New Hovis Bakeries boss Sarah Arrowsmith plots fightback after Britain’s biggest bakery merger

How does it feel to have the deal finally done?

It’s fantastic. It’s been a long time coming, and has felt a number of times like a marathon. I suppose the overwhelming feeling now is of responsibility to deliver. We’ve admired Hovis from afar for a long time – it’s always been the brand we wished we were, in some ways.

How was the CMA process?

It’s an intense process, and it should be. [Bread] is a staple, and they needed to investigate it properly. They asked a lot of very detailed questions, which alongside running a business was quite hard work for us but, by their standards, they went quickly. They did a really thorough job. I’m looking back with hindsight, now, so I can say that as a positive. 

How have the unions reacted to the deal?

They’ve been very supportive. They know we’re trying to do the right thing here, we’re trying to build a business for the future that will secure employment for many people for decades.

Do you think they understood that Allied would have failed without the deal?

Our people, and those at Hovis as well, I suspect, have been living under a cloud of uncertainty for many years. We’ve been cutting costs, and broadly that means taking out bakeries and depots – the deal is an opportunity for us to grow and develop a sustainable business. They understand that.

How close was Allied to closing for good?

Distressingly close, is the honest answer. 

What’s your first priority?

We’ll have 26 sites, and around 5,500 people. But we need to know what there is in Hovis, and although we’ve done our research, we don’t fully know that yet. So we’ll spend the first few weeks discovering what we have and comparing it to our business plans. I would hope we would have a reasonable feel [for the situation inside Hovis] but the devil will be in the detail, and we’ll find out when we get there. It’s a challenging start.

So what’s your first move?

Because we and Hovis have been financially challenged, we haven’t been supporting our brands or communicating to consumers as well as we should.

There’s an inevitability that [brands] aren’t front of mind, and lose relevance when they’re not supported. So we have a massive opportunity to get back behind the brands. 

We’re going to be back on the air with Hovis in September, and have over £10m of spend in the year for our marketing, so we’re taking this seriously. We’ll have a real go.

How much was it last year?

Nothing – £7.50 [laughs]. Obviously we don’t know their spend – but they didn’t put [their ad] on air, they just had a little bit of video on demand. For our part we spent a little on Kingsmill, but not a massive amount.

Aside from advertising what else is in the plan?    

It’s really important we don’t take our eye off the ball. Both the retailers and our competition have had a long time to prepare for this – we’ve spent years wargaming what our competitors are going to do – so we need to make sure we come out fighting. What we will do commercially, will be to very quickly get to a position where we can get behind the brands.

We have innovation plans running, and we’ve done a lot of research with customers and consumers. I would expect to see some really exciting innovation in the early parts of 2027. 

In the meantime,  we have the operations behind that: our direct-to-store [delivery business] is vitally important. We are a route to market for a lot of our competitors, and that’s really important for our retail customers. They’ve been very vocal about its importance, and we treat that really seriously. 

You’ve changed the name of the business to Hovis, which given ABF’s history, says a lot. Will you retain the Kingsmill brand? 

The short answer is yes. But clearly, Hovis is a national institution. It hasn’t had the love it really deserves over recent years, because of the ownership structure [under Endless] but it’s got 140 years of heritage, and fundamentally it’s about Health. We’ve done lots of consumer research that tells us that health and nutrition sits really comfortably in Hovis. What it has lacked is relevance – but that’s a marketing thing. Relevance is about visibility and about spend. 

So Hovis is the institution – but Kingsmill has a really loyal customer base. It’s important that brand decisions, fundamentally, are made by customers and consumers. We think Kingsmill has some real relevance, particularly as a family brand – but I’m not hiding from the fact that Hovis is the hero.

And what of Allinson’s and Sunblest?

Sunblest has massive relevance in Northern Ireland. It’s a really important NI brand, and no way would we do anything to change that. Allinson’s is a tiny brand, but it does matter to people, so we’ll work on that as we go. But as I say, customers and consumers ultimately will make those decisions.

How will you lean into Hovis’ links to health, when bread has been a poster child for UPF?

That perception frustrates the life out of me. Bread is a really important part of the nation’s nutrition rates. It’s not far off 20% of the fibre, about 10% of the calcium, 10% of iron. It’s really important nutritionally, particularly for lower-income families.

I think it gets a rap it doesn’t deserve. But we do have to be very cognisant of what our customers are thinking and feeling, and if our customers want a product with a shorter ingredients panel, then that’s what we have to deliver.

We have a USP here with Hovis’ goodness credentials, that we believe it can deliver against. 

Much of the growth in the industry has come from other bakery products – that’s something Warburtons has done well, and Geary’s with sourdough or St Pierre with brioche. Both you and Hovis have dipped a toe into this area, but not explored it thoroughly. Is that part of the plan?

It takes capital to invest to produce these things. Because we’ve been financially challenged, the ABF board didn’t want to put money into a business that wasn’t making any money. But now it will be about innovating ahead of [Warburtons]. We will have failed if all we try and do is be ‘me too’.

Can you give any specifics on where capital will be spent?

I don’t want to give too much away to our competitors. But the segments of the market that are growing, around nutrient-dense sourdough, simpler labels – they all take investment. And that’s capital that has been signed off [by ABF] as Allied, but that doesn’t necessarily mean that’s where it’ll stay.

And would those products come under the Hovis brand?

Not necessarily. As I said, Sunblest is a great favourite in Northern Ireland, and I wouldn’t mess with that. 

What about fortification, such as added-protein products? Does that fit the Hovis brand’s more ‘natural’ positioning?

That’s one of the interesting challenges. It’s an important part of the category, and we’ve just launched a protein Kingsmill [product] with 15g of protein in two slices. I think one would have to be very careful doing something like that with Hovis – because there is a [perception of] goodness and naturalness. You’d have to be very certain of what you’re doing if you wanted to add things.

Are you going to rationalise the SKU lineup post-merger?

That’s a piece of category work we’ve started. Our customers don’t want duplication, so we need to work hard to make sure we can differentiate everything. We have very sophisticated customers who will make sure we’re kept honest.

And what about culture – how will you manage the merger on an organisational level?

Building a culture is probably one of the most important things we have to do. We have to bring these businesses together, and in two or five years’ time, I want it to be a business that people are really proud to work for. For that, we need a single, committed culture that resonates with people.

How?

We’ve been clear in our comms that we want the best of both cultures – we’re not going to impose an Allied culture on to Hovis. We’ve workshops planned to sit down with a mix of people from both businesses and all of the bakeries, to understand what they value and what they would like to change.

That’s going to take time. None of this is going to happen overnight, but it’s really important. 

And how will the management structure change?

We’ve drawn up an organisational design that we had SME consultants help us with. We’re going to spend some time in the early weeks making sure that lines up with what Hovis does. 

Where we’ve got opportunities, that’s easy, and where there’s duplication, we’ll have that conversation. Both businesses run pretty lean, so it’s not going to be one plus one equals one.