Sun, Apr 15, 2012 - Page 1 News List

Bakery sector braces for closures after price hikes

By Yang Ya-min, Hsieh Chia-chun and Wu Liang-yi  /  Staff reporters

Following the announcement that electricity prices are to rise, with prices of consumer goods likely to follow, concerns have been raised that there could be a repeat of events in 2008, when hundreds of bakeries went bankrupt.

On Thursday the Ministry of Economic Affairs and state-owned Taiwan Power Co (台電) announced an average 16.9 percent hike in the cost of electricity for household use effective from May 15. Commercial electricity rates will rise by 30 percent, while industrial rates are set to increase by 35 percent.

Noting that as a result of the global financial crisis of 2008, more than 600 bakeries across Taiwan closed, Taipei Bakery Association chairperson Chang Kuo-jung (張國榮) said that while in 2008 the bakeries’ problems stemmed from the rising price of flour, oil and other ingredients, this year’s situation was potentially worse because while ingredient prices have spiked, gas and electricity prices are also being raised.

Boluobao (菠蘿包), a buttery bread known for its crunchy top layer, is a staple of many traditional bakeries and originally sold for NT$20 per bun. It is now selling for NT$25 because its main ingredients are among those that have seen the steepest price rises.

Although cost overheads for bakeries differ depending on their location, ingredients account for about 30 percent of total costs, employment and hiring 20 percent and 30 percent, rent 10 to 20 percent, while water and electricity costs make up 10 percent, Chang said.

Many of the lower-end bakeries are already finding it difficult to make ends meet and one salesperson in Greater Tainan said that since the Lunar New Year sales have fallen by at least 15 percent.

“We are afraid that after the price increase sale will drop even more,” the salesperson said.

A bakery owner surnamed Huang (黃) said prices already reflected her overheads and only a few items now sold for about NT$10, because most had been increased to between NT$12 and NT$15.

“People who come to stores like mine are usually financially less well-off and once prices go up they will come less often, and I will have less business,” she said.

Meanwhile, rising prices are also affecting breakfast shops, coffee shops and even shops that sell lunchboxes.

One breakfast shop owner surnamed Yang (楊) said that five to six years ago, running a breakfast shop produced a daily income of more than NT$10,000 (US$3,380).

However, rising unemployment over the last few years and greater competition from an increased number of breakfast shops meant that it was only possible to make NT$5,000 to NT$6,000 per day, Yang said.

“Those stores that do not make enough to cover rising prices will most likely have to close down,” he added.

Over the past few years many coffee shops have also faced rising prices for ingredients and climbing rents, adding that the increase in gas and electricity prices, coupled with the jump in hourly wages, would likely cause many operators to shut up shop.

Lunchbox stores are also affected with one business owner in Taoyuan County, surnamed Lu (呂), saying he was afraid that raising the price of his lunchboxes, which currently sell for NT$50, would scare away his loyal customers.

At shops that are similar to dollar stores in the US, where all products are priced at NT$10, profits from each sale average about NT$2 after deducting overheads. With the latest raise in electricity and gas prices, many stores will be forced to close.

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