Commodities

Bakers cut bread prices on competition by supermarkets

NAIVAS1210V

A supermarket attendant arranging loaves of bread on a shelf in October 2020. PHOTO | EVANS HABIL | NMG

geraldandae

Summary

  • Bakers have sliced bread prices by Sh5 on the stiff competition by supermarket in-store bakeries, hurting their profit margins in the wake of the prevailing high global cost of wheat.
  • The price of bread in the in-store bakeries has been cheaper by an average Sh5 since April when rival bakers raised their prices in a fresh attempt to pass the additional cost in the price of wheat to consumers.

Bakers have sliced bread prices by Sh5 on the stiff competition by supermarket in-store bakeries, hurting their profit margins in the wake of the prevailing high global cost of wheat.

The price of bread in the in-store bakeries has been cheaper by an average Sh5 since April when rival bakers raised their prices in a fresh attempt to pass the additional cost in the price of wheat to consumers.

The in-store bakeries did not adjust their prices — titling the scale as price-sensitive consumers opted for the cheaper products. Spooked by the consumer shift, bakers have now lowered their prices to keep up with the competition.

A spot check by the Business Daily shows a 400-gramme loaf of Superloaf and Festive is now retailing at Sh50 from Sh55 previously with 800-gramme Festive brand selling at Sh92 from Sh100, depending on the point of purchase.

“It is evident that the public cannot pay a premium for the bread and this is what has forced bakers to cut their prices because of competition,” said Broadway Group of Companies managing director Bimal Shah.

This is the second time that bakers have been forced to review the price downwards since the beginning of the year.

There have been about three reviews on the cost of bread since January but supermarkets maintained the cost of in-house baked bread at Sh50, offering consumers a cheaper option.

Most supermarkets across the country bake their bread, which they sell alongside those from other bakers. Processors attributed the increase — the first in four years — to the high cost of wheat flour and other ingredients such as cooking oil.

James Ng’ang’a, a shopkeeper in Nairobi’s Shauri Moyo Estate, said consumers had stopped paying an extra Sh5 for bread as they opted for cheaper ones, leaving him with huge unsold stocks.

“Customers would settle for less known brands leaving the ones that they are used to because of the Sh5 increase,” he said.

The decision has placed millers at a crossroads as they have to weigh options on their margins and turnover of their stocks in the wake of the rising cost of wheat at the global market.