Supermarkets’ record-low bread prices to impact on bakery franchises

Sales of private label bread have doubled since Coles and Woolworths slashed prices to $1 a loaf earlier this month, putting pressure on independent bakery operators.

On July 3 Woolworths cut the price of Homebrand white bread from $1.29 to $1 and Coles priced its white SmartBuy bread at $1 a loaf.

Packaged private label bread sales rose by 100% as a result according a report in The Australian Financial Review.

Coles has defended the move, claiming it was able to fund the latest price cuts because of new supply agreements and was not selling private label bread below cost.

Paul McDonald, general manager of the National Baking Industry Association, said the private label price cuts could remove many well-known brands from supermarket shelves.

In a submission to the dairy inquiry earlier this year McDonald said private label bread priced at $1 would change consumers’ shopping habits and would have massive implications for the baking industry because independent bakers could not produce a basic loaf for less than $1.50.

Kendra Teasdale, spokesperson for Baker’s Delight, agreed that the price change may impact on the buying habits of pre-packaged supermarket bread buyers.

“For example a Tip Top buyer may now purchase a generic brand. However we don’t expect this to have an impact on bread buyers who purchase their bread from Bakers Delight,” Teasdale says.

“Bakers Delight customers see value in bread that is baked fresh from scratch every day.”

Brian Walker, managing director of The Retail Doctor, says independent bakers should play up the fact that their produce and their service are of a higher standard than supermarkets.

“It’s about creating a point of difference. Outside of Woolworths and Coles if you don’t have a differentiated offer around service and convenience you probably don’t have a very competitive offer anyway,” Walker says.

He says the challenge for small food retailers is creating an environment where customers walk into the store, you know them by name and you can have a conversation with them, which supermarkets can’t do.

“Small retailers can’t compete on range and they will struggle to compete on price so they have to compete on these other differentials,” he says.

According to Walker outstanding customer service and product knowledge should be combined with convenience, such as longer opening hours.

Walker says that rather than offering a huge range small retailers should offer the right range for their area and customer base.

He says retailers should ensure that they value add with multiple promotions and think of other ways to please customers, such as free samples.