Tesco versus Hovis: Viewpoint

22 October, 2010
British Baker editor Sylvia Macdonald asks what would an ombudsman make of the stand-off?

It is a massive industry spat! Tesco the retail giant, described in the press last week as making £6,000 profit per minute, has delisted 11 Hovis lines because the bread baker has made clear its need to impose a price rise.

It is easy to be envious of Tesco’s profits and forget its tremendous talent in retailing. But you’d also be blind not to have noticed the recent rise in UK and global wheat prices, due to floods, drought, hoarding of stocks and hedge-fund betting.

It is not easy walking away from a customer like Tesco; it takes courage and principles. It is also easy to forget that British bread is among the cheapest in Europe and, like that other staple, milk, is often under-priced.

Much has been made in the national press of the fact that Hovis’ parent company Premier Foods has £1.4bn debt. But the price rise for Hovis is about much, much more. It is about retailers wanting quality loaves, it is about investment in innovation (lots of that on the Hovis front), it is about supporting the brand in the media, it is about updating old plants to produce the wide choice of breads retailers demand and it is about passing on price rises in commodities such as flour that would cripple plant bakers if they were merely absorbed.

Above all, it is about paying a fair price for a fair product – and in this case recognition must be given to the fact that Hovis supports British farmers by using 100% British wheat. Hovis’ presence on the shelves also keeps competition healthy alongside the two other major brands – Kingsmill, Warburtons – and other smaller ones.

Amid all the rhetoric for and against the need for an ombudsman, it would be interesting to know what such a figurehead would contribute to the dramatic impasse. At two conferences I attended earlier this week, the British Society of Baking in Warwickshire and the Irish bakery conference in Belfast, the prevailing comments were that everyone needed to make a profit, not just a certain supermarket.

On a softer note, Hovis is also supporting the Royal British Legion’s annual Poppy Appeal, giving 4p from every Hovis Seed Sensations loaf sold between now and 16 November. It would be a shame if this worthy cause were to lose as much as a penny.





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