Margin pressure continues to push up bread prices

The average price of a large loaf of wrapped bread has risen 6p in the past year as rising costs put pressure on Britain’s bakers.

Prices have risen across the past 12 months in the nation’s major supermarkets, with a large (700g-plus) loaf of wrapped bread currently selling at an average of £1.08 versus £1.02 a year ago, according to BrandView data (see graph below).

Of Britain’s biggest three bread brands – Warburtons, Hovis and Kingsmill – the steepest increase has been in the price of Kingsmill, up from 90p in January 2017 to £1.02 this month. Over the same period, the average price of a Hovis loaf has risen 5p to £1.19, with Warburtons rising 10p to £1.29.

The average price paid for a loaf of Kingsmill has fluctuated widely over the past year, rising as high as £1.03 in June and plunging to a low of 84p in October as a result of 800g white loaves selling for 50p for a short time in Tesco.

The average Hovis price generally declined until the autumn, and has since been rising. In contrast, the average price of Warburtons loaves has risen fairly steadily over the period.

Own-label prices have also fluctuated wildly in the past 12 months, peaking at 97p a loaf in the summer. However, they are currently selling at an average of 86p, as they were last January.

In November, British Baker reported that Kingsmill owner Allied Bakeries was discussing higher bread prices with retailers, with parent company Associated British Foods (ABF) reporting in its full-year results that the business sustained a loss.

Other manufacturers have also been working to raise prices, after coming under pressure from low retail pricing and a highly competitive bread market. Bakers have also been hit by rising costs, driven by factors including the devaluation of sterling following the Brexit vote.

Millers have been affected by a drop in the proportion of UK wheat samples meeting full bread specification which has contributed to an increase in the price of UK milling wheat. According to Mintec figures for December, UK milling wheat is up 6.9% year on year at £149 a tonne.  A weak wheat crop in Canada because of dry weather has not helped the supply situation, and the price of Canadian wheat is up 2.2% year on year.

“Going forward, wheat pricing is going to be an issue, with supplies likely to be a bit tight on good-quality bread-making wheat,” said Gordon Polson, director of the Federation of Bakers, in November.

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