Soaring costs and deep supermarket promotions – it’s tough being a baker today. But, with a little help from a couple from Solihull, Allied Bakeries is succeeding where others aren’t, as CEO Mark Fairweather tells Rob Brown
Lee from Solihull knows what he likes. And what he likes is white bread.
That’s what he told Mark Fairweather earlier this month. “Why does my girlfriend keep telling me I should be eating something with seeds in?” Lee complained, unaware he was talking to the CEO of Allied Bakeries, who was doing a spot of undercover shopper research.
It’s a question that sums up the dilemma faced by bakers in today’s increasingly diverse market. Success rests on keeping two sets of consumers happy on the one hand, the likes of conservative ‘white sliced only’ Lee, and on the other, people like his health-conscious, environmentally aware and adventurous girlfriend.
It’s no easy feat in a market beset by spiralling costs and heavy promotional activity. All the big bread brands have been struggling. Britain’s two biggest bakers, Warburtons and Hovis, have seen sales slump 4.7% and 9% in value and 5.4% and 3.3% in volumes over the past year [SymphonyIRI 52 w/e 19 Feb].
Kingsmill, the country’s third-biggest brand, has also struggled to deliver value growth, with sales slipping 0.7%. However, on the volume front, it has bucked the trend, posting a 4% rise a figure that’s all the more impressive when you consider that the overall market is down 4.8%. Even its value performance starts to look okay compared with the sector’s 6% slump.
How has it done it? By talking to people like Lee and making sure its NPD meets their demands but also those of the burgeoning number of shoppers who want something healthier, says Fairweather. “This is how we keep growing by making sure we have the right offering. It’s surprising what you learn from consumers about how and when they use bread.”
The ideal case scenario is, of course, a range of products that appeals to both sets of consumers. And that is exactly what Allied Bakeries hopes its new Kingsmill 50/50 wrap, Kingsmill Pockets and the Deli Soft Roll will do when they hit the shelves over the next few weeks (see Product News, page 31).
These are the latest innovations in an ambitious NPD programme that’s already seen the launch of Oatilicious, the Little Big Loaf, the Doorstep Loaf and Soft Malted Grain Farmhouse Loaf, all under the Kingsmill brand. Growth is being driven sorry Lee by bread that goes far beyond the standard bog standard white sliced.
So Fairweather is broadening his horizons. “Rather than putting the blinkers on and saying this is just about plant bread, we’ll be looking at a much broader array of products in the future. If you look at total bakery we’re only about 10.5% of the market, so we have 90% to look at.”
Allied is putting its money where its mouth is. The company is currently installing equipment that will give its West Bromwich plant capacity to produce a million bread rolls a week as part of a £50m investment programme at that facility alone (other upgrades are taking place at the company’s factories across the country).
NPD alone isn’t enough to guarantee success in such a challenging market after all, there’s been no shortage of innovation from the competition of late. Much comes down to the day-to-day grind of making sure products are consistently on shelf and retailers’ needs are met, says Fairweather, adding that in 2010 99.6% of Allied’s orders were fulfilled on time. “That’s world class and we’re very proud of that,” he says. “The commitment from everyone in the business is phenomenal. The focus is getting our product on-shelf, looking after our retail customers and making sure we are giving the consumers what they want.”
Of course the other factor is price. And prices are being hammered ever lower by supermarket promotions. Last year promotional activity in the bakery aisles of the Big Four and Waitrose increased by 17.1% [Assosia 52 w/e 28 February 2011]. But Allied’s stronger performance is not down to the deeper promotion of its brands last year Hovis was the most heavily promoted of the big bread brands, featuring in 274 promotions (up 28%). Kingsmill featured in 187 promotions (up 4.4%) and Warburtons 185 (up 153%).
Fairweather is surprisingly pragmatic about the aggressive promotions of the supermarkets, particularly given the current harsh conditions (milling wheat stands at £197 per tonne this week, up 74.1% year-on-year, while Brent crude was at £123.3, up 41.2%). “It is about as difficult as it ever has been,” says Fairweather. “We’re taking some pain and so are our customers, but part of our commitment is to keep the best value offering for our consumers. But should the value of bread continue to decline? No. We’ll absorb some of the costs and pass some of them on. It’s the retailers’ call on whether they then pass them on.”
He adds that future success will lie in the pursuit of new retail customers that will allow Allied to keep pace with the changing habits of shoppers. The launch of four new products under the Kingsmill brand into the convenience sector in January made clear the direction in which Allied’s attention is being drawn.”That as a business is where we are going. We want to be able to offer c-stores the complete range. If c-stores choose solo supply, they will know that we’ve got the full offer and they don’t have to go elsewhere.”
And presumably neither will Lee or his girlfriend.
Mark Fairweather snapshot
Family: Married to Claire, with two children, Felicity (23) and Thomas (21)
Career: Joined Allied Bakeries as head miller at the group’s Belfast facility in 1986. Became operations director in 1998, MD in 2006 and CEO in 2008
Hobbies: Horse riding, rugby (plays for Saffron Walden), rock climbing, riding motorcycles
The bread: For a bacon sandwich, it has to be doorstep Kingsmill with butter, a bucket load of brown sauce and a fried egg if I can get away with it. With tomato soup, a good slice of Kingsmill Oatilicious with lots of butter. You’ve got to have butter. For a ham salad sandwich, it’s got to be Allinson Wholemeal. It was made for a good ham salad sandwich.