Consumers in Britain who are concerned by the struggling economy are buying less bread and stretching what they do buy further—even if that means eating stale bread. Supermarkets that have been hit by shoppers' reluctance to purchase are pressuring their suppliers for cheaper products.
This winter, British bakeries are also dealing with a poor wheat harvest caused by wet weather, following a spike in grain prices after the devastating drought in the U.S. and a heat wave in Russia.
Patrick Coveney, chief executive of Greencore, a leading manufacturer of convenience food for supermarkets, says bread prices face "material inflation." The impact of this squeeze already is being felt by some of the U.K.'s most famous food brands.
Next year, the Hovis brand of bread, which was created in 1886, will close two bakery sites in Greenford, west London and Birmingham, which were built in the 1950s and 1960s. Along with the closure of distribution centers by Premier Foods, the owner of Hovis, this will eliminate 900 jobs.
Michael Clarke, chief executive of Premier, reports that the company made the closures after dropping an "uneconomical" bread contract with the cooperative. He says the cuts were needed to provide a "more sustainable and profitable" bread business, but acknowledges that this challenge would be "tougher" than in other parts of Premier's business, which includes Ambrosia rice and Loyd Grossman sauces.
"You can't be all things to all people," Clarke says, declining to confirm whether Premier will continue to own Hovis.