“This is a merger out of distress, not progression” – can ABF-Hovis deal bolster UK bread businesses?

Wed, Aug 20, 2025, 1:15 PM 8 min read

Leaf through at least the last ten years of Associated British Foods’ annual reports and it’s clear the UK bread market has been no cakewalk for the food, ingredients and retail group.

There have been years in which ABF has reported year-on-year revenue growth from its Allied Bakeries arm in the UK but the last decade has been mostly one of sluggish sales and of striving to turn a profit.

ABF’s struggles in UK bread have long begged questions about its future in the category. Back in 2019, then finance director John Bason, after reporting the third consecutive year in which Allied Bakeries had made an operating loss, told Just Food the company remained committed to the market and ruled out a sale.

And the debate stretches back at least as far as this correspondent has covered the food sector. In ABF’s 2008 financial year, the Kingsmill bread brand owner said Allied Bakeries had performed “poorly” in the face of rising commodity costs and fierce competition in the UK bread market (it was ever thus). Some City analysts had begun asking whether ABF should remain in bread, a business central to the start of the company in the 1930s.

Fast-forward five years to 2013 and there was speculation ABF might swoop for Hovis, then owned by UK manufacturer Premier Foods. Robert Lawson, the managing partner at European consultancy Food Strategy Associates, remembers the opposite transaction was mooted when he was at Premier in the late 2000s.

“The synergies were significant – consolidation of factories and of the two businesses' expensive direct-store-distribution systems delivering on a daily basis, rationalisation of the management teams running the businesses, consolidation of mills and procurement synergies. On top, there was also the opportunity to rejuvenate Hovis’s aged bakery network, which even then was much older than ABF’s,” Lawson says.

This week, a deal did come to pass – and was something of a surprise to some industry watchers. When ABF announced in April it was putting Allied Bakeries up for strategic review – and, days later, said it was in talks with Hovis’s owners, the private-equity firm Endless – many onlookers assumed the group was set to leave the UK bread market.

“Getting bigger in bread is probably not what investors want to see,” Barclays analysts covering ABF said in a note to clients on Friday (15 August). “No doubt investors would have preferred ABF to have exited UK bread altogether but this wasn’t really a realistic option given the structure of the industry with market leader Warburtons family-controlled and Hovis owned by private equity.”