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KEY NOTE Bread & Bakery : February 2005

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This report covers:bread, and, bakeries, bread, white bread, brown, wholemeal, bread, ethnic, and, speciality, bakery products, health, obesity, Atkins Effect, Bread, Fresh Pastry Goods and Cake Manufacture

Companies covered include:ABF Grain Produscts, British Bakeries, Fine Lady Bakeries, FLetchers Bakeries, Greggs, Harvestime, Rathbones, Warburtons, Frank Roberts & Sons, William Jackson Bakery, Lyndale Foods, Three Cooks,

EXECUTIVE SUMMARY

Executive Summary

Despite continuing threats to the bakery market including market saturation, discounting and the current media fascination with low-carbohydrate diets, the UK market managed to hold its own during 2004, showing year-on-year growth of 2.1% to reach a total of £3.1bn.

Sales of white bread — which has traditionally been less likely to be viewed as healthy than brown and wholemeal varieties — have suffered more than other sectors from the current media focus on low-carbohydrate diets.

However, there has been continuing activity by manufacturers in terms of marketing and new product development (NPD). Much of this has had a health-related slant — for example, cholesterol-reducing loaves and products with added calcium or low carbohydrate levels.

The brown bread sub sector has suffered in the past from consumer resistance to the taste and texture of wholemeal bread, and sales have been declining for some years. However, the sales decrease slowed during 2004, helped both by NPD aimed at making brown bread more palatable to consumers, and by a renewed focus on the fibre content of bread. Paradoxically the sector may have been helped by publicity surrounding low-carbohydrate diets, some of which make a distinction between different types of bread.

Growth in the ethnic and speciality bread sub-sector is now somewhat slower than it was at the beginning of the decade. However, it has been maintained at a healthy level of just under 3%.

The emphasis within the bread market over the next few years is likely to be on premium, added-value products. In particular, there is likely to be a high level of NPD in the areas of health-related and/or indulgence premium bakery products.

TABLE OF CONTENTS

Executive Summary

1. Market Definition

REPORT COVERAGE

MARKET SECTORS

Bread

White Bread

Brown and Wholemeal Bread

Ethnic and Speciality Breads

Bakery Products

MARKET TRENDS

Health, Obesity and the Atkins Effect

Changing Eating Habits

Table 1: Purchase of Sandwiches by Location (% of respondents), 2000-2003

Sophisticated Consumers

ECONOMIC TRENDS

Population

Table 2: UK Resident Population Estimates by Sex (000), Mid-Years 1999-2003

Inflation

Table 3: UK Rate of Inflation (%), 1999-2003

Unemployment

Table 4: Actual Number of Unemployed Persons (million), 1999-2003

Household Disposable Income

Table 5: Household Disposable Income Per Capita (£), 1999-2003

MARKET POSITION

Table 6: A Comparison of the UK Bread Market and Other Major UK Food Markets (£bn at rsp), 2003

Table 7: The UK Bread and Bakery Products' Market Share of the Total Food Market by Value at Current Prices (£bn at rsp and %), 2003

2. Market Size

tHE TOTAL MARKET

Table 8: The Total UK Market for Bread and Bakery Products at Current Prices (£m at rsp), 2000-2004

BY MARKET SECTOR

Bread

Table 9: The UK White and Brown Bread Market by Value at Current Prices (£m at rsp and %), 2000-2004

White Bread

Table 10: The UK White Bread Market by Value at Current Prices (£m at rsp and %), 2000-2004

Brown and Wholemeal Bread

Table 11: The UK Brown and Wholemeal Bread Market by Value at Current Prices (£m at rsp and %), 2000-2004

Ethnic and Speciality Breads

Table 12: The UK Ethnic and Speciality Bread Market by Value at Current Prices (£m at rsp and %), 2000-2004

Bakery Products

Table 13: The UK Bakery Products Market by Value at Current Prices (£m at rsp and %), 2000-2004

Overseas Trade

3. Industry Background

Recent History

NUMBER OF COMPANIES

Bread, Fresh Pastry Goods and Cake Manufacture

Table 14: Number of UK VAT-Based Enterprises Engaged in the Manufacture of Bread, Fresh Pastry Goods and Cakes by Turnover Sizeband (number and %), 2003 and 2004

Employment

Table 15: Number of Local Units Engaged in the Manufacture of Bread, Fresh Pastry Goods and Cakes by Number of Employees (number of units and %), 2004

Regional Variations in the Marketplace

Table 16: Major Plant Bakers by Number of Sites and Location of Operations, 2004

Distribution

Table 17: UK Expenditure on Bread and Bakery Products by Place of Purchase (£ and %), 2002/2003

HOW ROBUST IS THE MARKET?

LEGISLATION

Weights and Measures Regulations

Noise at Work Laws

KEY TRADE ASSOCIATIONS

Federation of Bakers

The Flour Advisory Bureau

National Association of British and Irish Millers

National Association of Master Bakers

The Scottish Association of Master Bakers

4. Competitor Analysis

THE MARKETPLACE

Plant Bakeries

Table 18: Vertical Integration in the Milling And Baking Industry, 2004

In-Store Bakeries

Craft Bakeries

MARKET LEADERS

Allied Bakeries Ltd

Company Structure