Australian food group Goodman Fielder, which has made losses in its last two financial years, said today (22 November) it had secured a “milestone” agreement on prices and recovering input costs.
MD Chris Delaney said Goodman Fielder had enjoyed an “improved dialogue” with its retail customers in recent weeks and had struck agreements that would help its business generate “more acceptable earnings”.
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“We have worked hard to deliver an improved level of alignment and engagement with our retail partners, particularly in their recognition of the costs involved in Goodman Fielder continuing to reliably supply fresh bread to destinations around Australia,” Delaney said.
The company, which sells brands including Meadow Lea and White Wings, had agreed price increases and on recovering higher commodity costs affecting both its bakery and grocery businesses.
“This is another important milestone in restoring more acceptable earnings, particularly in our bakery business,” Delaney told Goodman Fielder shareholders at the company’s AGM.
Manufacturers, particularly those that use grains, are facing pressure on their commodity bill after severe weather in key producing countries like the US and Russia.
Goodman Fielder’s success in securing price increases follows similar deals by local rival George Weston Foods, which is owned by Associated British Foods. Earlier this month, ABF finance director John Bason told just-food the company secured price increases on its bread products in Australia, a market the group described as “a difficult retail and competitor environment”.
Australia is a market in which two retailers, Woolworths Ltd and Coles, account for almost 80% of sales. Speaking to just-food in September, Coles MD Ian McLeod said suppliers would in the past demand price increases “with no real justification”. Now, he said, Coles would need to be convinced price hikes were necessary.
Delaney, meanwhile, is looking at other ways to improve Goodman Fielder’s profitability. The company has sold an oils business and has plans to offload its milling operations in New Zealand. In June, Goodman Fielder announced it would close three bakery sites. Once they are closed, Goodman Fielder will have 45 plants but it wants to have less than 35 by 2015.
The restructuring plan aims to save Goodman Fielder A$100m (US$103.7m) and Delaney told shareholders the programme was “on track”.
