Private equity to make inroads into flour milling

The bulk of Britain’s flour milling operations will in future be independently owned with private equity playing an increasing role as the big integrated bakeries exit the ‘free flour’ market, a bakery sector analyst has claimed.

Speaking at an event to mark the 150th anniversary of independent flour miller Jas Bowman & Sons, former Investec analyst David Lang said: “The trend is towards independents and free flour trade in the next harvest year.” He added: “UK flour could be about all free market.” He also claimed that private equity would take an increasing interest in the milling sector.

He suggested Premier’s (formerly RHM’s) free flour operations were likely to be sold off to private equity owners, because of low margins in the sector and to finance other potential acquisitions. The prospect of this happening has “got some veracity” he suggested.

However, Lang also raised questions about independently owned ADM’s continuing commitment to the UK flour market, following the closure of its Tewkesbury mill and the mothballing of its mill in Newcastle. “I would be very surprised if flour survived indefinitely,” he said.

Some further consolidation of the UK’s flour milling sector looks inevitable, despite the large numbers of closures that have already occurred. Today there are just 57 flour mills in the UK, with three more producing starch, compared with more than 500 in the early 1960s, said Lang.

Bowman’s chief executive Guy Bowman, suggested current overcapacity in the milling sector is just under 10%, although he said this was “manageable” and necessary to accommodate seasonality in the market and temporary mill unavailability.