George Weston Foods has blamed a weaker first half result on the recent round of price cuts to private label bread by Coles and Woolworths.
George Weston Foods chief executive Andrew Reeves said private label price cuts had resulted in a $100 million slide in value in the bread market, according to a Fairfax Media report.
According to the report, George Weston Foods had been forced to cut the price on its branded bread range, which includes Tip Top.
"I don't believe the current level of pricing is sustainable for the health of the category," Reeves reportedly said.
"There's been on average a 10 per cent reduction in the price of bread, which is very significant; interestingly, we are not selling any extra loaves.
"We have seen more than $100 million of category value disappear and it's certainly had a detrimental effect on our bread business profitability in that time. We are selling the same product for less price and that flows right through the P&L [profit and loss statement]. That's something we'll address in the months ahead."
GWF is a wholly owned subsidiary of Associated British Foods (ABF). Discussing ABFs interim result, chief executive, George Weston said that this had been “a disappointing period for George Weston Foods in Australia”.
“Bread margins have been reduced by a combination of competitive price pressure and retailers featuring bread in their drive for lower prices with heavy price promotion activity,” he said.
