The Competition and Markets Authority (CMA) has cleared a £75 million deal for Associated British Foods (ABF), owner of Kingsmill, to acquire Hovis, creating the UK's largest bread brand. The regulator determined that the takeover does not raise competition concerns because, without the deal, ABF's bakeries arm would likely exit the UK market entirely, which would particularly affect lower-income households for whom bread is a staple.
Market challenges and regulatory rationale
The CMA's in-depth investigation concluded that Allied Bakeries (AB), ABF's UK bakery arm, has faced significant financial losses over the past 14 years due to declining demand for sliced bread, rising costs of energy, wheat, and distribution, and a shift toward lower-margin private-label products. Younger consumers are increasingly opting for artisan breads like sourdough, while low-carb diets and concerns about ultra-processed foods have reduced sliced loaf consumption.
Cyrus Mehta, chair of the independent inquiry group, stated: "Bread is a basic staple for millions of people, which is why it is important we looked carefully at this deal and assessed the competition implications for households across the UK. On the basis of the wide range of evidence we received, which showed the difficult position many UK-based bakeries are in, we found Allied Bakeries would likely leave the market entirely if the deal did not proceed."
Financial and operational context
AB supplies bread and baked products under brands including Kingsmill, Allinson's, and Sunblest, along with own-label goods for supermarkets. Hovis, acquired by private equity group Endless in 2020, owns Mother's Pride and Ormo brands and reported pre-tax losses of £4.7 million in the year to September 2024, up from £3.6 million the previous year.
The CMA noted that AB's Kingsmill brand is relatively weak compared to competitors like Warburtons and Hovis, contributing to declining branded sales. As one of only three UK suppliers with a nationwide distribution network delivering six days a week, AB faces high fixed costs. Restructuring options were deemed unlikely to turn the business around.
ABF's response and future outlook
ABF welcomed the clearance, stating: "Combining with Hovis enables Allied Bakeries to continue operating and to create a sustainably profitable UK bakeries business over the long term that is better placed to compete and establish a platform for product innovation." The company recently announced plans to spin off Primark next year. The tie-up is expected to combine production and distribution activities, potentially leading to job losses.
