Discount Ireland

22 May, 2009
The bread industry in the Republic of Ireland is struggling as heavy discounting by major multiples is turning bread into a loss leader. Hugh Oram reports
Page 15 

Close to 2,000 jobs could be at risk in the Irish Republic baking industry as supermarkets sell bread at big discounts. Jobs under threat are in production, distribution, van sales and among shop staff. And at least one major plant bakery is at risk of closure.

So says Pat Garvey, who runs the Flour Confectioners & Bakers Association in Dublin, representing nearly 200 bakeries. He says heavy discounting, as well as the flood of cheap bread imports into the Republic from Northern Ireland and Britain and the splurge of spending in Northern Ireland by consumers from the Republic are creating "terrible problems" for the Irish baking industry. He adds that the major bakeries are not talking to each other about these problems.

With own-brand bread, retail prices are as low as 60 euro cents (53p), sometimes even lower for an 800g sliced white pan. Martin Hanlon, general secretary of the Bakers, Food & Allied Workers Union in Dublin, says the widespread supermarket price-cutting also means branded bread products are suffering from deep price cuts. Recently, Tesco Ireland was selling Brennans 800g sliced white pan for just €1 (89p); last year, it would have retailed for around €1.50 (£1.34).

At Super Valu in Skerries, north Co Dublin, a country white sliced 800g loaf from McCloskey's Bakery in Drogheda was selling for €1.39 (£1.24), dear enough in the current retail climate. But Super Valu's cheapest own-brand 800g loaf was also selling for the same price as Tesco - 60 cents. Many special promotions are also being offered in some of the main supermarket chains, such as two loaves for the price of one.

Garvey says it's impossible to calculate how uniformly deep the discounts are, because each bakery has its own pricing and discount structure with supermarkets. In one case, he claims, a major plant bakery is selling into supermarkets below cost, just to maintain market share.

Recession impact

Hanlon believes it is inevitable, given the recession, that consumers are seeking the cheapest possible food. "People need to buy cheap food and supermarkets are now using bread as a loss leader," he says, adding that retail prices of bread are now so low, that if any bakery is making a margin, it is so small as to be virtually non-existent. He adds that the discounting of bread prices is almost as prevalent in Northern Ireland as in the Irish Republic.

The cheapest bread of all is sold by Aldi and Lidl, usually even cheaper than Tesco. Garvey says that some smaller semi-plant bakeries are supplying their bread.

Hanlon says that, inevitably, these low selling prices will affect the trade. Currently, in the Republic, he estimates there are about 1,100 unionised bakery workers; in the late 1980s, there were between 4,500 and 5,000. Now, a big fall in employment numbers could be looming.

He adds that, as a sign of the times, Irish Pride, one of the top plant bakeries in the Republic with bakeries in Ballinrobe, Co Mayo and Taghmon, Co Wexford, is pleading inability to pay rises in wages, due under the current social partnership agreement.

Meanwhile Tesco Ireland is introducing price cuts of around 22% across its range in all its stores in the Republic, to deter people from going North to shop and this, says Garvey, will mean much more imported bread.

The sheer volume of shopping being done in Northern Ireland by consumers from the Republic is now a big problem. Last year, official figures estimate they spent a whopping €2bn (£1.8bn) north of the border. Garvey adds that many of these shoppers, are adding bread and confectionery products to their heavily-laden trollies.

In Northern Ireland, all bakery products have long been zero-rated for VAT, but in the Republic, all confectionery and some specialised bread products are VAT-rated at 13.5%. Garvey wrote to the Minister of Finance before the most recent Budget in Dublin, pointing out the anomaly, but no action was taken.

Ironically, concludes Hanlon, multiples like Superquinn and Tesco, which have their own in-store bakeries, are producing good quality bread and confectionery products and are getting good margins on them.





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