Trend toward aggressive pricing among bakers a prescription for trouble
Trend toward aggressive pricing among bakers a prescription for trouble
BakingBusiness.com, November 24, 2009
by Josh Sosland

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Between recent unemployment and housing data arrayed on one side and the stock market and productivity figures on the other, the current economic picture offers fodder for those taking either a hopeful or a pessimistic view of prospects. Looking at baking industry facts and figures, the picture appears more one sided, unfortunately.

A scan of recent weekly circulars reveals scattered promotional discounting as aggressive as at any time in recent memory. Private label bread offered at prices equating to 63c per lb and widespread offers of "half-off" for leading national brands in certain categories is disheartening for an industry that has not exactly prospered in recent years.

Baking ingredient prices may be below recent highs, but costs hardly could be called "cheap." The mid-November index for white pan bread ingredients, as calculated by Milling & Baking News, was down 7% from a year earlier but remained a hefty 41% above the 2000-06 average.

Lamenting the deteriorating competitive marketplace, one baker noted that promotional prices "may simply move unit volume between brands while the category suffers with an overall lower average price." He added that his company would counter the competitive prices where necessary to protect share.

It’s difficult to think this approach will be different from what other baking companies intent on preserving market share pursue and that any baking company will derive much benefit from such practices. Promotional pricing, in building a business, is a poor substitute for product innovation, investment in greater efficiency and marketing that builds the value of brands. What appears to be going on currently is little more than an exercise in which bakers sustain considerable short-term pain with scant reason to expect long-term gain.


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