The supermarket milk price war has given Tasmania's small farmhouse milk market an unexpected boost, with several farmers planning to expand their herds to meet increased demand.

Producers attribute the rise in sales of farmhouse milk, in part, to the negative publicity generated by the introduction of $1 per litre milk by Coles in 2011.

They say publicity about the impact on farmers of aggressive milk pricing has encouraged some consumers to support dairy farmers by buying the more expensive farmhouse milks.

"At the end of the day it's either $2 for a 2 litre bottle of milk that they don't know anything about, or it's $4 for one they could go meet the producer on the weekend," Jon Healey from Pyengana Dairy Company said.

"There's been a little bit of a drive against the big players and probably the big supermarkets in the $1 a litre milk thing because any customer that has any marbles at all realises it's not a sustainable practice."

Tasmanian cheese maker Jane Bennett says consumer sympathy is giving more dairy farmers the confidence to bottle their own milk.

"There's local milk popping up everywhere," she said.

"It's not a huge percentage of the market, but it's a growing percentage, and it's a percentage existing players don't want to give away."

Growth market

A worker bottles milk at Tasmania's Red Cow Dairy. ( ABC News: Pip Courtney )

If the queues at the weekly farmers market in Launceston are a guide, support for farmhouse milk grows by the week.

Red Cow Dairies, run by north-west Tasmanian dairy farmers Andy and Matt Jackman, is one company benefiting from the trend. They milk 300 cows and make their own cheese.

A year ago they took a punt that people would pay for old-fashioned milk direct from the farm and launched their own milk brand.

From 150 litres a week, they are now selling 2,000 litres a week of pasteurised, un-homogenised milk in 750 ml glass bottles.

"There's still growth for the milk sales in Tasmania but also interstate as well," Andy Jackman said.

She says many buy farmhouse milk for the taste, but concern about the ethics and impact on farmers of $1 milk is also driving sales.

"It's made people aware and consciously made them ask themselves questions like, 'where is this milk coming from? And what is the reality that is going on in the milk market?'" she said.

"It allows them to say, 'well, this money that I've given to buy this milk is going directly back to the producer and I like that feeling, and I like cutting out that middle person and the multinational companies as well'."

The Jackmans' herd produces 1.4 million litres of milk a year. Most is sold to Fonterra but they make significantly more per litre by bottling their own.

Organic dairy farmers Antonia and Josef Gretschmann sell 5,000 litres of pasteurised, unhomogenised milk each week under the Elgaar brand.

It sells for $2.30 for a 750 ml bottle, and to keep up with demand they are expanding their jersey and guernsey herd.

"Customers like the cream rising on the top and they like the glass bottle and being able to return it and knowing it's been reused, but the main thing is the flavour," Mr Gretschmann said.

"They say it's different, that it tastes like real milk."

Mr Gretschmann says there is a growing awareness of the issues surrounding $1 milk, with some consumers concerned the low price damages farmers.

Backlash

A pair of dairy cows have a feed at a dairy in Tasmania. ( ABC News: Pip Courtney )

To make more from their milk, the Bennett family diversified into cheese-making in 1993, with award-winning results.

When cheese sales dipped five years ago they launched their own milk brand.

Sales were slow until National Foods slashed prices to its Tasmanian farmer suppliers in 2009.

Angry dairy farmers ran a protest campaign calling on Tasmanians to boycott the company's products.

The six-month public relations disaster for National Foods was a boon for Ashgrove.

"At the start of the campaign we were selling milk into three stores in Hobart," Jane Bennett said.

"Within six weeks we were selling into 27 stores in Hobart. Within three months the Coles national milk buyer was calling up and saying 'we need your milk in our stores'.

"That's the kind of game-changer that it actually was for us."

Ms Bennett says Ashgrove received a further sales boost when Coles introduced $1 milk.

"We had an expectation it would have a very negative impact on our sales and it had quite the opposite," she said.

"Customers asked the question: 'How can these large companies produce milk and sell it sustainably for that price?'"

She says Tasmania's small 58 million litre drinking milk market has changed significantly in the past two years.

"It's segmenting into the two extremes of the marketplace," she said.

"You're either a cheap milk or you're a value proposition offering something that's got some unique attributes."

Sales are now so strong the Bennetts have invested $5 million in a new bottling plant, and they are increasing their 1,300-cow herd to meet rising demand.

Mainland expansion

Pyengana Dairy Company on Tasmania's east coast is famous for its much-awarded cloth-matured cheddar cheese.

It started selling pasteurised, non-homogenised milk 16 years ago.

"Our milk's the closest thing that you can get to putting your jug in the vat," Pyengana's Jon Healey said.

Mr Healey says competition from new players has affected sales, so he is looking to sell on the mainland.

"I think there are other small players in Tasmania looking to do the same thing," he said.

Mr Healey hopes the ongoing public debate about the impact big corporates are having on farmers affects the shopping habits of more consumers.

"A dollar per litre for milk isn't a sustainable price," he said.

"The price for branded milk and branded products is a sustainable price and the more that we can convince people they're degrading their children's future by buying non-branded produce the better."

Coles maintains it is a big supporter of the Australian dairy industry.

In a statement to the ABC's Landline program, the company said: "All Coles brand milk is sourced locally, and we sell all of the popular national brands and the increasing number of small local brands so our customers have plenty of choice."

Watch Pip Courtney's full report on Landline at noon on Sunday on ABC 1.