RHM feels wheat price hike

By Catherine Boal

- Last updated on GMT

Related tags Bread

Like many UK bakers, food group RHM, who own the Mr Kipling and
Hovis brands, has been feeling the heat from an exceptionally warm
summer driving up wheat prices.

The company announced this week that high commodity costs had dented yearly sales but was optimistic that the traditionally successful trading period at Christmas would restore falling figures.

This year's summer was a bad one for bakers as wheat supplies dipped to their lowest levels in 25 years due to drought and, judging by a trading update released by RHM, the effects are still being felt by producers.

RHM, who make around a third of all British bread, was forced to rely on an increase in flour prices to counteract the spiraling cost of wheat and, in August, said it would up prices to around £30 (€45) per tonne.

The extent of the damage done by the drought and subsequent wheat supply drop has yet to be established according to the company who stated: "The lag in recovery of higher wheat costs is estimated to have had a 2m impact in the first half of the year. The full year impact will depend upon further movements in the wheat price and the timing of bread price increases."

RHM appears to be on track for its six month interim report however, thanks to the success of core brands such as Hovis which was reformulated and repackaged this year to promote its healthy image.

Chief executive officer Ian McMahon said: "We are on track to deliver further progress in the year as a whole, notwithstanding the impact of the current exceptionally high wheat price and our increased advertising investment."

He continued: "We are encouraged by satisfactory trading in September and October across all of our divisions and are now focused on delivering a successful Christmas period, continuing the turnaround in performance in our branded cakes business and recovering higher wheat costs."

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