Kingsmill margins have taken a knock even though the bread brand grew faster than rivals Warburtons and Hovis last year.
Owner Associated British Foods said this week that the brand’s margins in the six months to 3 March had been squeezed by high levels of promotions, fed by intense competition.
It had also cut its base prices, which together with promotional activity had reduced the average price of a standard 800g loaf of Kingsmill by about 10p to £1.05 over the past year, said Associated British Foods FD John Bason.
“It’s been a difficult environment - UK consumers were squeezed last year so it’s no surprise they were looking for value,” he said.
The lower prices have, however, helped Kingsmill outperform its pricier rivals. Its sales rose 2.2% last year in value, while Hovis was up 1.1% and Warburtons actually fell 0.7% [Nielsen 52w/e 24 December 2011].
Kingsmill was further aided by the fact neither of its rivals cut their prices. Indeed, Hovis has increased the price of its 800g medium sliced white loaf by 3% to £1.25, while Warburtons maintained a price of £1.35 [BrandView 52w/e 29 February 2012].
Meanwhile, the tough bread market has accelerated the trend among big bakers to close bakeries and invest in larger sites.
ABF has recently closed small bakeries in Gateshead and Cumbernauld, as it expands its sites in Glasgow and West Bromwich. Warburtons closed a bakery in Oldham in January after re-opening a site in Bolton. Last month, Premier-owned Hovis announced the closure of a bakery in Eastleigh.