View from City Road: Mr Kipling looks an exceedingly good buy

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The Independent Online
Get your 19p white sliced loaf while you can. According to Greg Hutchings, chief executive of Tomkins and something of an authority on bread since the conglomerate's poorly received pounds 935m takeover of Ranks Hovis McDougall in 1992, stocks are limited.

By his reckoning, supply and demand in milling and baking are roughly in balance for the first time in years. This will limit the scope for retailers to push down bread prices by playing one supplier off against the other.

Just in case an outbreak of peace in the bread wars proves more complicated than that, he offers the reassuring observation that milling and baking accounts for less than 8 per cent of Tomkins' profits.

Maybe; but there was enough in yesterday's figures to suggest that the Mr Kipling combine will prove to be an exceedingly good buy.

True, the power of the supermarket multiples is underlined by the meagre 2.1 per cent margin achieved on milling and baking but demand for flour is at last on an upward trend.

In the rest of the food businesses, the 6.9 per cent margin compares favourably with many rivals - particularly when brands like Paxo, Bisto or even Mr Kipling are hardly in fast-growing markets. And Tomkins' integration programme has not yet really started to bite.

But the City remains convinced that food retailers will force their suppliers to take a disproportionate share of the pain of price wars. Tomkins' shares suffered the ignominy of falling during the spectacular 1993 bull run. Until Mr Hutchings can prove the City wrong, his assurances are likely to fall on deaf ears.