Goodman Fielder says days of $1 loaf may be ending

Blair Speedy
February 13, 2013
The Australian

GOODMAN Fielder chief executive Chris Delaney has warned that the days of selling bread for $1 a loaf may soon be coming to an end as suppliers refuse to supply supermarkets at loss-making prices.

·Goodman, which makes some of Australia’s best known brands, including Meadow Lea margarine, Praise mayonnaise, White Wings, Pampas and Helga’s, Might Soft, Vogel’s and Wonder White breads, today reported a 17 per cent decline in underlying earnings before interest and tax to $95.3 million for the first half of the financial year.

Mr Delaney attributed the result, which was below expectations, lower volumes from its baking business and increased pressure from private label products which required the company to cut prices and boost promotional expenditure in order to compete.

But he said the company’s contract to supply house-brand bread for supermarket giant Coles to sell at $1 a loaf was set to expire on June 30, and would not be renewed unless prices were increased.

“The world has moved on in the past 18 months and there’s a recognition of that in the industry, which would include the retailers,” he said when asked if the contract would be renewed.

“It’s a significant contract that carries a lot of volume; I would not be willing to renew that contract at today’s pricing, but at some level of pricing where there’s a benefit, and that’s the question that we’re going through.”

Goodman had managed to negotiate an 8 per cent increase in the price of its branded bread products with retailer customers during the first half, he said.

Coles kicked the grocery price war into high gear in January 2011 when it cut the price of house-brand milk to $2 for two litres, following it up in July with $1-per-loaf bread.

While Woolworths matched both moves immediately, it was also the first to blink, upping the price of store brand bread to $1.10 per loaf last month after supplier George Weston Foods requested a price rise to take account of a 30 per cent increase in global wheat prices.