The owner of Kingsmill has been given the go-ahead to buy Hovis in a £75m deal that will create the UK’s biggest bread brand, after the competition watchdog ruled that the takeover did not raise competition concerns because without it the buyer would likely leave the UK market entirely.
The Competition and Markets Authority (CMA) said that if the deal did not proceed, “the most likely outcome” would be Allied Bakeries – the UK baking arm of Associated British Foods (ABF) – exiting the market. This would hit lower-income households particularly hard as bread is a basic staple, the regulator noted.
“CMA clears £75m Kingsmill-Hovis deal, creating UK's biggest bread brand, as ABF would exit market otherwise.”
ABF’s Allied Bakeries owns the Kingsmill, Allinson’s and Sunblest brands. Hovis, acquired by private equity group Endless in 2020, also owns Mother’s Pride and Ormo. The combined entity would be the largest bread brand in the UK.
Bread suppliers are struggling with declining demand and rising costs. AB has run up losses for 14 years despite restructuring, due to waning popularity of sliced loaf bread, increased demand for cheaper own-label products, and higher costs for energy, wheat and distribution. Younger people are eating less sliced bread, opting for artisan sourdough amid low-carb diets and concerns over ultra-processed foods. Hovis’s pre-tax losses deepened to £4.7m in the year to 28 September 2024, from £3.6m the year before.
Cyrus Mehta, the chair of the independent inquiry group leading the investigation, said: “Bread is a basic staple for millions of people, which is why it is important we looked carefully at this deal and assessed the competition implications for households across the UK. On the basis of the wide range of evidence we received, which showed the difficult position many UK-based bakeries are in, we found Allied Bakeries – owned by ABF – would likely leave the market entirely if the deal did not proceed. Taking that into account, we have concluded the deal does not raise competition concerns.”
The deal, announced last August, is expected to combine production and distribution activities, leading to job losses. ABF recently said it would spin off the Primark budget clothing chain next year.
The merger will reshape the UK bread market, but the CMA’s clearance hinges on the premise that without it, ABF would have walked away entirely.