Asian cake industry priced out of butter
The commodity squeeze in the Asia Pacific region is making butter too expensive for many bakers, according to Japanese newspaper the Asashi Simbun.
Cake makers have been hit by a triple whammy of greater demand for dairy in the region, drought in Australia reducing supplies, as well as dairy firms focusing on milk products that have bigger profit margins.
The butter supply to cake shops is therefore 20 to 30 per cent lower than last year, the newspaper said, pricing some manufacturers out of the market.
According to the US Department of Agriculture, dairy costs all over the world are all hitting record highs.
On the international dairy market prices for milk powders are currently well above US$400 (€298)/100kg with cheese prices also approaching the figure in value, the USDA said.
Although the government body did not give a figure for the cost of butter, it said that butter is similarly at a "historically high level."
ABF considers bakery sale
UK-based Associated British Foods (ABF) is considering offloading its bakery divisions, after higher commodity costs led to a fall in profits, according to the Times.
As well as rising flour prices, the company has had to contend bread falling in popularity in recent months, the newspaper said, quoting unnamed industry insiders.
Earlier this month, ABF posted overall group revenue, which includes sales of food products, ingredients, feed and clothing divisions, of £6.8bn (€9.5bn) for tax year 2007, a 13 per cent increase from the year before.
However, In ABF's grocery division, which includes the bread brands Kingsmill, Allison and Sun-blest, margins declined 1.3 percentage points to 5.8 per cent, from 7.1 per cent the year before.
Profit in this group also went down to £153m (€214m), a 16.9 decrease from £182m (€255m) last year.
Sales of the Australian bakery business in Sydney had also been poor in 2006, although the subsidiary had shown a "major improvement" in its performance over the last year.
According to the Times, ABF refuses to comment publicly on any disposal plans, even though company insiders admit that bread is no longer core to the business.
