This week brings another blow for Hovis as Tesco drops two of its bread brands from its express stores in favor of Kingsmill, so what does the future hold for this 125 year old bakery brand?
The past few years have bought a flurry of bad news for Premier Foods brand Hovis with a Tesco trading dispute back in 2010 and the loss of a £75m ($117m) contract with The Co-Operative Group in 2012 to Kingsmill manufacturer Allied Bakeries which led to the closure of three factories.
In January this year the UK bakery company had to default on its 100% British wheat-sourcing promise due to an unfortunate harvest and in recent weeks they hit the headlines again for strikes at its Wigan factory over contentious zero-hour employment contracts.
Missing out on a slice of the action
Discussing Hovis’ latest misfortune, Canadean research manager Michael Hughes said that it “spells further bad news as sales in pre-packed bread have also fallen in the last 6 months”.
Hughes told BakeryandSnacks.com that Tesco’s decision to drop the brand from their express stores was likely to hit the brand in the long-run.
In the UK, 14% of the UK’s adult population visit Tesco Express stores at least once every two weeks. These customers are most likely looking for “emergency” items they have run out of, Hughes said. “A prime example of these core groceries would be bread, meaning Hovis is now missing out on a significant slice of the UK market.”
However, Hovis is not the only bread brand suffering in an increasingly competitive market, he said, with the likes of Kingsmill also showing signs of a struggle.
Finding a solution
In this atmosphere of competition it is important that bread manufacturers consider the two key driving motivations behind bread consumption: taste and health, Hughes explained.
"A key battleground for Hovis will be navigating around the consumer landscape of conflicting needs - from tasty and indulgent products, to healthy products, to offering value for money. Pinpointing the consumer groups, the motivations to target, and with which product and messages to do this will be important in maintaining shelf presence in the future," he said.
“Given the competitive nature of the pre-packaged bread market and the fact that volume sales are falling for the category, it is crucial that Hovis ensure that good relations are maintained with all major retailers, in order to protect and grow market share,” he added.
Premier Foods declined to comment stating the contractual issue with Tesco was ongoing.