Own label baker sold

- Last updated on GMT

Related tags: Market analysts mintel, Baker, Baking, Allied bakeries

Rathbones Bakeries, one of the leading suppliers of own label bread
and baked goods to the UK retail trade, has been sold by Greencore,
the Irish food group which is keen to focus on building its
convenience food operations.

The business, which operates eight bakeries in England and Wales, has been bought for €30 million by Finedon Mill, an independent flour miller based in south east England.

The UK bakery business has been something of an albatross for Greencore, which is the world's biggest producer of pre-packaged sandwiches, posting losses of €0.4 million before tax and goodwill amortisation last year on sales of nearly €103 million. Greencore has already sold one bakery and closed down another site after a fire last year.

But while this has much to do with its increasing marginalisation within the Greencore group as a whole, the losses also reflect the significant pressure on margins in the UK bread market, in particular in the own label sector.

According to market analysts Mintel​, UK food retailers are increasingly using bread as a core element in the EDLP (every day low pricing) policies, putting considerable pressure on their suppliers to pare margins down to the minimum at the same time as investing in innovation to help them keep ahead of the competition.

As part of a diversified group with its attention focused on other, more profitable areas of the food industry, Rathbones has suffered in this regard, but its acquisition by a company already operating in the bakery sector - Finedon is a miller and supplier of flour to other bakeries and also offers a range of support services to independent bakeries - will give it a major advantage.

In a market dominated by Allied Bakeries (ABF) and British Bakeries (RHM) which together account for around 40 per cent of total retail sales according to Mintel, smaller players such as Rathbones need the versatility to supply the major retailers with innovative and added value products if they are to compete effectively.

This will be much easier now that the group is no longer part of Greencore, but it will have to work hard to push through more margin-enhancing products as quickly as possible to offset the likely tightening of the pressure from its major retail customers for their standard own label products.

Related topics: Market Trends

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