Australia's largest baker, Goodman Fielder, is seeking approval from competition regulators to establish a supply agreement with its largest competitor, George Weston Foods, after announcing plans to close another three bakeries with the loss of 215 jobs.
Goodman Fielder, now owned by Singapore-based food company Wilmar International and Hong Kong-based investment company First Pacific, announced plans on Tuesday to close its only bakery in Western Australia, at Malaga in Perth, in May.
About 75 jobs will be lost and Goodman has entered into a commercial supply agreement with George Weston to manufacture its fresh bread products, which include market leading brands Wonder White, Helga's, Molenberg, Lawson's and Mighty Soft.
Goodman Fielder is seeking clearance for the supply agreement from the Australian Competition and Consumer Commission (ACCC), as it is the first time the two fiercely competitive bakers have collaborated on manufacturing.
Chief executive Scott Weitemeyer said he believed the ACCC would approve the supply arrangement, saying it only applied to the WA market.
"We're engaging with them collaboratively, we remain in discussions with them," Mr Weitemeyer said.
George Weston, which is owned by Associated British Foods plc and makes Tip Top, Burgen and Abbotts bread, is the second largest player in the fresh loaf market with 34 per cent compared with Goodman's share of 42pc.
Goodman Fielder is also in consultation with employees over plans to close two bakeries in Brisbane, at Carina and Hemmant, in the second half of 2017.
About 140 production jobs would be lost at Carina and Hemmant but 60 new positions would be created when production shifted to Burleigh Heads, Moorebank and Canberra.
Goodman also plans to shift production of garlic bread from its "artisanal" bread facility at Erskine Park in Sydney to Moorebank, but Erskine Park will continue to operate.
The proposed plant closures will reduce the number of Goodman Fielder bakeries from 13 to 10 and follow the closure of six bakeries in the past four years.
Goodman Fielder closed its Rockhampton, Cairns and Whiteside bakeries in 2012, Ballarat in 2013, Alice Springs in 2014 and Tamworth in 2015.
The plant closures follow years of rising costs and declining returns in the $2 billion bread market as the major supermarket chains cut shelf prices for packaged and house brand bread and ramp up production of fresh-baked bread amid a shift in consumer eating habits.
Goodman Fielder Australia managing director, Julie Coates, said the plant closures were part of a group-wide strategy to improve efficiencies across the consumer food giant's baking network.
"We are consolidating our manufacturing network and investing in larger capacity sites to create a more sustainable business for the long term," said Ms Coates, the former managing director of Woolworths' BIG W chain.
"We understand the impact these announcements have on our people and our immediate priority is to ensure that they are supported through this process," said Ms Coates, who joined Goodman in 2015 after a $1.3b takeover by Wilmar and First Pacific.
"We remain committed to our customers and consumers in each of the impacted areas and our plans are focused on ensuring they continue to receive daily fresh deliveries from Goodman Fielder," she said.
Goodman Fielder, which also makes Meadow Lea margarine and White Wings cake mixes, plans to invest $200 million across its Australian businesses, mostly in baking, and $650m across its entire portfolio over the next three years.
- This story first appeared in The Australian Financial Review
