Rising costs force Goodman's hand

CLAIRE ROGERS
Last updated 17:23 22/11/2012

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Supermarket shoppers look set to pay more for some breads after food producer Goodman Fielder said it will raise the prices it charges retailers. 

The company makes Nature's Fresh, Quality Bakers, Vogel's and Freya's bread as well as spreads, dressings, baking ingredients and dairy products. 

Goodman Fielder New Zealand managing director Peter Reidie said that after discussions with retailers it would lift prices in its range of proprietary branded bread from next month.

"Over the last 18 months a significant number of the company's costs have risen including key ingredients, energy, labour and more recently, distribution costs with new government road user charges coming into effect on the first of August.

"We are unable to continue absorbing these higher costs and have no option but to now reflect this in our baking product pricing."

He did not disclose by how much Goodman's prices would increase. 

A Countdown spokesperson said it was too early to comment on Goodman's price increase, but it would seek to negotiate the best price for customers. 

Its rival Foodstuffs, which runs the New World and Pak n' Save supermarkets, was unavailable for comment.

Goodman signalled the price hikes in Australia and New Zealand in its grocery and baking products at its annual general meeting in Sydney today. 

It said the increases would help it recover higher input costs, including commodity ingredients. 

In August, Goodman Fielder reported a A$147 million ($187 million) loss for the year ending June 30, thanks in part to a "perfect storm" that saw volumes in its bakery division fall, commodity prices rise and retail prices plunge on competition from cheaper private labels. 

By August the price of some Australian wheat had increased by almost 50 per cent since mid-May, after predictions of a poor corn harvest in the US forced grain prices to rise sharply. 

Goodman Fielder chief executive Chris Delaney told shareholders the company was on track to make $100m in annualised savings by 2015. 

That programme involves cutting its manufacturing facilities from 53 to 35 through consolidation of sites, closures and divestments. 

It has already closed or announced plans to close or sell 11 sites, including the Champion flour mills in Christchurch and Mt Maunganui that are part of its New Zealand Milling business, which is up for sale.

Delaney said it expected to conclude a sale of business, which employs about 130 people, "in the near future".

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Market conditions would remain a challenge. Consumer confidence in Australia and New Zealand continued to be subdued, and the pricing and competitive environment was still tough, he said. 

The company is divesting non-core businesses and pouring its energies into boosting earnings in its core divisions of bakery, dairy, flour and cake mix, spreads, and dressings and mayonnaise. 

It is also planning to branch outside supermarkets with products such as artisan breads, which could be sold into restaurants and hot bread shops. 

Goodman's shares rose 6.6 per cent on the NZX to close at 81 cents.

- BusinessDay.co.nz

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