Key takeaways:
- The CMA has fast-tracked Associated British Foods’ proposed Hovis takeover into a full Phase 2 investigation, signaling serious competition concerns.
- The deal would combine two major branded bread players in a shrinking market, intensifying scrutiny over pricing power, private label competition and retailer leverage.
- The outcome could set a precedent for how far consolidation in everyday bakery categories is allowed to go in the UK.
When the UK’s competition watchdog skips the preliminaries and goes straight for a full investigation, it’s rarely about tidying up the timetable. It’s about unease. That’s the subtext behind the Competition and Markets Authority’s (CMA) decision to fast-track Associated British Foods’ (ABF) proposed acquisition of Hovis into a Phase 2 probe.
The deal, valued at around £70m-£75m, would bring two of the most familiar names in British wrapped bread under common ownership. Kingsmill and Hovis have spent decades competing for space in the same aisles, fighting for promotions, price points and relevance in a category that’s been slowly losing its shine. Combining them might look neat on a spreadsheet. From a competition perspective, it’s anything but.
ABF asked the CMA to move straight to Phase 2 and the regulator agreed, a decision that underlines how little appetite there was for a gentle, box-ticking review and how central the question has become of whether the UK bread market can tolerate another squeeze without snapping. Packaged bread volumes are falling, costs refuse to ease and retailers remain under pressure to keep everyday staples cheap, leaving the CMA to decide whether consolidation is a pragmatic response to structural decline or a step too far.
Fast-tracked but not waved through
There’s a temptation to read ‘fast-track’ as shorthand for approval. In reality, it signals the opposite. It means the CMA has decided there’s no realistic scenario in which the issues raised by this deal could be resolved quickly.
Under the Digital Markets, Competition and Consumers Act 2024, merging parties can ask the regulator to bypass the initial Phase 1 review and move straight into Phase 2 where deeper analysis is inevitable. ABF and Hovis took that route, arguing that an early, definitive outcome was preferable to months of procedural limbo. The CMA agreed and in doing so, made clear that this merger would be judged under the most exacting scrutiny available.
Phase 2 is where deals are dismantled piece by piece. An independent inquiry group takes control. Economists interrogate pricing data. Retailers, suppliers and competitors are asked how the market actually behaves, not how it’s supposed to behave on paper. The CMA will be testing whether a merged Kingsmill-Hovis business would have the ability or incentive to raise prices, narrow ranges or soften promotional intensity over time.
The statutory deadline for the investigation is June 24, 2026, although extensions remain on the table. Either way, this isn’t a quick pit stop. It’s a long examination designed to answer one question: does this deal materially weaken competition?
Why bread has become a regulatory pressure point
At first glance, bread doesn’t look like a category that should be causing sleepless nights for competition regulators. It’s mature, volumes are in decline and shoppers can choose from everything from sourdough to supermarket own label. Look closer though, and the CMA’s concern sharpens.
Hovis accounts for roughly 18% of the UK’s packaged sliced bread market. Allied Bakeries, which houses Kingsmill alongside Allinson’s and Sunblest, sits at around 6%. Together, that pushes the combined business into the mid-20s, bringing it level with market leader Warburtons.
In a growing market, that might feel manageable. In a shrinking one, concentration bites harder. As consumers drift away from mass-produced loaves, the remaining volume becomes more strategically important. Fewer large players means fewer constraints, particularly when price competition is already intense and margins are thin.
The CMA will also be interrogating the role of private label with fresh skepticism. Supermarket bread is often held up as a competitive counterweight, but branded loaves still play a critical role in promotions, shelf architecture and how shoppers perceive value. If Kingsmill and Hovis become one negotiating voice, retailers may find their leverage looks weaker in practice than theory suggests.
There’s also a supply chain dimension that’s harder to ignore. A more concentrated customer base changes dynamics for flour millers, packaging suppliers and logistics providers. The CMA’s remit extends beyond what shoppers see on shelf to how competition functions across the entire system.
ABF’s logic and its exposure
For ABF, the logic is operational rather than expansive. Allied Bakeries is operating in a UK bread market that has shrunk faster than its cost base, leaving the business with excess capacity and limited room to maneuver. Acquiring Hovis offers a way to consolidate plants, rationalize distribution and concentrate investment behind fewer, stronger brands.
That helps explain why ABF pushed to fast-track the CMA review. The group has little to gain from a drawn-out Phase 1 process that would only delay an inevitable deep dive. But speed doesn’t eliminate risk. If the CMA concludes the merger would substantially lessen competition, remedies could be intrusive. Divestments, behavioral commitments or supply obligations could all dilute the efficiencies ABF is seeking to unlock.
The wider group context raises the stakes further. ABF has already warned that weaker consumer confidence is weighing on performance, including at Primark. Against that backdrop, a prolonged investigation or a heavily conditioned approval would add complexity at a time when management bandwidth is already stretched.
What the CMA is really testing
Strip away the legal language and the CMA’s task is straightforward. It has to decide whether the UK bread market still functions effectively with fewer large players.
That means asking whether competition at the top end of the market remains strong enough to keep prices keen and innovation alive. In practical terms, the CMA will be looking at whether Warburtons and a combined Kingsmill–Hovis business would continue to compete aggressively on price, promotions and range, or whether reduced rivalry would gradually soften that pressure.
It also means testing whether private label genuinely constrains branded bread, or whether it operates in a separate value tier that doesn’t fully check the behavior of major brands. And it means assessing whether the efficiencies ABF says it can deliver would actually be passed on to retailers and shoppers, rather than absorbed internally.
These aren’t abstract questions. Bread is a price-sensitive, high-frequency purchase. Small shifts in competitive intensity can show up quickly at the checkout, particularly at a time when households remain alert to food prices.
Beyond this deal, the CMA’s approach sends a clear message to bakery and snack manufacturers eyeing consolidation. No category is too familiar or too functional to escape scrutiny. Scale alone won’t carry an argument, and claims about private label competition will be tested against how markets behave in reality.
For retailers, the decision will shape future negotiations with branded suppliers. For suppliers, it will influence expectations around bargaining power and volume security. And for consumers, the question remains simple: will this deal lead to higher prices or fewer choices in a category that’s already under strain?
The CMA now has months to answer it. What’s already clear is that this isn’t a procedural footnote. It’s a test case for how much consolidation the UK’s everyday food categories can absorb before regulators decide the loaf has been sliced too thin.
