He's no baker but is earning a decent crust from bread

Bread supplier Ran Avidan says demand for premium loaves is growing in the downturn

By Candice Krieger and Natalie Ostroff, December 1, 2011
Healthy sales: Ran Avidan, co-owner of The Bread Factory and Gail’s

Healthy sales: Ran Avidan, co-owner of The Bread Factory and Gail’s

Bread is big business. Despite rising food inflation and curbs on consumer spending, sales of bread are on the rise, particularly among the artisan varieties.

Both Tesco and Waitrose have reported significant increases in sales of "speciality bread" and have expanded their ranges to cope with customer demand.

Taking a slice of the sales is Israeli Ran Avidan, co-owner of leading artisan bakery, The Bread Factory. The company, which includes Gail's, a chain of high-street shops and cafes, is doing better than ever.

The group supplies its loaves to Waitrose and Ocado plus many top hotels, restaurants and brands including the Dorchester, Jamie's Italian and major airlines. It is also the supplier to London Fashion Week.

The brand prides itself on handmade fresh produce that is baked daily on site and without preservatives - supermarket loaves are typically industrialised. "From cholla to croissant, we seek out bakery goods from around the world" cites its website.

The Bread Factory makes around 50,000 units of bread every day

The Bread Factory makes around 50,000 units of bread every day

Mr Avidan, who admits he is "no baker", says: "Business is doing very well and actually I am not surprised. We haven't been hit by the downturn."

And the financials certainly match up. Since he took over the company in 2003 the group has grown from revenues of £2 million - and trading at a loss - to in excess of £20 million expected this year. Staff has grown from 40 to 250.

Around 80 tonnes of dough are kneaded weekly, producing 50,000 units of bread a day and 400 varieties.

But it comes at a price. A 400g loaf retails for £3, nearly three times as much as a packaged loaf such as Hovis, and double the cost of in-store bakery bread.

"I can't win the price war against freshly-baked supermarket breads," acknowledges Mr Avidan, a former associate at McKinsey & Company management consultancy. "But I don't intend to directly compete. We have a different offering."

But are people really willing to pay these prices in such tough times? Although October's inflation dropped to five per cent - slightly down on the three-year high of 5.2 per cent thanks in part to a supermarket price war - it remains more than double the government's two per cent target. And with the spiralling prices of staples - wheat, maize, sugar and coffee have hit near record levels this year - consumers are cutting back.

"People who buy our bread appreciate the value they are getting and are willing to pay a premium for it. They most likely will not go back to processed bread," he says. "Bread is a staple part of most western diets. A great artisan loaf at £3 is still relatively cheap when shared by the whole family, unlike a cup of coffee which can cost over £2. We are not selling Bentleys or Ferraris"

In fact, he says his company has been benefitting from the nation's financial situation. "In a crisis people are less likely to go to fancy restaurants where they would pay £80 a head but they still want to treat themselves with cheaper items like a cake, sandwich or coffee, paying around £8 instead."

The group is also cashing in on the growing trend of consumers seeking "healthier options.

"People care more about what they eat and are looking more at the ingredients. They want something fresh."

Perhaps not surprising then that the leading supermarkets are expanding their range of premium bread products as customers show no signs of trading down to cheaper varieties.

A spokesman for Waitrose says that although sales of its sliced bread were only slightly up, there had been a 12 per cent increase in its speciality and artisan bread, which includes Gail's.

Tesco also reports that their speciality bread lines are growing at a rate far in excess of the typical standard loaves. A spokesman says: "Artisan bread products can and will survive. Consumers don't see them as comparable lines and the consumer need is different between the two. You wouldn't find many customers having beans on San Francisco sourdough toast for example."

Mr Avidan, 40, moved to London in 2000 to join McKinsey. "While working there I couldn't find any convenient places to buy good bread that wasn't packaged. That's where the whole romance with bread started."

He began researching the UK industry before leaving McKinsey to pursue his new-found passion. He took over The Bread Factory, an ailing wholesale business at the time, and together with his business partner, Tom Molnar turned its fortunes around. He then established sister company Gail's "to solve the lack of good quality bread on the high street."

Gail's accounts for one third of the group's business. Around £300,000 is invested into each branch, the top-performing being Hampstead, Notting Hill and St John's Wood. The tenth Gail's shop is about to open in London.

Although business has been growing, the company is not immune to the increasing cost of raw materials that have put pressure on suppliers to increase their prices.

According to the Office for National Statistics (ONS), the average cost of bread has increased nearly 30 per cent over the past five years and around three per cent this year alone. Although the company has tried to minimise passing on any price hikes Mr Avidan admits they "had no choice." Their rosemary and sourdough loaf rose from £2.99 to £3.20 this year.

What about the competition? There are new bakery shops such as Paul and The Bread Shop popping up all over the place? "Greater competition will help build a market base for bread as it did for the coffee revolution in the nineties. The advent of cafes on the high street such as Starbucks and Costa normalised drinking coffee and turned it into a popular product."

Mr Avidan lives in Ramat Hasharon but spends two working weeks a month in London. He says the UK bakery market has a lot to learn from Israel.

"Eighty per cent of the bread that is produced is industrialised but in parts of Europe and in Israel people eat much more fresh bread. There are more bakeries in Tel Aviv per square mile than in London. I would like the British industry to become more like this."

Last updated: 12:52pm, December 1 2011