Winning the bread war

 

breadAggressive discounting and pricing wars on bread loaves between the supermarkets has drawn widespread attention, with an announcement by Woolworths to further reduce the price of its bread from $1 to 85 cents also attracting controversy.

Despite the competition between supermarkets, Roy Morgan Research suggests smaller specialist stores, such as Bakers Delight remain unaffected by the deep discounts provided by the majors, with marketshare remaining fairly stable in both supermarkets and specialist stores.

Of the supermarkets, Woolworths already has the largest share of the bread market, accounting for 27 per cent of total dollars spent on bread in an average week, with a mean weekly spend per customer of $5.96. Coles Group is second, with a 23 per cent share and mean weekly spend of $5.66, well ahead of IGA at seven per cent and Aldi, six per cent.

Overall, supermarkets account for almost two thirds of Australia’s total weekly bread spend.

When combined, bread shops such as Baker’s Delight, Brumby’s Bakery, and Delifrance have almost the same share of the weekly dollars spent on bread as Woolies, with the former comprising 27 per cent of the market, compared to Woolworths’ 26 per cent.

Despite this, the mean weekly spend at specialist retailers is markedly higher than supermarkets: ranging from $6.85 at Delifrance/other bread shops and $7.37 at Bakers Delight to $7.58 at Brumby’s.

Given the difference in spend on bread at supermarkets and bread stores, it is not surprising that people belonging to high-income Helix Personas communities Leading Lifestyles, Metrotechs and Aussie Achievers are more likely to purchase their bread from the specialist bread shops, while those from the less well off Getting By, Golden Years and Battlers communities are more likely to buy it from supermarkets.

Warren Reid, group account director at Roy Morgan Research, says that some media and industry sources claim that Woolworths’ decision to discount its Homebrand white bread so heavily could hurt independent and specialist retailers that don’t have the buying power to match such a low price.

“Data from Roy Morgan Research shows that consumers who buy their bread from stores like Bakers Delight can afford, and are willing, to pay more, and almost certainly wouldn’t be swayed by an 85 cent white loaf,” says Reid.

“For example, by using Helix Personas to profile bread buyers, we find that people from the Progressive Thinkers persona (part of the Leading Lifestyles community) are 54 per cent more likely to buy their bread from Bakers Delight. With a very healthy household income, an optimistic outlook and a taste for life’s little luxuries, these individuals wouldn’t think twice about paying more for bread if they thought the taste and quality warranted it.

“On the other hand, Pennywise Australians are 39 per cent more likely to buy their bread from Woolworths. Part of the Battlers community, Pennywise is exactly the kind of shopper who’d find 85 cent bread an irresistible proposition. Typically living in rural areas, they earn a below-average income but are adept at making it last: and one of their tried-and-true budgetary measures is buying stores’-own products.

“People who purchase their bread at specialist bread stores tend to be very different to those who buy it at supermarkets, and although there is some crossover, offering white loafs for 85 cents is unlikely to change this. Woolies would have been more likely to win over Coles and Aldi customers if these supermarkets hadn’t been so quick to discount their own white loaves in response to the price reduction.

“The real threat will be to the ‘branded’ bread sold through supermarkets, when consumers are forced to compare the two products side by side – one much cheaper than the other.”

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