Britain's oldest bread brand with 139-year history confirms talks over merger as sales plunge by £38million
The deal would bring the UK's second and third biggest bread brands together, as demand for sliced white bread declines.
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Huge losses
Hovis, which dates back to 1886, has seen its sales take a big hit, with figures from its latest Companies House report showing the iconic bakery has seen a £38 million drop in sales.
This comes as the breadmakers' owner, PE Firm Endless, continues talks with ABF's Allied Bakeries, about a possible merger with Kingsmill.
The Companies House report confirms talks with a "potential third party".
"These decisions are ongoing, no formal sale and purchase agreement has been signed and completion of any transaction is expected to be subject to UK regulatory processes," it said.
Turnover at Hovis fell 8.6%, to £446.8 million in the 52 weeks to September 2024, down from £489 million in the previous 53 week financial period.
However, underlying profits rose again for the 52-week period, with EBITDA up £1.5 million to £28.4 million.
"The group has achieved positive financial progress despite continued tough trading conditions," CEO Jon Jenkins said,
"Overall, bread share remained stable, despite significant price inflation and the ongoing cost of living crisis, demonstrating the resilience of the Hovis brand and its iconic status."
Decline in demand for bread
Breadmakers like Hovis and Kingsmill have been struggling over the past decade, as health conscious Brits are swapping toast for cereal, and eating less white bread.
According to recent research, Britons eat a whopping 50% less bread than they used to 50 years ago.
A merger between the two companies would put them ahead of Warbutons, the current market leader, which has boosted its sales with crumpets, wraps and muffins as loaf sales falter across the industry.
Meanwhile, intense competition in supermarkets has also limited the ability for bread-makers to increase prices as shoppers often use the price of a loaf of as an indicator for whether or not a supermarket is more expensive than a rival.
ABF previously said: 'Allied Bakeries continues to face a very challenging market. We are evaluating strategic options for Allied Bakeries against this backdrop and we remain committed to increasing long-term shareholder value.'
The potential deal has been called 'survival through scale' by Anubhav Malhotra, an analyst at Panmure Liberum, who said that the two companies may 'struggle to remain viable independently'.
He said: 'Allied Bakeries has faced ongoing challenges amid a highly competitive UK bakery market, characterised by competition for volumes, a price-sensitive consumer and retail landscape conditions under which Hovis also reported an operating loss last year.'
Hovis has been contacted for comment.
This comes as Santander is set to buy rival bank TSB for £2.64 billion.
It is not yet clear whether the brands will be merged, or kept separate.
If approved, the deal is expected to be completed in the first quarter of 2026.
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