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Bread market 'competitive' in KwaZulu-Natal and Western Cape
![Bread market 'competitive' in KwaZulu-Natal and Western Cape](https://biz-file.com/c/1503/265386.jpg)
Tiger's bread business in KwaZulu-Natal - where it has bakeries in Durban, Margate and Pietermaritzburg - has seen pressure on sales resulting from new competition and a five-week strike by its distributors late last year.
Less than a decade ago SA's four major bread producers were found to have connived to reduce competition through involvement in a so-called bread cartel.
An investigation by competition authorities that started in 2006 found the producers had been operating a cartel in the Western Cape and various inland markets, that divided markets regionally and fixed prices. Changes in the competitive landscape since then are difficult to gauge as the industry shares less information for fear of being in contravention of the Competition Act.
Tiger's JSE-listed competitor Pioneer Foods, which owns the Sasko brand, increased its presence in KwaZulu-Natal in late 2013 by opening a modern bakery in Shakaskraal. Before then it only had a bakery in Ladysmith, but it has three bakeries serving the Cape Town region versus Tiger's two.
Tiger head of grains Noel Doyle told investors last month that "the strike (last year) came on top of what is a very competitive environment in terms of the pricing dynamics in both KwaZulu-Natal and ... the Cape Town markets".
"We have certainly seen our volumes come under pressure in both of those regions as a consequence of the pricing pressures."
In response to questions on competitive pricing pressures in the regions, Pioneer said "bread pricing varies between regions based on actual cost drivers and supply and demand dynamics".
"The opening of the new Shakaskraal bakery at the end of 2013 has enabled Pioneer Foods to achieve KwaZulu-Natal volume growth," the company said.
A 700g loaf of brown bread cost 8.66% more in January than a year before, while white bread cost 8.87% more, according to figures from the National Agricultural Marketing Council. The council's Food Price Monitor report does not break figures down by province.
Tiger and Pioneer compete in KwaZulu-Natal, the Western Cape and other markets with Braitowned Premier Foods, which makes Blue Ribbon and other brands. RCL Foods' Foodcorp business competes in inland markets with its Sunbake breads.
The four producers collectively sell more than half of SA's bread, and were all implicated in a Western Cape and national bread cartel following a tip-off in 2006.
In imposing a R195m penalty on Pioneer for its role in the cartel, the Competition Tribunal said in 2010 that the four businesses had agreed to a division of markets between 1999 and 2001 - "which in our view still persists". This agreement extended to "at least" the southern Gauteng, Free State, North West and Mpumalanga.
Source: Business Day
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