Under pressure

08 October, 2010
Despite rife discounting in Ireland, baker of branded breads are showing resilience in the face of recession. Yet there are clear challenges on the horizon. Hugh Oram examines the market trends
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Faced with widespread discounting, bread bakers in Ireland are just about holding their own, according to Bord Bía, the Dublin-based state agency that promotes Irish-produced food. "Wrapped breads have shown some decline in both value and volume in the Irish Republic, but overall the category continues to be resilient in the current marketplace," says Bord Bía spokesperson Sheila Boylan.

Brian Irwin, chairman of Irwin's Bakery, Craigavon, says: "There seems to be some reduction in sales more in the Republic than in Northern Ireland."

Boylan adds that volume is currently being driven by strong and ongoing promotional activity, such as TV commercials and other promotions from Pat the Baker. "However, there's some evidence that consumers are trading down, with an increase in private-label sales affecting the performance of brands," she says. Supermarket groups are responding by slashing the selling prices of branded bread.

Bord Bía statistics estimate that the ambient bakery market in Ireland will be worth around E490m (£416m) this year.

Over the past two years, bread sales have declined slightly and now account for just over 60% of the bakery market, while morning goods have grown to around 20%. Cakes and pastries are also in decline, with a market share down to under 20%.

Branded bread products are challenged by inexorable rise of the two German-owned discoun-ters, Aldi and Lidl, which now have close to 15% of the Irish grocery market. In the Republic, Lidl is selling branded products from Irwin's, including soda bread, for 89 cents; it is also selling Nimble wholemeal loaves for 69 cents. However, the retailer is also concentrating on its own-brand bread, baked locally and sold very cheaply. Currently, an own-brand thick white sliced 800g pan loaf is selling in Lidl for 55 cents, the same price as in Aldi.

Many of the supermarket chains are also discounting bread heavily. Superquinn, for instance, has been discounting an 800g white sliced pan from Pat the Baker from E1.78 to E1.19 (£1.51 to £1.01). Brennans 800g standard sliced white pan loaf has been sold for just E1 (about 85p)in some supermarkets.

Further competition comes from Tesco, which is expanding its in-store bakery operations in Ireland. And smaller bakeries are under as much pressure as the large plant bakeries.

Irwin adds that smaller pack sizes are becoming much more popular with consumers, to reduce wastage. "There's a return to familiar tastes and comforts, in uncertain times. Premium products are past tense; consumers want quality at value prices." His colleague Michael Murphy, commercial director at Irwin's, agrees:" Price is a big factor and there is a lot of discounting going on, both in Northern Ireland and the Republic" .

The four main plant bakeries Brennans, Irish Pride, Johnston, Mooney & O'Brien and Pat the Baker make up the Irish Bread Bakers Association. Declan Fitzgerald, general manager of Pat the Baker, chairs this grouping, but declined to comment on the current state of the Irish bread market.

While modest price rises in recent years have driven value growth in the Irish market, households have been cutting back on the frequency of purchases, with a number switching to Aldi and Lidl. But the trade will soon be facing a major challenge: soaring flour prices mean that Irish bakers may have to increase their prices by at least 10% over the next six months.





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