Two months ago we reported on the ascendancy of the sliced-bread brands that were stealing market share left, right and centre from retailer own-label bread manufacturers (December 1, 2006, pg 26).
David Howlett, sales director of Fine Lady Bakeries, says that in just 10 years, a national split of 70/30 own-label/branded, in favour of own-label, has been turned on its head. In central England - where Fine Lady Bakeries distributes within a 150-mile radius of its Banbury, Oxfordshire, base - own-label manufacturers and other bakeries, outside of big brands such as Warburtons, Hovis and Kingsmill, lost nearly 3% market share between July 2005 and July 2006 (Warburtons Bakery Review 2006).
But Fine Lady is flying the flag for own-label. It has supplied retailers’ brands for over 40 years and has successfully divided its business into retail and sandwich breads, building up one of the biggest bakeries in Europe and an impressive list of major customers in the process.
Fine Lady supplies Tesco’s Finest breads and Howlett says: "Our lifeblood is own-label and we see ourselves, and the customers we work with, as the custodians of own-label." Retailer own-label has gone from strength to strength, he adds, because it offers excellent value compared to branded bread.
Development of super-premium breads for Tesco and Waitrose is driving the category. "The likes of Tesco and Waitrose are showing some of the best performances on own-label. We like to think it’s partly to do with our involvement with them, as well as the types of businesses that they are."
While the company does have a brand, Good Fresh Bread, which covers a limited number of key products such as white, brown, wholemeal and malted, and goes into wholesalers, schools, colleges and small shops, but the main focus is on supplying retailers and sandwich manufacturers. "If the brands had their way it would be a completely branded market," says Howlett. "But I believe if you have a marketplace full of brands, what’s the difference - from the retailer’s perspective?"
Away from retail, Fine Lady is the biggest supplier of sandwich bread to the industry. It supplies the UK’s largest sandwich manufacturer, Greencore Sandwiches, while Marks & Spencer was recently added to its list of big hitters. "M&S is seen as a forerunner in the sandwich market so it’s extremely pleasing. It says a lot about the quality and service of our business," says Howlett.
Sandwich bread volume is higher at the start of the week whereas bread destined for retail is higher at the back end and this allows Fine Lady to balance its business. Sandwich and retail bread are two very different markets, says Howlett.
On one hand, NPD is focused on achieving the softest possible loaf for retail and, on the other, bread with enough resilience for sandwich manufacturing. So batch loaves for retail will be made with a single dough piece, baked open-topped for an open structure, while sandwich bread will be mainly four-pieced and lidded.
Bread is increasingly regarded as more than just a carrier. The emerging trend in sandwich making is for freshness and many think Pret A Manger has set the benchmark, making sandwiches on-site daily in ambient conditions. But sandwich bread doesn’t fare so well in a chilled chain - chilling quickens the staling process and the filling doesn’t help. So how does the plant baker adapt his loaf to meet this consumer shift?
"Anything is achievable," says Howlett. "We’re challenging areas other bakers probably don’t even look at because we’re working with a different supply chain. Our aim is to put the best possible bread into the market."
Although standard bread types dominate the market, Fine Lady has developed premium lines, such as white bread with onion and a Christmas loaf with cranberries.
Significant cost increases will present further challenges this year. Rising energy costs, which have slowed recently, have merely sharpened the focus on adding value. "The baking industry is a very demanding market - it’s all about balancing volume with a commercially viable proposition and driving value into the market, which has helped us over the last two years," says Howlett. "The challenge this year will be making a sufficient return to keep investing in the business in tough commercial conditions."
Key to controlling costs is to constantly reassess equipment and processes, while retaining quality. This includes fully automating the new Omega industry tray, which Howlett believes will become standard throughout systems, alongside the existing basket.
A significant capital spend has been made on installing a high-tech ice machine on the sandwich bread line to control dough temperatures, after last year’s hot summer. The firm has also introduced a longer tin that extends the loaf by two or three slices, specifically for the sandwich market, reducing the waste on end crusts. "With the volume that goes through the bakery. you need to be efficient," he says. "There’s additional capital cost but it’s essential for the long-term."
Fine Lady Bakeries, established in 1962, is part of the independently owned Heygate Group, which helps it to invest in equipment, he says. The group also owns six mills on three sites. For bakery, flexibility, speed to market, consistency, quality of product and service, he believes, benefit from single-site production.
"We are limited in our geographical area, but we make up for that by being quicker to react and having everything under one roof. Not being a public company, we can look at things in the mid- to long-term. We are autonomous, swift on our feet and able to make decisions quickly. That gives us an advantage over some our larger competitors."
So how does Fine Lady go about developing ranges with its customers? "We tailor-make specific solutions," says Howlett. "We constantly monitor the product’s appeal, whether it is still hitting the key messages behind its launch, and any responses to trends." The firm’s dedicated NPD team usually takes products to shelf within three to six months, working with the customer.
Breads, rolls and fruited products are a mainstay of the baker’s repertoire but morning goods remains relatively underdeveloped, he believes. "There has been a lot of focus in the industry on premium breads, but the roll side has been a poor relation. That’s certainly an area of our business that we’re looking to expand."
Close relationships are forged in developing the retailer’s unique briefs - whether that’s inventing a new roll or reducing salt levels in existing products, he says. Own-label manufacturers are ahead of the brands on the healthy-eating agenda, he believes, and hydrogenated vegetable oils have been removed in most Fine Lady products. "Sodium levels on own-label are generally lower than the brands, and we’ve worked extremely hard on our sandwich bread to bring them down."
All ingredients will henceforth be questioned, he believes. "We must ask: ’How can we get the cleanest label possible?’
"Bread is such a staple part of the diet, we have to ask how can we help with the health debate. Anything on the label needs to be challenged to justify why it is there." n
=== Fine Lady at a glance ===
Ownership: Part of family-owned Heygate Group
Location: Single bakery in Banbury, Oxfordshire
Annual turnover: £50 million-plus
Product turnover: Two million loaves per week and in excess of a million units of morning goods
Specialism: Supplying retailer own-label breads and sandwich manufacturers
Key customers: Tesco, Waitrose, Greencore Sandwiches, Samworth Brothers
Products: Premium and standard breads, batch breads, organic breads, sandwich loaves, sub rolls, torpedo rolls, oval rolls, round rolls, cobs and burger buns, fruited teacakes and buns
Distribution: Via own dedicated fleet and some third-party distribution
Brand label: Good Fresh Bread