The battle for market share between Aldi Coles and Woolworths and has come at a cost to Australia’s second-largest baker, George Weston Foods, which said packaged bread prices are damaging the entire baking industry.
The company’s chief executive Andrew Reeves said about $100 million has been stripped from the $2 billion bread market since Coles and Woolworths cut the price of housebrand bread last year, forcing Weston and rival Goodman Fielder to reduce the price of leading brands such as Abbott’s Village, Tip Top, Helgas and Wonder White.
“I don’t believe the current level of pricing is sustainable for the health of the category,” he said, as reported by the financial Review after the company posted a weak first-half result.
“There’s been, on average, a 10 per cent reduction in the price of bread, which is significant. Interestingly, we are not selling any extra loaves. We have seen more than $100 million of category value disappear and it’s certainly had a detrimental effect on our bread business profitability in that time. We are selling the same product for less.”
The executive’s comments echo those in February of Goodman Fielder’s former chief executive, Chris Delaney, who blamed a 54 per cent slump in baking profits on aggressive discounting in supermarkets. They raise questions about the promotion strategies of ‘the big two’ amid signs a long-running marketing war in the $88 billion grocery market could escalate into a fully fledged price brawl as Woolworths invests more than $500 million into grocery prices to regain market share lost to Coles and Aldi.