Bread producers are allegedly continuing to collude on price-setting even though an investigation is ongoing and there is a political row heating up on the most recent cost hikes.
The Mail & Guardian understands that Foodcorp, one of the alleged colluders yet to be dealt with by the Competition Commission, contacted Tiger Brands less than a month ago to find out when it would be raising its bread prices.
An industry insider, who did not want to be named, informed the M&G recently of the continued attempts at collusion and said that the Competition Commission also received a formal complaint that Foodcorp had been placing pressure on smaller bakeries to raise prices in areas it operates in.
Foodcorp CEO Justin Williamson said he was surprised to hear these allegations and insisted that the head of its baking division said none of his staff had spoken to competitors. However, Williamson said Foodcorp’s investigation into alleged collusion was ongoing and it asked the competition authorities to assist it in singling out potential culprits. “We do not take this lightly,” said Williamson. “I would be absolutely shattered if it was suggested that one of my senior managers was involved in this.”
Tiger Brands head of corporate affairs Jimmy Manyi said he has no record of any manufacturer contacting the company to discuss bread prices.
This follows the uproar that greeted Tiger Brands’ announcement this week that it was raising bread prices by 40c a loaf, with other bread producers expected to follow suit shortly.
Competition Commission head Shan Ramburath said that bread producers in South Africa have given the competition authorities the “middle finger” by raising bread prices substantially just months after they were found guilty of colluding to fix prices.
He also said that the Competition Commission will still prosecute the “remaining cartel members”, Pioneer and Foodcorp.
Late last year Tiger Brands and Premier Foods were found guilty by the competition authorities of colluding to set prices. Premier Foods got off scot-free through the Competition Commission’s corporate leniency policy by being the first to rat on their fellow colluders.
Tiger Brands were fined R99-million for their part in the collusion and the Competition Commission promised it would go after other alleged colluders — Pioneer Foods and Foodcorp.
But just over a month after the Competition Tribunal agreed to Tiger Brands’ R99-million fine, they announced a 40c increase per loaf of bread.
Pioneer Foods also began the implementation of price increases of between 35c and 40c, and similar increases are expected from the other manufacturers shortly.
Cosatu have also condemned the announced price increases releasing a statement this week that said the price increases will add to the “intolerable hardship” for millions of poor families.
Cosatu questioned the fact that Tiger Brands, Pioneer and Premier were all raising bread prices by similar amounts at similar times.
“The strong suspicion therefore remains that these three companies are acting in collusion to make bigger profits at the expense of poor consumers, and that Tiger Brands is passing the cost of the R99-million fine to its customers” says Cosatu’s spokesperson Patrick Craven.
Tiger Brands head of Corporate Affairs Jimmy Manyi says it is “simply not true” that the bread manufacturer is passing on the R99-million fine to the consumers and that the price increase is being driven by increases to the wheat and fuel prices.
“You have to make a call, whether you make a loss or maintain a particular margin,” says Manyi.
Manyi says that in the last year the wheat price had increased from about R1700 per ton to R3100 per ton and this had a huge impact on the bread industry.
“I think we are actually behind,” says Manyi. “The rate of increase of wheat prices has doubled in the last year, but the price of bread has not doubled, the wheat price increase has been absorbed by the manufacturers.”
Premier Foods’ head of Corporate Affairs Steve Mallach told the M&G that in terms of the agreement between itself and the Competition Commission it could not discuss the investigation with the media but added it would continue to cooperate with the competition authorities.
Pioneer Foods’ Managing Director Andre Hanekom says it is common knowledge that there has been a huge hike in wheat and fuel prices and these increases are not something that can be hid away.
Hanekom says the profit margin on bread is already very low so there is very little space for manufacturers to absorbs these costs.
Hanekom says Pioneer Foods have been informed that the Competition Commission would be lodging a complaint against them but they have not received it and could not comment.
When the M&G attempted to contact Foodcorp for comment on the alleged collusion at 15:45 on Wednesday January 16, 2008, we were told by receptionist Tebogo Molobi that everyone had already “knocked off” for the day.