Continued pressure on the UK grocery market has hit profits at bread giant Warburtons. 

Warburtons reported a 2.4% drop in operating profit before exceptional items to £35.4m in its annual report for the 52 weeks ending 26 September 2015.

The bakery giant said the decline was due to “pressure on gross profit margins in our core product areas”, adding the performance was in line with expectations and the board regarded it as “satisfactory in the current economic environment”.

Turnover rose 0.7% year on year to £551.5m, despite what it described as the “very competitive” British grocery market.

It cited intense competition for market share in the face of continued growth of discount retailers Aldi and Lidl, which it said had impacted retail bread prices.

The average price of a standard large loaf of bread for Warburtons, Hovis and Kingsmill (the UK’s three largest bread brands) has fallen from £1.16 in 2014 to £1.06 this month, according to data from retail analysts Brand View

Category volumes on sales of wrapped bread are also down 3.6%year on year in the 12 months to 2 January 2016, according to IRI data.

In its annual report, Warburtons said it would continue to focus on growing its share of the bakery market by developing new ranges such as the Bagel Thins line it launched last year.

It said gluten-free sales continued to grow, and that it will look to introduce new products to meet increasing consumer demand.

Jonathan Warburton, Warburtons chairman, said: “Our performance has remained stable, despite the continuation of difficult trading conditions and volume decline in the wider bakery market.”

He added: “The performance reflects our continued focus on breakthrough innovation, quality and service in a very competitive marketplace.”

According to Warburton, continued investment in staff and infrastructure ensured that the company was focused on meeting the needs of changing consumer trends: “This focus, along with our family ownership structure, means we are uniquely positioned to invest for the long term – making decisions today that we believe will contribute positively in the future.”

In May Warburtons won a Corporate Social Responsibility (CSR) award for helping children learn about the importance of health and nutrition.

Topics