One of the UK’s biggest bakers has warned that it is making “unsustainable losses” as Britons’ appetite for bread wanes and costs rise.
Bread remains one of the most popular items on weekly shopping lists, but the trend for low-carb diets, concerns about gluten and an increase in alternatives to the lunchtime sarnie – from protein pots and salad bowls to sushi and macaroni cheese – have all hit sales.
The basic sliced loaf has proved the biggest victim with sales volumes slumping about 12% over the last five years, according to the research firm Mintel, a loss of about 23,000 tonnes. The amount of bread rolls and freshly baked bread sold is also down.
Avocado toast may be an Instagram sensation, but growing preference for buying a takeaway breakfast or lunch rather than making toast or sandwiches at home has also hit sales.
Rising prices have put a further dampener on demand and squeezed suppliers.
The price of a loaf is up 4% in the past year alone, according to Kantar Worldpanel, as the cost of wheat and other commodities has been bumped up.
George Weston, chief executive of Associated British Foods, which owns the baker Kingsmill, said commodity price inflation had eaten away profits as costs for bakers had soared ever higher.
“We are making an unsustainable level of loss and are in discussions with retail customers. We need to put that right,” Weston said.
The price of the kind of wheat used in bread has soared 24% in the past two years, according to the Agriculture and Horticulture Development Board, as the fall in the value of the pound since the Brexit vote has combined with rising demand for wheat for animal feed and to make fuel.
Some bread wheat is imported from Germany and Canada and so has been affected by the more than 10% fall in the value of the pound. But even the price of wheat grown in the UK is partly governed by overseas prices because farmers have the option of exporting if the price is not good enough.
Although British farmers planted more wheat suitable for baking in recent years, the recent damp August also held back supplies.
Kingsmill is a brand worth £500m, but Weston said that even though Associated British Foods had invested heavily in its bakeries – making it one of the lowest-cost operations in the country – it continued to make a loss. He said that Kingsmill was negotiating with supermarkets over how its costs could be better met.
The baker Hovis also reported losses of £30m last year, up from a £19m loss the year before. It said the amount of bread sold had fallen by 9% in 2016, partly because some of its lines were dropped by Asda, according to accounts filed at Companies House.
Warburton’s, the UK’s other leading baker, saw sales dip 4.6%, though it increased profits by tightly controlling costs and introducing new products such as giant crumpets.
Britain’s bakers are caught in a pincer movement between rising costs and falling demand.
About 42% of Britons eat bread on a daily basis, down from 52% two years ago, according to the Harris Interactive poll carried out for the Grocer trade journal. The change is being led by young people, with only a quarter of 16- to 24-year-olds eating bread every day compared with about half of those over 45.
Industry analysts say at least one of the major bakers is likely to have to cut back operations as there is too much capacity in the industry.
One supermarket told the Guardian it expected to reduce space devoted to bakery items within the next 18 months because of declining interest from its shoppers.
“Sales of sliced bread have been coming off for maybe four years. People see it as highly calorific. It’s gone from being a real staple to being perceived as a negative food,” said one supermarket executive.
“Women in particular are trying to limit their carb intake and bread is in the firing line when they are making those cutbacks,” says Emma Clifford, a food and drink analyst at Mintel.
She said some people were switching to wraps, bagels or garlic bread, as they were looking for something healthier and more interesting at lunchtime.
“People are eating less bread and when they do they want to really enjoy it and are likely to trade up to more special options,” she said.