels to make them even clearer.

"What do I say to [the people who drink the milk]? It's clearly labelled. At the end of the day what they do with the milk after they purchase it is their choice," she said.

"Whether they listen to me is out of my hands.

"When the health department sent out the information, we did say to them we'd put that information on our labels, as well on the back of the bottle, because I think it is important for people to be aware that if the Health Department are saying that milk is not safe to add extra precaution," she said.

"We would probably just put the link to the Health Department website or print what their warnings are."

'No guarantee' that raw milk is safe to drink

Unpasteurised milk can cause potentially fatal gastrointestinal illness which affects the kidneys and bloodstream and could cause a parasitic infection that presents as gastroenteritis.

"Unpasteurised milk is labelled and sold for cosmetic use only, but the packaging is often very similar to other milk products," Dr Lester said.

"Since the 1940s it has been compulsory to pasteurise cow's milk in Australia.

"Milk is heated for a very short period of time effectively destroying any disease-causing bacteria which may be present in raw milk.

"Everyone is vulnerable to illness caused by the pathogens present in raw milk, but the risks are even greater for young children and for the elderly, those with underlying health problems, immuno-compromised or pregnant.

"No matter what precautions are taken by dairy farmers during milking, there can be no guarantee that the milk will be free from harmful bacteria, making pasteurisation essential."

Ms Jones said she was aware of the incident and had been contacted by health authorities following the death of the child.

"Apparently [the child's family] had purchased our milk, but I have been told the child had been previously seriously ill and that he had passed away, and that he had consumed our milk," she said.

"The health department had taken samples of our milk [for] salmonella, E.Coli, dysentery and all the results have come back negative, or not detected."

She also said her company ran their own tests on the milk every week for bacteria and it always came back negative.

Raw milk label stating "not for human consumption". ( ABC News )

Dr Lester said she had written to Victorian Consumer Affairs and the Australian Competition and Consumer Commission about the issue.

"This is correctly labelled as not [for human consumption], so it's in the domain of consumer law, not food law," she said.

"Many people will have been drinking it without effect, but we can't guarantee that it's safe."

She said she would like to see the products labelled differently and sold in separate sections of stores.

When asked about whether the product should be banned, Dr Lester said it was "too early to say what the solution should be".

Victorian AMA supports ban on raw milk

The president of the Victorian branch of the Australian Medical Association, Dr Tony Bartone, said there was no reason the product should be on the market.

"This is an increasing fad that we're hearing about, people drinking unpasteurised milk for cosmetic or body-building purposes," he said.

"It's probably increasing in frequency, but still thankfully not an across-the-board phenomenon.

"Unfortunately there's no good scientific reason to drink it, so you can only wonder at some of the reasons (people drink it).

"There's only scientific reasons that it will harm you."

He also echoed Dr Lester's concerns with the way the product was packaged and sold, and so has Dairy Australia.

"For the unsuspecting customer it may appear to be milk, and therefore warning labels and even the shape of the bottle it's sold in, it can't look like an alternative to normal, every day milk."

He also called for new warnings and packaging regulations, and said a ban on raw milk should be considered.

"I can see no useful purpose for the sale of this milk," he said.

Police said the three-year-old's death was being handled by the coroner.