Big Tobacco Discounter, which is adorned with a large sign saying "Cheapest milk and bread", also offers bread for $1.59.
The store's manager said the milk was a loss leader which the shop did not make any money on.
It brought customers into the shop, and helped people, said the manager, who wanted to be known only as John.
"It's an essential item. Elderly [people] don't smoke but they come in to get their basics, their milk and bread. It's good for them."
Cow & Gate milk is owned by Australian-based Goodman Fielder, which buys raw milk from diary giant Fonterra.
Shoppers are clearly looking beyond the supermarket to seek out the best milk prices. The Warehouse reported record sales last week.
Ann Smith, total money management supervisor at Tauranga Budget Advisory Service, advised consumers to compare prices before buying milk.
"It's always a problem, and people with children are more affected than those without.
"You have to shop around a bit."
Mrs Smith said buying small bottles was often less economical than buying larger bottles.
"It's better to get the big bottles and put them in the freezer," Mrs Smith said.
If a large bottle is too much for your household to use at once, decant the milk into smaller bottles before freezing it.
But bigger doesn't always work out to be cheaper - three litres of Homebrand milk is $5.49 at Countdown, which works out more expensive per litre than the two litre bottle which is $3.60.
Prices can vary hugely by brand - at Countdown, two litres of Meadowfresh Calci Trim is $5.49, Anchor Super blue is $4.81, while Homebrand is $3.60.
Tauranga registered dietitian Fiona Boyle, of Food Solutions, said the cost of milk was prohibitive for some families, which could cause a problem in getting the right amount of calcium.
Milk and milk products were one of the four main food groups, and consumption of milk was vital, she said.
"It's a good nutritious food that we all do need to have.
"Obviously the cost is really prohibitive, there's no easy way around it," Mrs Boyle said.
"Children need three servings a day of dairy products, and for adults it's two. Most of us need to be aiming for two to three servings of dairy products a day. The serving is 250ml of milk or 40g of cheese or a small pottle of yoghurt.
"If you weren't going to have milk, then you need to make up for it through cheese or yoghurt, which are terribly expensive, too."
Mrs Boyle said powdered milk was just as nutritious as fresh milk, and was possibly a cheaper option.
"We all have to be more aware [of our spending].
"I'm sure we have all changed our buying habits of cheese and yoghurt, and look for the ones on special, especially cheese.
Mrs Boyle suggested comparing prices to find the cheapest price per 100ml, and said most low-fat milk products were "pretty much the same".
She also suggested cutting back on non-essential foods to make room in the budget for staples like milk.
"If you can, save money on food that isn't as nutritious for you. But people argue they would like to have some treats in their diet as well."
The Government this week launched a parliamentary inquiry into why milk prices are so high when New Zealand is a leading milk producer and many families are struggling to make ends meet.
Consumer NZ chief executive Suzanne Chetwin said she was pleased the National Party had realised how important this issue was to the public.
Labour MP Lianne Dalziel, who chairs the commerce select committee which will conduct the inquiry, said the committee could make recommendations to Parliament but did not have the power to change laws.
Cheaper milk worth the drive
Andrew Robson doesn't smoke but he visits a tobacco shop twice a week to pick up milk for his family.
The Tauranga man makes a special trip to Big Tobacco Discounter on Cameron Rd on his way to the supermarket to pick up the rest of his groceries.
With two children in his house, Mr Robson's family go through about four 2-litre bottles of milk a week.
That costs him $12 at the tobacco shop - a saving of $2.40 even on the cheapest supermarket milk.
The saving was "enough to make it worthwhile" to go out of his way, Mr Robson said. The present price of milk was ridiculous, he said.
"We don't live overseas.
"Fonterra makes the money from our country, so why do we pay what overseas pay?"
He said the Cow & Gate brand, which is owned by Australian-based Goodman Fielder that buys raw milk from dairy giant Fonterra, tasted good.
"Milk is milk. I don't see any point in buying the most expensive because it's [all] milk, it's the same."
