While traditional British food culture celebrates items like bacon sandwiches and boiled eggs, bread plays a crucial yet complex role in our diets. It’s under pressure, particularly for well-known brands.
A staple in shopping carts, packaged sliced bread has seen a decline in popularity since a 1973 TV ad showcased young riders enjoying it on their bikes.
Currently, Endless, the owner of Hovis, is discussing a merger with Kingsmill’s owner, Associated British Foods (ABF). Together, their market share in packaged bread is under a quarter, as they have struggled to maintain profitability in recent years.
ABF CEO George Weston noted in 2017 that the bakery sector was facing “unsustainable levels of loss,” exacerbated by events like Ukraine’s invasion and ongoing inflation, before even considering rising wheat prices.
As one bakery insider remarked, “The packaged bread industry is in a relentless decline. We need a solution.”
Sliced bread finds itself sidelined due to low-carb diet trends and worries about ultra-processed foods.
The increase in costs—ranging from energy and transportation to wheat and labor—coupled with sales pressures from competition, makes things challenging for packaged bread.
These days, rather than starting the day with a slice of bread, many opt for yogurt, protein pots, salads, noodles, or sushi. Sliced bread seems to be fading as concerns over low-carb diets and processed foods gain traction.
Kiti Soininen, head of food and drink research at Mintel, noted that “every time a new breakfast or lunch option appears, bread often gets overshadowed.”
Research from Mintel shows that only about a third of those who consumed sliced bread daily have since stopped buying it since mid-2015.
This trend is especially pronounced among younger shoppers; those under 34 are 15% less likely to buy it compared to older shoppers over 65, who are 11% below the average, according to Kantar’s grocery analysts.
Soininen emphasized that younger consumers seek “diverse options” in their food choices.
In a harsh twist, traditional sliced bread faces steep competition, while overall bread sales are dipping. Kantar reports that total bread sales in the UK fell by 15% over the last five years, whereas flatbreads saw a 52% increase, with pita bread rising by 7%.
Part of the pressure on major brands comes from pricing; the average branded 800g loaf currently costs £1.43, a significant increase from £1.10 in April 2021.
With rising household costs, many consumers have shifted from brand-name breads to supermarket own-label options, which can be half the price. These private labels now count for over 40% of the market.
In response to dwindling demand, supermarkets are cutting shelf space for packaged bread. Hovis, for instance, was reduced to just two major brands on Tesco shelves last year.
Fraser McKevitt, Kantar’s consumer insights director, highlighted that it’s not solely about pricing. Evidence shows shoppers are moving towards more premium, but still higher-cost, bread varieties. The appeal of rustic breads and sourdough is growing as they offer a more textured experience.
“People are considering their carbohydrate intake,” he noted. “If they do eat carbs, they prefer something that seems less artificial.”
Mintel’s Soininen suggested that there’s something distinctly appealing about premium options, especially as competitive pricing becomes more common.
At first glance, it appears that the bread market is struggling. During prosperous times, households often indulge in takeaway treats from places like Greggs.
Hovis’s latest accounts reveal that it’s facing significant losses. The company highlighted that 2022 and 2023 were particularly tough due to cost inflation in the UK and abroad stemming from crises affecting commodity prices.
Sales have picked up to £489 million, largely due to inflation, employing around 3,000 people, with about half in manufacturing. However, they reported a pre-tax loss of £3.6 million after a £2 million restructuring, a drastic shift from a loss of £209 million the previous year.
Meanwhile, Allied Bakeries, part of ABF and owner of Kingsmill and others, reports an annual loss of about £30 million, despite sales around £400 million, according to analysts.
Both companies face tough competition from Warburton, a family-owned brand which leads the market thanks to innovative products such as crumpets and seeded flatbreads, commanding over a quarter of packaged bread sales.
Warburton’s sales grew 17.4% to £711.3 million and pre-tax profits shot up nearly sevenfold to £34.3 million.
A potential merger between the second and third largest bread brands in the UK could raise eyebrows among competition authorities, but Anubhav Malhotra from Panmure Liberum suggested that such a move may be essential “to restore profitability and ensure long-term viability.”
