Key takeaways:
- Regulators are widening merger reviews in staple food categories to consider consumer affordability, not just market share and pricing power.
- The UK bread case shows that efficiency arguments in mature food markets are being tested more aggressively against supply resilience and household impact.
- Food manufacturers pursuing consolidation should expect closer scrutiny where everyday products play a visible role in cost-of-living pressures.
The UK competition authority has confirmed it will take consumer affordability into account as part of its indepth review of a proposed bread merger, widening the scope of an investigation that was already expected to be demanding.
The deal involves Associated British Foods (ABF), which is seeking to acquire Hovis and fold the business into its Allied Bakeries unit. Allied Bakeries produces national brands including Kingsmill, Allinson’s and Sunblest, while Hovis is itself one of the UK’s best-known bread brands. Together, these brands sit within a small group of roughly five manufacturers that dominate the UK’s packaged sliced bread market.
If approved, the transaction would create a supplier responsible for more than a quarter of the UK’s packaged sliced bread market. It would also reduce the number of large, national bread producers operating in a category that has seen volumes fall for several years.
That level of concentration was one of the factors behind the decision by the UK’s Competition and Markets Authority to fast-track the transaction into a full Phase 2 investigation, rather than conducting an initial review.
Why the scope of the review has widened
In setting out the areas it will examine, the CMA said it will look beyond traditional competition measures. Alongside pricing power and market structure, it will assess the potential impact of the deal on consumer affordability, particularly for lower-income households, as well as the security of bread supply.
Bread is a frequent purchase and a basic staple. Price changes are noticed quickly, and regulators have become more alert to how consolidation in essential food categories can affect household budgets.
The CMA will also consider whether supermarket private label bread provides a sufficient constraint on branded suppliers, and how a combined business might influence pricing, promotions and product availability over time.
From ABF’s standpoint, the rationale for the acquisition is tied to structural pressures in the UK bread market. Packaged bread volumes have been declining, while operating costs have remained elevated. Allied Bakeries has been running with excess capacity, and acquiring Hovis would offer scope to rationalize production and simplify distribution.
Those arguments will be tested during the investigation. The CMA has indicated it will examine supply resilience closely, including whether further consolidation could leave the market more exposed if capacity is reduced or production networks become more concentrated.
Any remedies required to address those concerns could prove significant. Measures designed to protect supply or limit rationalization may cut into the efficiencies ABF is seeking to achieve through the deal.
The Phase 2 review is due to conclude by mid-2026. While the outcome will shape the future structure of the UK bread market, the approach being taken by regulators is already being watched more widely as scrutiny of consolidation involving staple foods intensifies.
Global implications for food and beverage consolidation
Beyond the UK, the case reflects a broader recalibration in how regulators approach mergers involving everyday food products. Staple categories such as bread, grains and dairy are increasingly viewed through a social as well as economic lens, raising the bar for approval even in mature or declining markets.
Efficiency arguments are also facing greater challenge. Cost savings and scale benefits are being assessed against whether they are likely to translate into consumer outcomes, rather than simply stabilizing supplier economics in inflation-sensitive environments.
Resilience has emerged as a further consideration. Regulators are paying closer attention to whether consolidation reduces redundancy in food supply systems, increasing exposure to disruption from labor shortages, logistics constraints or climate-related shocks.
Taken together, these dynamics point to a more demanding global environment for food and beverage dealmaking. Companies pursuing consolidation in staple categories should expect longer reviews, broader questioning and, where approvals are granted, remedies that may limit the operational upside of a transaction.
