UK bakery giant Warburtons hit by pressure on bread profit margins

By Vince Bamford contact

- Last updated on GMT

Warburtons recruited the Muppets for a big-budget TV ad last year. Photo: Warburtons
Warburtons recruited the Muppets for a big-budget TV ad last year. Photo: Warburtons

Related tags: Bread, Marketing

Continued pressure on the UK grocery market has hit profits at the country’s biggest bread brand.

Warburtons has reported a 2.4% drop in operating profit before exceptional items to £35.4m ($46.3m) in its annual report  for the 52 weeks ending 26 September 2015.

The bakery giant attributed the decline to “pressure on gross profit margins in our core product areas”, ​adding the performance was in line with expectations and viewed by the board as “satisfactory in the current economic environment​”.

Turnover rose 0.7% year on year to £551.5m ($721m).

Competition for market share 

The business operates in what it described as the ”very competitive​” British grocery market. Intense competition for market share in the face of continued growth of discount retailers such as Aldi and Lidl has impacted retail bread prices.

According to data from retail analysts Brand View for the UK’s three largest bread brands - Warburtons, Hovis and Kingsmill -  the average price of a standard large loaf of bread has fallen from £1.16 ($1.52) two years ago to £1.06 ($1.38) this month.

Bakers have also come under pressure from a decline in sales of wrapped bread, with category volumes down 3.6%year on year in the 12 months to 2 January 2016 according to IRI data.

Warburtons Thin Bagels Sesame Hi res CO

In its annual report, Warburtons said it would continue to focus on growing its share of the bakery market by developing new ranges such as the Bagel Thins it launched last year.

Gluten-free sales grow

The baker added its gluten-free sales had continued to grow, and that it would look to introduce new products to meet increasing consumer demand.

Our performance has remained stable, despite the continuation of difficult trading conditions and volume decline in the wider bakery market​,” said Warburtons chairman Jonathan Warburton  in a statement issued by the  business. “The performance reflects our continued focus on breakthrough innovation, quality and service in a very competitive marketplace​.”

Warburton added that continued investment in staff and infrastructure ensured it was focused on meeting the needs of changing consumer trends. 

This focus, along with our family ownership structure, means we are uniquely positioned to invest for the long term – making decisions today that we believe will contribute positively in the future​,” he said.

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