The hot summer is set to burn a hole in consumers' pockets as it will lead to a rise of 10-15 cents in the price of bread next month.
The exceptionally dry summer has cut the European wheat harvest by 10 per cent, driving up the price of both grain and flour. Odlum's, the Republic's largest miller, recently wrote to its bakery customers warning that it planned to increase flour prices by €30 a tonne. Industry sources said this was an estimated 10-15 per cent increase on bread, depending on the grade of product.
Yesterday, the Irish Bakers' Association spokeswoman, Ms Rosemary Garthe, warned that increases on this scale would have to be passed on. "It is inevitable that it will have to be passed on, the industry has had to absorb huge cost increases over the last three years and cannot continue to do this," she said. She added that bakeries had been hit with a 33 per cent labour cost increase and a six-fold hike in insurance charges in recent years.
One industry source confirmed that bakers were looking at increasing their charges, but said some operations could absorb up to 5 per cent of the price rise. He added that the hike was unlikely to be short-lived, as the supply squeeze would continue until 2004. "You only have a harvest once a year," he said.
It is thought consumers will have to start paying more for bread from next month. According to the Central Statistics' Office (CSO), the average 800 gram white loaf costs €1.08. If the full increase is passed on, it could jump by 15 cents. If the suppliers take part of the hit, it could be closer to 10 cents. A 10 per cent increase on the average 800 gram brown loaf, which sells for €1.19, would bring it past €1.30.
Yesterday, Irwin's Bakery in Portadown, Northern Ireland, warned consumers that they were facing price hikes of at least 6p sterling or 8.5 cent a loaf. At the same time, British Bakeries, producers of the Hovis and Mother's Pride brands, said they would be forced to increase prices by 7p sterling, or 10 cents. British and Northern Irish multiples use bread as a loss-leader to attract customers, but their equivalents in the Republic do not undercut the wholesale price.
A spokeswoman for Tesco, which has a 20 per cent-plus share in the Republic's grocery market, said the multiple was not in a position yesterday to say how it would react. "Bread prices are a very competitive area and we are going to wait and see," she said.
NCB Stockbrokers' economist, Mr Dermot O'Brien, said yesterday that increases of 10-15 per cent in the retail price of bread would have only a marginal impact on the consumer price index (CPI), which is the key inflation measure. He said flour-related products accounted for just 1.8 per cent of the overall CPI.
Ironically, IAWS, which holds 50 per cent of Odlum's with Greencore, fixed prices with the flour suppliers for its Cuisine de France business several months ago. Cuisine de France imports the flour used in its products from France.
