The Prime Minister talks of bread and butter issues like the cost of living. But bakers warn that after nearly a decade in which they've held the price of a simple loaf of sliced bread, prices are now rising.
At 70 years old, there are still few things John Yarrow loves as much as the smell and taste of fresh bread from his family bakery in Manaia. It brings back memories of his childhood, running around the south Taranaki factory.
But like other New Zealand bakers, the company has been forced to diversify in recent years; now, you can't buy its bread loaves in the supermarket.
Aside from those it sells in Manaia, all its loaves go to export. Most of what it sells now is frozen cookie, croissant and Subway bun dough.
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There are several reasons why the century-old firm has stopped baking bread for the New Zealand market.
There were business problems that forced the company into receivership before John and Rosaleen Yarrow bought it back. There are New Zealanders' changing food tastes. And there was the price war in 2014 in which Foodstuffs and Countdown demanded bakers slash their margins in order to knock retail prices down to $1 for a loaf of sliced white bread.
In March 2012, the average price of a basic 600g loaf of supermarket brand white bread topped $1.75. It sparked a war of words (public health specialists said New Zealanders were paying too much for healthy food) and then a war of prices.
In July 2014, Countdown shoppers knocked the price of a loaf of Homebrand bread down from to $1. That was matched by competitor New World, which cut the price of its Budget bread to $1. Pak 'n Save emailed customers promising sliced bread for "under $1".
Sustained drop in price of sliced bread, since 2014 price war
And there it stayed, for more than five years. Bakers say the price deduction didn't come out of the supermarkets' profit margins. The hard-nosed management at Foodstuffs (which owns the New World, Pak'nSave and Four Square grocery brands) and Woolworths (Countdown, Super Value and FreshChoice) demanded suppliers reduce their prices.
The two main bread producers then were Australian-owned Goodman Fielder (Nature's Fresh, Molenberg, Vogel, Freya's) and George Weston Foods (Tip Top, Ploughmans, Bürgen) – and two locally-owned companies, Coupland's and Yarrows.
For most of a decade, the price of supermarket budget bread continued to defy inflation price rises – but not any longer.
Bakers warn that the latest hike in the price of flour, combined with labour and other supply chain costs, is forcing up the price of bread and other baked goods. Pak'nSave's cheapest loaf of bread is now $1.19, for Foodstuffs' Value house brand. New World sells the same loaf for $1.49. And Countdown's cheapest loaf of bread is sitting at $1.30, for Woolworths' Essentials brand.
John Yarrow now has a unique vantage point, watching the changes in the bread market. He isn't discussing his company's commercial relationships with the supermarket chains. But he does confirm the company pulled out of sliced bread for the domestic market – and it's no secret that was prompted by the supermarkets price war in 2014.
Now, he says, bakers are suffering new impacts from rising costs like flour, as well as labour and transport. "It's the same in every industry. You're going to see enormous wage pressure, whether it's nurses, teachers, whatever. At the end of the day, people need a fair wage for a fair day's work.
"And with transport costs and supply chain issues, you're going to see the impact on food as things move up."
"It's likely supermarkets are retaining profit levels at the levels they expect. Bakers are being squeezed by the rising cost of ingredients and labour." – Cameron Scott, Quality Foods Southland
"Now with Ukraine and Russia, the grain shortages in the Middle East, and the cost of grain shipping services, you'll see new prices for grain coming through at this time of the year. If the situation in Ukraine improved, we'd see some relief – but all the grain-growing countries of the world are facing real problems.
"Right at the moment, I don't see flour coming down in price."
Bakers have tightened their belts and accepted narrower margins, he says, but that's no longer sustainable. They'll have to pass on some of their costs.
Quality Foods Southland is another that focuses on frozen dough exports now, and no longer bakes bread. Chief executive Cameron Scott agrees prices have been forced down in recent years, but as another informed observer, he predicts bread prices will rise more quickly now.
From this month, companies will pay an extra 10 percent for flour, in large part because of the invasion of Ukraine. And that comes on top of the increase to the minimum wage that will affect some bigger bakeries, and other supply chain costs.
"It's likely supermarkets are retaining profit levels at the levels they expect," Scott says. "Bakers are being squeezed by the rising cost of ingredients and labour."
Back in Manaia, John Yarrow says his company is no longer focused on the domestic market. It exports to Australia, to six Asian countries, and to Pacific Island nations.
"Bakers were working very hard, very long hours. Their sons and daughters who were born after the war didn't want to work the hours or times their parents were working, so they either closed the units down or sold out." – John Yarrow, Yarrows the Bakers
The company now employs 340 people, in its bakeries in Manaia, Rotorua and Tirau, and in a flour mill it's also built in Tirau to hedge against volatile commodity prices. Even then, it has to import the wheat from Australia, in order to produce about 50,000 tonnes of flour a year.
"Our business is now 100 years old, and I've seen enormous changes," Yarrow says.
"They were very tough years, coming out from the Depression and from the war years. No real equipment in the factories. Bakers were working very hard, very long hours. Their sons and daughters who were born after the war didn't want to work the hours or times their parents were working, so they either closed the units down or sold out."
"I've always said to my staff, and even my family, that you've got to be able to change. When I was a boy, we used to make lots of little small cakes. And then we went into packaged cake. You had a choice of bread – brown or white – that wasn't wrapped.
"In New Zealand, 25 or 30 years ago, no-one had really heard of croissants. People's tastes change and you've got to change along with that. We've had the foresight to look at what we can do, where we can sell some of our products, and we've grown accordingly."
When he was a boy, the country had about 800 bakeries producing bread to supply the grocery stores; now there are about seven. Patrick Goodman and other independent bakers consolidated into the Quality Bakers cooperative from 1968; a few then split off again before being absorbed into the Australia-based corporate Goodman Fielder.
Those that remain have got larger and more industrial. Yarrows' main factory in Manaia is "a hell of a lot bigger". The flour used to arrive in 160 pound tube sacks; now it turns up in road tankers and is stored in silos. Yarrows makes more than 3 million cookies a week for export, and similar numbers of croissants.
"If you don't change, you don't get ahead."
Some things never change, though. Yarrow reckons you still can't beat a good meat pie, or a sandwich made from slabs of fresh sliced bread like those he remembers as a kid.
