Woolies: give us our daily bread

Paddy Manning
November 22, 2011
The Age

AUSTRALIA’S biggest retailer, Woolworths, has fired a shot across the bow of Goodman Fielder, which has flagged abandoning daily delivery of fresh bread to supermarkets in an effort to cut costs.

”Woolworths are the fresh food people and we take this responsibility seriously,” said spokesman Benedict Brook. ”Moves by any of our suppliers that changes the freshness of a product like bread would need to be fully discussed with us. Ultimately it will be the customer who decides what goes on our shelves.”
There was a strong reaction to a report in The Age yesterday that Goodman Fielder was considering ways to cut supply chain costs by reducing the frequency of bread deliveries, perhaps down to every second or third day.

Intense discounting and increased reliance on private label products by supermarket duopoly Coles and Woolworths – including the introduction of $1 loaves of bread last July – has increased pressure on product manufacturers and suppliers.

Goodman Fielder spokesman Ian Greenshields said in Europe and North America the model was for bread to have a 10-day shelf life. The company was exploring ways of extending shelf life of bread in Australia using natural ingredients and packaging innovation. Preservatives would not be used, he said.
”There’s no way we’re going to change the taste, freshness or quality of our product,” he said. ”Freshness is a statement of quality not a statement of time. Everyone knows how to check for freshness, you give it a squeeze. People know what stale bread is.”

But analysts yesterday questioned whether the supermarkets would allow a shift away from daily delivery of fresh bread.
”Don’t know how it’s going to fly in a highly perishable product category such as bread,” said one. Given competition with Bakers Delight and Brumby’s outlets, he said, if branded bread makers began delivering product that was 2-3 days old, ”I can’t see the supermarkets biting on that one”.
Goodman Fielder might not get the benefit of the cost cuts anyway, he said. ”Who is going to hold the inventory? If you have less deliveries, that’s basically saying the retailer is going to hold more stock. I’m yet to see a retailer take on more stock without significant remuneration.”
But another analyst said supermarkets might welcome such a move if it increased sales at in-store bakeries – and so would other hot bread shops and bakeries. ”You can just see the Bakers Delight ads, can’t you?” he said.

Rival George Weston Foods, maker of Tip Top breads and the second-largest baker in the country, yesterday ruled out any move away from daily bread deliveries.
”It’s not something we’d contemplate,” said chief executive Andrew Reeves. ”We are a daily fresh business. That provides the best product.”
At an investor update last Thursday, Goodman Fielder flagged it would seek to cut costs in the troubled baking division by $25 million from 2011-12, chiefly by redesigning the supply chain, which accounted for 43 per cent of costs – more than the manufacturing cost.

Those expected savings did not include abandoning daily bread deliveries, which is a longer-term option.
Goodman Fielder’s Mr Greenshields said any move away from delivery was at very early stages.

”It’s day one of a very big process. We don’t know if it’s workable in Australia yet,” he said.
”We don’t know if the supermarkets are interested in doing it. We’ve discussed it with them in principle”

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