While it might not seem obvious to many, one of the largest corporate battles in South Africa revolves around sliced bread.
According to Sean Culverwell, Investment Analyst at Anchor Capital, South Africa’s food producers have a broadly positive outlook for 2026.
This is due to easing input costs, cost efficiencies driven by investment-led economies of scale, and an emerging inflexion in industry volume growth.
Culverwell said that the sector is entering into a new phase where structural efficiency, instead of pricing power, will determine long-term winners.
The main milling and baking (Millkbake) players are Premier (Blue Ribbon), RCL Foods (Sunbake), Pioneer Foods (Sasko), and Tiger Brands (Albany).
Tiger Brands and Premier are primarily undergoing significant structural changes in their Millbake operations, with automation and regional consolidation set to support improved volume growth and expanded operational margins.
The industry is starting to change after a massive scandal in the mid-2000s, when the Competition Commission uncovered widespread collusion among major bread producers.
“The investigation revealed coordinated price increases and market allocation practices, including the strategic closure of bakeries to limit competition in certain regions,” said Culverwell.
“The fallout was significant, resulting in reputational damage and financial penalties. While the industry came under heightened scrutiny, no lasting price regulation was imposed.”
Competition was expected to reassert itself, and the bread industry is doing just that, with competition fierce and pricing remaining the main battleground.
Break market structures vary by region, with Nielsen data suggesting that Tiger Brands’ Albany is the leading brand at 27% market share, followed by Pioneer’s Sasko at 24%.
Tiger Brands dominates inland markets, while Premier holds larger stakes in the coastal regions, such as the Western Cape, KwaZulu-Natal, and the Eastern Cape.
The investment analyst noted that bread is a mature, highly competitive category, with questions arising from where sustainable value creation comes from.
“In our view, long-term winners will be determined by two factors: scale-driven cost leadership and superior asset utilisation. These characteristics increasingly favour Tiger Brands and Premier,” said Culverwell.
“Food manufacturing is inherently high in terms of operating leverage. Production is concentrated in capital-intensive facilities with high fixed costs, meaning profitability improves as volumes rise.”
In commoditised categories like bread, competition is primarily focused on price, with scale the most effective defence against margin erosion.
While Tiger Brands and Premier are reshaping their cost curves via regional consolidation, automation, and logistics optimisation, Culverwell said that smaller players lack the resources to replicate these investments.
Tiger Brands
The analyst noted that Tiger Brand’s Millbake division is undergoing a multi-year structural reset following a prolonged period of operational underperformance.
The main part of this is the commissioning of its Super Bakery, expected by the end of CY26, which will replace six sub-scale inland bakeries.
This facility will replace six sub-scale inland bakeries without increasing overall capacity, lowering conversion costs through automation, reducing labour intensity, and improving yields.
Management has guided to a roughly 50% reduction in regional conversion costs, which should lead to a step-change in margins into FY27.
Tiger Brands has also launched a logistics network optimisation programme targeting more than R200 million in cost savings.
This initiative focuses on fleet utilisation, route optimisation, back-haul efficiency, and warehouse rationalisation.
The company is also focusing on the informal trade channel, targeting 130,000 general trade outlets by FY29 (up from 91,000 in FY24).
“A higher informal trade sales mix is margin accretive and should support volume recovery following years of market share loss,” said Culverwell.
“With improved product consistency and better on-shelf availability, we expect Tiger Brands to return to modest but sustainable volume growth over the medium term, alongside meaningful margin expansion.”
Premier
A huge advantage for Premier is its vertical integration, with around 60% of its wheat flour supplied internally from co-located mills.
This makes Premier the lowest-cost producer in the market and provides a natural hedge against the volatility in wheat pricing and supply.
The group owns 13 bakeries and has invested heavily in large-format, highly automated “mega-bakeries” over the last few years.
This includes the Pretoria facility, commissioned in 2023, and the Aeroton bakery, commissioned in 2025, which can produce 8,000 loaves per hour compared to the traditional 5,000-6,000.
“Historically, Premier’s inland bakeries generated materially lower margins than coastal operations due to outdated technology,” said Culverwell
“The commissioning of Pretoria and Aeroton marks a structural shift. Management expects several older inland bakeries to be mothballed, resulting in a sustained uplift in operating margins.”
Geographically, Premier’s inland expansion is attractive, with Gauteng accounting for one-third of all bread consumption, and Premier’s Sasko becoming the number two player in the province.
If Premier were able to lift Gauteng market share to the national average, Anchor Capital believes inland volumes could increase 20% over the medium term.
“Premier’s exposure to the informal channel is another advantage, with roughly 75% of its bread volumes sold through this channel, supporting both mix and operating margins,” said the expert.
“While the bread industry remains highly competitive, we believe scale and efficiency – not price – will determine long-term winners.”
