Bread
Premier raises bread prices as profits half
The Hovis-to-Mothers Pride group blames surging wheat costs and governments' push on biofuels for the rising price of a loaf.
Premier Foods will force shoppers to pay up to 8p more for a loaf of Hovis after raising the price of bread for the second time this year because of an “unprecedented” surge in wheat costs.
The company, which makes Hovis, Mothers Pride and Homepride bread, said that it had no choice but to push through an increase given that wheat prices had doubled in the past 12 months after poor harvests around the world and the UK's dismal summer.
Premier Foods admitted the price rise as it revealed its pre-tax profits fell nearly 50 per cent to £13.9 million in the six months to June 30. Profits at Premier's Bread Bakeries business almost halved to £19 million.
Robert Schofield, chief executive, refused to reveal the extent of the price increase, adding that it was up to supermarkets and independent retailers whether to pass it on the additional cost of a loaf.
However, Mr Schofield said that two major retailers had increased the price of bread from today, with one group raising prices by 8p.
It could mean that an 800g Hovis white loaf could cost more than £1, compared to 88p last summer before a price rise in February. Mr Schofield refused to rule out another price rise - the third - later this year.
The surge in wheat prices has already affected the price of Italian pasta and French baguettes.
Mr Schofield warned that other food products were also facing inflationary pressure, in part because of the desire by governments to give over more farmland to biofuel products.
He said: “Everyone is focusing on wheat and bread prices at the moment but there is a general inflation that hasn’t been with us since the 1990s.
“As long as governments are going to grow fuel there will be in effect an environmental tax on food.”
Kevin Hawkins, director general of the British Retail Consortium, said he believed shoppers would be able to weather higher bread prices.
He added: "The main growth areas in the bread market have been speciality lines such as walnut and organic in the last few years, which are generally higher priced anyway.
"The standard white and brown breads have been in a steady decline for a long time."
Turnover across the group, which also makes Branston Pickle and Sharwoods cooking sauces, more than doubled to £899 million following last year’s acquisition of Mr Kipling rival RHM and the UK arm of Campbell’s Soup.
The group said trading profits across the enlarged business, excluding one-off exceptional costs, rose 112 per cent to £96.8 million.
(Published by Times Online, September 4, 2007)
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