Plant bakers are set to see record profits over the next year, top city analyst David Lang from Investec has predicted.
Speaking at British Baker’s recent Baking Industry Sum-mit, he said Warburtons’ recent sales patterns have “been brilliant”, with British Bakeries not too far behind, and there have been great results from indepen-dent firms Roberts and Brace’s.
Plant bread is already nearly three times as profitable for bakers and retailers as it was a decade ago, Mr Lang claimed, although millers have seen a slight drop in profitability. Over the years, there has been a shift in bread sales patterns, which have moved from the commodity end of the market to the premium branded one, improving profitability, added Mr Lang. Promotion still plays too big a part in the industry’s marketing mix, but there has been a welcome pick-up in long-term brand-building investment, he said.
Mr Lang commented: “Plant bakers, have responded to better times, with innovative new product ranges, and have aligned themselves with health and wellness trends, by intro-ducing lines such as Best of Both, and Wholemeal & White.”
Also, with Rathbone Kear back on an even keel and with a miniaturised Harvestime likely to follow, as well as higher returns expected almost everywhere else, all the signs are that 2005/6 will be a plant baking record, he predicted.
“Back-o’-th’-fag-packet calculations suggest supermarket bread operating margins of nearly 20%,” he said. “So the bread department has been restored to rude health, and that’s ignoring the effect of fantastic sales velocity.
“With discounts and over-riders of over 40%, retailers are making a bomb as well,”
And despite the fact that an already yawning private-label price gap has been stretched beyond breaking point, sales are still shifting to the brands, he said. “Consumers seem to want the reassurance that premium pricing brings,” he noted.
The improvement comes despite all the low-priced bread still on the market and even with Allied Bakeries currently performing disappointingly, he told delegates.