The CMA has been investigating the proposed merger of the two bread businesses and whether it would substantially reduce competition in the supply of bread and baked goods in Northern Ireland and Great Britain.

In the interim report, the CMA states its provisional conclusion is that absent the merger, Associated British Foods (ABF) is likely to exit the Allied Bakeries business in the whole of the UK, however added there is likely to be a purchaser for Allied Bakeries assets in Northern Ireland that would continue to compete with Hovis absent the merger.

It found that the merger between the companies would not substantially reduce competition in Great Britain as competition between the two would be lost with or without the merger. However, they have provisionally found competition concerns in Northern Ireland.

Subsequently, ABF is presently running a sales process for its bakery business here in Northern Ireland, where it remains profitable, unlike the GB business.

The CMA’s interim report found that evidence shows that Allied Bakeries is a heavily loss-making business in a structurally declining market and the bakery business is not of wider strategic importance to Associated British Foods; while Allied Bakeries’ Kingsmill brand is considered to be weak compared to other brands, such as Hovis and Warburtons, and this has contributed to the significant decline in branded volumes.

“As one of only three GB suppliers with a nationwide delivery network that delivers bread and other bakery products direct to retail stores six days per week, Allied Bakeries faces high fixed costs from distribution, which has impacted profitability as Allied Bakeries’ volumes have declined,” states the CMA.

PROVISIONAL CONCLUSION

It added that the overall pool of potential purchases for the Allied Bakeries business as a whole is “likely to be limited as Allied Bakeries is loss making” with any potential purchaser requiring significant funding to absorb losses.

The CMA also notes that with the company’s Northern Ireland business largely independent of the GB business, it is profitable and considers that there are relevant differences between GB and NI that impact whether it is likely that there would be an alternative buyer for the NI business.

“The Allied Bakeries NI business represents an opportunity for other suppliers, such as those based in the Republic of Ireland, to enter or expand in NI to help overcome barriers to entry and expansion in NI, including access to distribution and the importance of the brand,” states the CMA.

“Evidence indicates that the markets for bread and other bakery products in NI are separate from those in GB,” it adds, stating that there are different consumer preferences in NI compared to GB, there are different distribution models and the competitive dynamics differ between GB and NI.

The CMA concludes provisionally that the merger between Hovis and Allied Bakeries would result in the creation of a relevant merger situation (RMS), and the creation of that RMS may be expected to result in a substantial lessening of competition (SLC) in the supply of each of bread, pancakes, potato farls and soda farls in Northern Ireland, but may not be expected to result in an SLC in the supply of bread or any other bakery products in GB.

This is not the final decision of the CMA, and it has invited any interested parties to make representations to them on these provisional findings no later than 5pm on Thursday 16^th April.

Responses can be submitted by email to ABFGrainProducts.Hovis@cma.gov.uk

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Behind this seasonal staple is a £7 million supply contract between Lidl Northern Ireland and Belfast’s own Hovis bakery, a partnership that has brought local baking to the breakfast tables of Lidl shoppers in Northern Ireland for more than 25 years.

Having supplied the retailer since it opened its very first store in 1999, Hovis is a cornerstone of Lidl Northern Ireland’s local supply chain. This Easter, the Hovis team at Apollo Road in South Belfast is producing two types of the seasonal classic hot cross buns which will be available in all 44 stores across the region: the premium Deluxe Hot Cross Buns [£1.39], crafted with real butter and 30% fruit content, and the family favourite private label Connell Bakery Hot Cross Buns [£0.99].

Kevin Duffy, Chief Commercial Officer at Lidl Ireland and Northern Ireland said: “Hot cross buns are a seasonal staple in many households across Northern Ireland and we are proud to meet that demand through our long-standing relationship with Belfast’s own Hovis.

“This £7 million contract reflects our ongoing commitment to prioritising local sourcing and our significant spend within the local agri-food industry. Having worked with Hovis since our first store opened in 1999, we value the heritage and quality they bring to our shelves, ensuring our customers can enjoy the very best homemade produce at market-leading value.”

COMMITMENT TO LOCAL SUPPLIERS

Trevor McCrum, General Manager at Hovis Ireland added: “As a Belfast-based bakery with over 150 years of history, we take great pride in seeing our hot cross buns at the center of Easter celebrations across the country.

“Our longstanding relationship with Lidl Northern Ireland provides a key platform for our business, delivering scale while staying true to our local roots. We are delighted to continue delivering high-quality, Belfast-baked favorites to Lidl shoppers for another busy Easter season.”

Lidl Northern Ireland’s commitment to investing in local suppliers is demonstrated in its latest Supplier and Business Partner Impact Report, released in November 2025, which revealed that the retailer procured a record £557 million in goods and services from local suppliers and business partners in Northern Ireland in the last financial year alone, with £413 million worth of NI goods exported to Lidl stores across the globe.

Alongside established partners like Hovis, Lidl also champions emerging local producers through its Kickstart Supplier Development Programme. Now in its ninth year, Kickstart has seen Lidl invest more than £4 million into showcasing innovative homegrown products, acting as a springboard for numerous local success stories including Holmes Bakery, Hellbent, and Slumber Jack Coffee.

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In its Q4 trading updated released earlier this month, the company revealed it had outperformed a tough market, with total sales up 6.8% to £2,151 million, with company-managed shop like-for-like sales up 2.4%.

While market conditions remain challenging, Greggs continues to outperform with year-on-year gains in market share.

The food-to-go operator opened 207 new shops in 2025, averaging four openings every week, with 50 relocations and 36 closures, resulting in 121 net new shop openings. The company had 2739 shops trading as at 27^th December 2025.

Chief Executive, Roisin Currie said that 2025 was a challenging year with subdued consumer confidence impacting the food to go market, however the company made good progress throughout the year.

“Against this backdrop, I’m pleased that Greggs outperformed the wider market and increased its market share of visits,” she said.

“We enter 2026 with a strong pipeline of new opportunities to make Greggs even more convenient for customers. This is underpinned by the investments we have been making in our supply chain capacity, which start to become operational this year.

“Our ongoing focus on efficiency allows us to deliver exception value to customers who are managing their budgets carefully.”

Fourth quarter total sales were 7.4% higher than in 2024, with like-for-like sales in company-managed shops growing by 2.9%. Subdued consumer confidence continued to impact the food to go market, as did weather extremes earlier in the year. Against this backdrop, Greggs increased its market share of visits, including at breakfast and in the evening (Circana, 12 months to September 2025).

Operational costs were well controlled and input costs were in line with the company’s expectations. Their ongoing focus on structural cost reduction delivered a further £13 million in efficiencies in 2025, as they continued to drive additional value across its integrated supply chain and business processes.

Its estate expansion programme is developing their reach into new locations in under-penetrated catchments as well as relocating constrained existing shops to better locations, facilitating further growth in traditional trading areas. They also opened the first three of their smaller-format Bitesize Greggs shops, enabling them to reach customers in high-footfall, prime locations that are constrained by space.

Looking to 2026, they expect a similar rate and profile of estate growth in what they call “carefully chosen locations”.

“We expect the level of like-for-like cost inflation to be lower than in 2025 and are confident that we can continue to mitigate this whilst retaining our value leadership,” added Roisin Currie.

“We expect consumer confidence to remain a market headwind in the year ahead which, along with the costs of introducing our new supply chain capacity, will put some temporary pressure on margins, as previously disclosed. However, our competitive position remains strong and we continue to take market share in a challenging food to go market. Our store opening programme will continue to drive further strong sales growth.”

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Interim Chief Economic Adviser, Jenny Haydock stated on 8^th January that the CMA had accepted the fast-track reference request made by ABF, Hovis Group Limited and Endless LLP, having concluded that the conditions to accept a fast-track reference request had been met.

As a result, the CMA made a reference to its chair for the constitution of a group under Schedule 4 to the Enterprise and Regulatory Reform Act 2013 in order that the group may investigate and report, within a period ending on 24^th June 2026, on the following questions: whether arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and if so, whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the UK for goods or services.

In a previous update made before Christmas, the CMA revealed that its deadline for announcing its decision whether to refer the merger for a phase 2 investigation was 19^th February 2026.

Responding to the CMA’s December announcement, a spokesperson for ABF said they would continue to work closely with the CMA to ensure the case is run as efficiently as possible and to “demonstrate why this transaction will help to create a more sustainable competitor that is better able to invest, innovate and deliver for customers”.

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In an update just before Christmas, the CMA revealed that its deadline for announcing its decision whether to refer the merger for a phase 2 investigation is 19^th February 2026.

“The Competition and Market Authority hereby gives notice pursuant to section 96(2A) of the Enterprise Act 2002 that the merger notice provided by Associated British Foods plc, Hovis Group Limited and Endless LLP in relation to the anticipated acquisition by ABF (via its wholly owned indirect subsidiary, ABF Grain Products Limited) of Hovis, meets the requirements of section 96(2) of the Act,” stated the announcement.

The initial period defined in section 34ZA(3) of the Act in relation to the Transaction commenced on 22^nd December 2025.

The first step of the CMA’s information-gathering process – an invitation to comment time period – concluded in early October, with the next stage including the launch of its formal investigation into the transaction.

It was announced last summer that Hovis Group would be bought over by ABF, with the proposed acquisition hailed as a “significant step towards creating a more sustainable and efficient bakery operation in the UK”.

In a statement, ABF said the acquisition would combine the production and distribution activities of the two businesses, driving significant costs synergies and efficiencies, to create a profitable UK bread business that is sustainable over the long-term.

Responding to the CMA’s December announcement, a spokesperson for ABF said: “This formal step is an important milestone and follows ABF working constructively with the CMA to outline the challenges and changes taking place in the UK’s bakery sector.

“ABF will continue to work closely with the CMA to ensure this case is run as efficiently as possible and to demonstrate why this transaction will help to create a more sustainable competitor that is better able to invest, innovate and deliver for customers.”

The post CMA begins phase one investigation into proposed ABF acquisition of Hovis first appeared on Neighbourhood Retailer.