Australian drinks giant Foster's said Wednesday it halted beer shipments to major retailers Coles and Woolworths amid concerns they planned to sell it well below cost in a supermarket price war.

The two retail heavyweights have already gone tit-for-tat in slashing the cost of milk across Australia, and Foster's fears that beer looms as the next battleground.

Carlton and United Breweries, Foster's beer division, claimed that the supermarket chains planned to significantly cut the price of key brands such as Victoria Bitter and Carlton Draught, which it said would hurt their image.

"We have withheld supply from a number of customers for a short period where we believe they have been selling our product below cost for the purpose of loss-leading," CUB spokesman Troy Hey told reporters.

"We have done so to protect the brand equity -- the image of our brands -- and we don't do this lightly."

The brewer used section 98 of the Trade Practices Act that covers loss-leading behaviour -- luring customers into a shop by selling a product below cost and then trying to sell other items at higher prices.

Coles and Woolworths control around half of all alcohol distribution in Australia, and independent senator Nick Xenophon applauded Foster's for standing up to their domination.

"Unfortunately, there are many businesses that cannot stand up to Coles and Woolworths, and the dairy industry is an example of that," he said.

In January, Coles cut the price of a litre of milk to one dollar (US$1.01) and Woolworths followed suit, with a Senate inquiry now underway into the impact on the dairy industry.

Coles said that price cutting was normal practice, but denied it was intent on a beer war, saying it was a responsible alcohol retailer.

"Discounting is a regular feature of the industry, not just us," a Coles spokesman told reporters.

Woolworths made a similar statement.

"What has happened here is no different to what happens week in, week out with beer retailing since the beginning of time," a spokesman said.