Burnt toast? Packaged bread needs investors, not innovation

By Kacey Culliney

- Last updated on GMT

'Private investors could help manufacturers to recuperate profits,' says Euromonitor food analyst
'Private investors could help manufacturers to recuperate profits,' says Euromonitor food analyst

Related tags Supermarket

UK bakers must seriously consider outside investment because product innovation won’t be enough to reverse plummeting sales, says Euromonitor.

In 2014, sales at the three leading UK bread players Allied Bakeries, Hovis and Warburtons crashed by £148m, according to Euromonitor International.  These three companies represent 60% of the total UK packaged bread sector, which declined 8% in value terms in 2014 and will decline a further 4% in 2015, according to the research firm.

Pinar Hosafci, food analyst at Euromonitor International, said the way out of the slump had to be private investment.

“Private investors could help manufacturers to recuperate profits by reducing production costs, which might involve the closure of underperforming facilities as well as spinning of extraneous businesses,”​ she told BakeryandSnacks.com.

“In an environment that is being increasingly pressurized by cheaper private label products, such cost-cutting measures can help packaged bread manufacturers to secure a listing in major supermarkets, which are dominating bread’s retail scene,”​ she said.

In April 2015, for example, she said Asda – the UK’s largest supermarket chain – cut the price of an 800 gram wholemeal loaf from 90p to 75p. It also introduced a private label ‘Smart Price’ loaf for 40p.

Expensive naivety?

Kingsmill launched bagel thins in 2014
Kingsmill launched bagel thins in 2014

Hosafci said bread makers had been trying to innovate out of the packaged bread slump, with ‘thins’, gluten-free and premium variants but efforts weren’t enough to overturn “soggy sales”.

“Premiumization will help recover some of the bygone packaged bread sales, but it won’t be enough to counter the overall decline in bread, at least in volume terms,” ​she said.

“While premium bread might attract some of the discouraged consumers, considering how essential of a staple food bread is, not all consumers will be happy or willing to pay the extra price for something they need on a daily basis.”

She said gluten-free, for example, only accounted for 3% of total bread sales in the UK and boasted a price four times that of an average loaf.

“As long as these high prices persist, it is naïve to assume that gluten-free alone will reverse bread’s overall decline.”

Similarly, she said it was yet to be seen whether healthy variants like ‘thins’ were a long-term trend or just a fad.

“While innovations like sandwich thins, wraps and gluten-free might help to reinvigorate some of the foregone sales, searching for outside investors, notably private equity is perhaps the best solution for a timely recovery of companies’ profits,”​ she said.

Related news

Show more

Follow us


View more