an editorial supplement to The Grocer Something's got to give The bakers are fed up with the crust they earn for a loaf and protest that the squeeze has robbed them of money for npd to fight their way out. Elaine Watson reports Last year was not a great one for the Irish bakery industry. "Obviously, no individual company wants to put up its hand and say I'm losing money," says Northern Ireland Bakery Council chairman Brian Irwin, "but the industry here in the province at least is enjoying a collective negative return." Talk to any Irish baker and he'll tell you it costs far more to produce a loaf of bread in Ireland than Great Britain because of the vast differences in the economies of scale between the two markets, higher energy and distribution costs, shorter production runs and the expense of importing raw materials. "Retailers have to accept that the wholesale price of bread should be materially different on the island of Ireland," says Irwin, who has recently been lobbying MPs and consumer groups to convince them the collapse of the baking industry in the province is a real possibility if there isn't a price increase soon. Paul Rothwell, chief executive at Ormeau, the largest independent bakery in the province, says the arrival of the GB multiples in Ireland has pushed bread to the frontline of supermarket competition. Basically, the prices we have now are unsustainable." In practical terms, that means closures and job losses. During the past 12 months, Allied Bakeries and Mothers Pride have closed plants while others have disappeared altogether (O'Hara's, Kennedy's, McErlean's). Bakers' Federation director John White says the key is to develop new products in sectors where the market is growing, such as the speciality and premium categories. According to Taylor Nelson Sofres, consumption of bread and morning goods is far higher in Northern Ireland than in Great Britain, and GB therefore represents a key export market for speciality and value added lines as consumers trade up. The Republic of Ireland is a less attractive export market given the strength of sterling. Ormeau sales and marketing director Stuart McCulloch is therefore targeting the GB market with Irish specialities such as cheese and bacon soda farls, fruited breads and new products such as an organic wheaten, champ potato and cracked pepper soda farls. The brand leader in the NI market, Ormeau also supplies branded and own label loaves and speciality breads to major retail outlets in the ROI, GB and continental Europe. Rival Irwin's is also turning its attention eastwards with a £3.4m investment in speciality lines for export markets and a "healthy range" of loaves and rolls high in calcium, folic acid and fibre and low in sodium and fat. Meanwhile Allied Bakeries in Belfast has been building market share in the growing premium wrapped bread market with extensions of the hugely successful Kingsmill brand and a new organic loaf under the Allinson's brand. So how are companies faring south of the border? While bakers in the republic face similar problems to their counterparts in the province, the bread market is not as aggressive, says Dublin based group the Bread Bakers' Association, and bread prices are higher. A booming economy and a slight upturn in domestic bread consumption, along with a ban on below cost selling, plus planning restrictions on large retail developments, also make life slightly easier south of the border. However, bakers must still contend with rising wage bills and distribution costs. Bakeries have been closing down on both sides of the border as the market becomes increasingly competitive and margins are squeezed, according to one industry observer. "Put it this way, we're serving a population the size of Greater Manchester in an area 20 times its size. And bread prices here haven't kept up with inflation." Unlike their northern counterparts, top bakers in the republic, Brennan's and Irish Pride, claim they are better off focusing on standard loaves and rolls without diversifying into more speciality lines. A source at Brennan's says niche lines are probably not viable given size of the market and its shorter production runs. "Sliced pan is the basic fuel of the bread market in the Republic, accounting for approximately 70% of bread volume," says a spokeswoman for Dublin-based Irish Pride. Marketing spend is concentrated on the company's new premium sliced crusty loaf Original Farmhouse, while a promotion with Nutella is helping drive sales of the popular Big Toast brand. But no amount of promotional activity and NPD alters the basic problem that Irish bakers are not getting a decent return for a loaf of bread, says Irwin. "The Competition Commission report vindicates our view that an unfair relationship exists between the multiples and the bakeries. But what action are they actually taking to remedy the situation?" Mothers Pride Ireland sales director Colin Reid says bakers are stuck between a rock and a hard place: "We're fed up with being told NPD is the key to survival. The money just isn't there." Ormeau chief Paul Rothwell is equally candid: "The situation is already very serious. Unless we get the price rise the collapse of the industry in the province is a very real possibility. "We've already driven out all unnecessary costs from our businesses. "The multiples forced us to improve efficiency and quality, but they've also driven profitability right out of the industry. Something's got to give." {{SUPPLEMENTS }}

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