The past 12 months have been a tale of two halves for the bakery category - or three quarters, more like. In the first nine months of the year to 9 March, bakery prices were largely static, but after keeping a lid on inflation for much of 2011, prices have started to creep up across the five leading supermarkets.

A basket of 42 identical products stocked by all five retailers is now 4% more expensive than it was this time last year, with the average unit price moving from £1 to £1.04 []. The biggest rises came from Tesco, which increased prices on baked goods by 6% year-on-year, while Asda, Sainsbury’s and Waitrose raised prices 3%, and Morrisons put through a 2% increase.

Asda and Tesco were closely matched on those 42 baked goods for much of the year, but Asda won out in the end, beating Tesco to the title of cheapest supermarket for bakery on those products, thanks to some sharp price cuts in November. Although Tesco mirrored Asda’s cuts, it did not lower prices enough to match its Leeds rival completely. Asda finished the year with 99p average price, 2p below Tesco. That said, across a wider selection of about 800 products - including lines that would not be subject to price matching guarantees - Tesco’s prices were, on average, flat, while Asda’s rose by 8%.

Across the 42 products stocked by all retailers, own-label was responsible for the biggest price rises, with the average unit price up by 5.4% year-on-year, to 97p. Own label was closely followed by Hovis-maker Premier Foods, which saw its bakery prices rise 4.7% on average, to £1.12.

The average price of a Warburtons product stocked by all five retailers rose 2% to £1.03. However, when the number of products was broadened to include those only stocked by some retailers, the average rose more sharply, by 6.4% to £1.16.

Rising prices on baked goods may seem counterintuitive, given that British wheat fell from £199/tonne to £140/tonne in the year to December 2011 [HGCA]. But there is little direct correlation between wheat costs and retail bread prices, according to HGCA senior cereals analyst David Eydall. Prices are more affected by the buying patterns of flour millers, he says.

The change in wheat prices has also been less extreme than in 2010, when there did seem to be a knock on effect. They have fallen circa 30% over the past year, whereas in the year to 2010, they shot up 86% from from £107/tonne to £199/tonne, while retail prices rose 5%.

In terms of promotional activity, Morrisons dominated the bakery category, running 46.5% of the 776 promotions recorded over the year. Tesco and Sainsbury’s each accounted for 20%, while Asda ran just 56 bakery deals (7.2%), and Waitrose 41 (5.3%).

The most commonly used promotional mechanic was multibuy, which accounted for 71% of all promotions.

Wholesale prices: eggs and dairy

Fears about shortages following the battery cage ban continue to drive up EU egg prices. Shell eggs for processing remain the fastest risers, with prices up 88% in the past month and 165% in the past year.

Liquid white and powdered yolk have also reported double-digit hikes in the past month, rising by a respective 23.2% and 25.3%, although year-on-year increases remain modest compared with shell eggs.

Many dairy products are moving in the opposite direction. Butter has slumped 23.7% over the past year, and sluggish demand has resulted in prices continuing to fall over the past month, to £2,725/t.

Powder continues to be down significantly year-on-year, although decline has started to slow, with SMP and whole milk powder falling 1.5% and 3.6% over the past month compared with year-on-year drops on both of over 20%. Cheddar remains around £3,000/t - flat on last month and just up by a fraction year-on-year.

Julia Glotz