Costs fuel prices

25 January, 2008
Spiralling energy and ingredients costs are boosting bread prices in the UK, but they still lag far behind many other world markets, reports Patrick McGuigan
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British bread prices have risen by between 15 to 20% in the past year as commo-dity and fuel costs bite, but a loaf of bread is still cheaper here than in most of the rest of the world.
These are the findings of the Economist Intelligence Unit's (EIU's) latest Worldwide Cost of Living Survey (BB, 18 January, pg 4) which found that the average price of a kilo of bread in London rose from £1.09 in September 2006 to around £1.45 a year later. In Manchester, prices rose from 88p to £1.11 in the same period. The EIU said that rises in the UK had been compounded by the strength of sterling and weakness of the US dollar. "This has seen the relative cost boosted further compared to countries with weakening currencies or those linked to the dollar," said Jon Copestake, food and drink analyst and EIU survey editor.Despite the price rises, London ranked a lowly 70th place out of 130 cities around the world researched by the EIU, with Manchester coming in at number 93. Bread is more expensive in cities includng Warsaw in Poland, Istanbul in Turkey and Madrid in Spain. The most expensive city for bread remains Vienna in Austria, with bread prices averaging £4.22 per kilo."Bread prices in the UK have risen as rising commodity prices have been gradually passed on to consumers," said Copestake. "In Manchester, prices surveyed rose 15.2% in the last year, although only 1.2% in the last six months. In London, bread prices rose 20.1% in the last year, 13.6% of which came in the last six months."Huw Edwards, Asda bakery director, backed the assessment. "Rising ingredients costs, particularly flour and fat, are by far the biggest factors for price rises, but high fuel and energy costs have also had a big impact."Commenting on the different average bread prices in Manchester and London, Edwards added: "Asda has a national pricing policy and, as far as I'm aware, so do the other big supermarkets. I put the price differences down to local bakeries charging more in the capital, as they have larger overheads."Joe Street, MD of plant baker Fine Lady Bakeries, said he attributed the price difference between north and south to an increased presence of premium breads in the capital. "It has to be down to product mix, with fewer premium breads up north," he said, adding that soaring flour prices were the biggest cost pressure to face bakers. The EIU compiled the data via an international network of mystery shoppers. The three categories - low, medium and high - relate to different types of retailer. 'Low' covers supermarket chains, such as Tesco, 'medium' equates to top-end supermarkets, such as M&S, and 'high' comprises craft shops and department store food halls. The research found that low-end bread had risen steeply in price, up from 61p per kilo in London in 2006 to around £1 in 2007.Copestake said the UK's low position on the bread price list could be explained by the fact that 800g loaves dominate in Britain compared to 400g in many other countries. "Bread in the UK is seen as much more of a staple than in other countries and, as such, production is highly developed and commoditised compared to other markets," he said."Large-scale consumption allows companies to exploit economies of scale and the market is also highly competitive."



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