Hovis and Kingsmill in merger talks as demand for sliced bread falls
Hovis and Kingsmill are exploring a merger as Britain's appetite for sliced bread wanes.
Associated British Foods (ABF), the owner of Kingsmill, confirmed on Tuesday that it was in talks with Endless, the private equity owner of Hovis, over a 'potential transaction' after reports said they were exploring a combination of the historic brands.
ABF owns Kingsmill through its Allied Bakeries division, which was founded in 1935. Endless has owned Hovis, which was founded in 1890, since 2020, having acquired it from Premier Foods, the owner of Mr Kipling owner.
The merger talks come as bakers like Kingsmill battle to stave off a big decline in demand for sliced bread amid changing dietary trends and a backlash against so-called ultra-processed foods (UPFs).
Take-home volumes of sliced and wrapped bread have fallen by about 15pc in the past five years, according to Kantar data, while ABF warned it faced 'a very challenging market' as it confirmed talks.
Fraser McKevitt, head of retail and consumer insight at Kantar, said: 'People are not buying as often, and they're not buying as much.'
He said people were seeking out alternatives to toast at breakfast because of concerns over carbohydrates. 'People are thinking a lot more about protein these days, which lends itself to Greek yoghurt, eggs, all those kinds of things.'
At the same time, almost half (49pc) of UK consumers said they considered most bread available in supermarkets to be ultra-processed, according to a recent survey by the data firm Mintel.
The term UPF has no official definition but is broadly used to refer to foods with artificial ingredients such as emulsifiers and preservatives, which have been linked by some studies to health issues like obesity and heart disease.
'About a third of food and drink items are chosen for reasons of health, and there's been a lot of noise about UPFs, so people are considering it,' Mr McKevitt said.
Bakers have also had to grapple with soaring costs in the wake of the Russian invasion of Ukraine, which sent the price of wheat soaring and heaped pressure on their operations.
Competition issues
The family-owned bakery Warburtons is currently the biggest player in British bread with just over a third of the market.
However, while sliced bread sales have slumped, the Bolton-based company has spent recent years boosting its production of other types of baked products such as wraps, pittas, bagels and crumpets so it is less reliant on sales of loaves.
Warburtons' profits soared from £5.1m to £34.3m in 2023, its last available accounts show.
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