Investor confidence is a fickle thing. When a company such as Premier Foods makes bold acquisitions, it is lauded by the media. But when trading turns tricky, it’s like the cult of celebrity: you are fêted at the top, but detractors are quick to gather when you slide off your perch (pg 4).
Trading is tough for a lot of bakery firms at the moment. All this week I have been hearing about the squeeze some supermarkets are putting on bakery suppliers - both finished goods and ingredients. Some of the telephone calls have told horrendous stories and I doubt that the Compe-tition Commission report, which is published after we go to press, will do a single thing to alleviate the situation.
On the one hand, figures quoted by the Office of National Statistics reveal that the surging costs of wheat have led to a 36% rise in food ingredient prices in 12 months - the biggest in 20 years. Also, raw materials rose at an annual rate of 18.9% in January, the highest since records began 22 years ago. On the other, you have Andy Bond, chief executive of Asda, stating recently that suppliers should "do their own restucturing", so they are not passing on the increases.
Let’s be frank. For "restructuring" read "consolidation, closures and job cuts". Because, just to add fuel to the situation, many fixed-price contracts with suppliers are coming to an end, Sterling has weakened 9% against the Euro and many commodity prices reached their highest peaks ever in January.
In addition, the supermarket price war has taken on a different dimension, with Morrisons making a resurgence and joining the fray between Asda and Tesco.
In the plant bread sector, Warburtons’ market share has continued to grow, although North American wheat prices are likely to hit the company hard. But I doubt they will join the throng of bakers in America, who are being urged to descend on Washington and protest against critically low wheat reserves (pg 6). What is clear is that an alternative to wheat needs to be found for biofuels - and fast.
Meanwhile, if the supermarkets want healthy competition to continue, they will need to show more understanding. Every market research report shows consumers have not cut back on food. Prices to suppliers must be fair!
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