Gallaghers Bakery is a family business whose acquisition by Mayfair Equity Partners in 2017 provided it with the investment support to match its ambitious growth plans. CEO Patrick O’Sullivan talks to Maev Martin about building two premium bread brands that are successfully disrupting the category
Gallaghers Bakery, based in Ardara, Co Donegal, has been in business for more than 50 years.
“In 2017, there was a change of ownership, creating the opportunity to accelerate our innovation plans, invest in the bakery, and in brand building and scaling the business,” says Patrick.
“We have built a great team in Ardara who are very committed to the business and work 24/7 to produce high quality products.
Equally, London-based Mayfair Equity Partners have been very supportive of the team and our plans, so it has been a very successful relationship to date.”
A large employer in the north west, Gallaghers Bakery has a team of just under 300 people who are primarily focused on production in its bakery and on the sales side of the operation.
“We have a deep heritage that spans over half a century, and what has sustained our business over the decades is a mindset of innovation and continuous improvement” he says.
“We have been constantly looking to change, innovate and stay ahead. Over the last four years, our plan has been to build on that great heritage by creating two very differentiated premium brands to play in the ‘better for you’ bakery category: both in the gluten-free category with Promise Gluten Free, and in the conventional bread category with Gallaghers Bakehouse.”
‘Better For You’ Breads
The Promise Gluten Free brand was re-launched in early 2019.
“We completed a full end to end revamp, from new recipes to a new range of products, new packaging and extended shelf life,” says Patrick.
“It has been a three-year journey and we have had a fantastic response from both coeliac and gluten-intolerant consumers, as well as from new consumers who are joining the category as part of a healthier lifestyle.”
Gallagher's portfolio of brands is anchored in the ‘better for you’ bakery space, and Patrick is passionate about the specific attributes of both the Promise Gluten Free and Gallaghers Bakehouse brands that differentiate them from the competition.
“What we are doing in both the gluten-free and conventional bread segments is very different to what the category currently offers,” he says.
“Many brands talk about ‘better for you’, but very often this is not backed up in the product delivery when it comes to taste and nutritional content. We believe Promise Gluten Free delivers a taste profile which is closest to mainstream bread and levels of nutrition that are far ahead of the category. We are focused on delivering something breakthrough for the category with Promise Gluten Free because, historically, gluten-free did not deliver on its promise to the consumer.
“When gluten-free products first entered the market, they were quite brittle in texture and didn’t taste great. The next generation of products had more sugars and fats, so they tasted better, but were poor on nutritional content. With Promise Gluten Free, we are now delivering as close to mainstream taste as is possible, which in itself is a really big achievement and a daily challenge. Additionally, our sugars and fat levels are a fraction of the levels seen in the category.
“For example, on certain lines it is 15% to 20% of what the category average would be, and double the fibre of comparable products in the category. In short, the Promise Gluten Free brand is very high on the ‘good stuff’ and very low on the ‘not so good stuff’. We have also expanded our gluten-free range beyond loaves and rolls into brioche, sourdough cobs and flatbreads.
“Prior to our launch three years ago, the gluten-free market in Ireland was stagnant, but since then, Kantar data reveals that the value of the category has grown by 50%, and this growth has been driven substantially by the Promise Gluten Free brand. Kantar data also tells us that our market share has grown sixfold in that time. In fact, when we compare the quality of our products to any leading competitors in international markets, Promise Gluten Free is far ahead, so it is clear that the brand is delivering on the ‘better for you’ promise’.”
Gallaghers adopted the same approach to its ‘conventional’ bread brand, Gallaghers Bakehouse, which was relaunched in 2020.
There are a few exceptional categories in the grocery retail sector where branded products lead the market ahead of private label. One of these is bread. It is a market driven by well-established brands that many Irish households grew up with.
“Everyone loves bread and consumes it frequently and it is almost a habitual purchase, so this was a very big challenge for us,” he says.
“However, when we looked at conventional bread, we saw some major players in the market as well as a lot of regional bakery competitors. They produced and delivered similar products that were competing at similar price levels and offered very little in the way of product innovation or differentiation. We wanted to create a premium brand with Gallaghers Bakehouse, like we did with Promise Gluten Free. When we researched the conventional bread market, we saw that while the traditional pan was much loved, consumers were looking for more, including lighter and healthier options, and there was a desire to remove the guilt which is often associated with eating bread.
“We saw an opportunity with our Bakehouse brand to underpin all our recipes with sourdough starters, which not only improves the product performance, but also brings health benefits. Apart from our brioche burger bun, the entire Gallaghers Bakehouse range of products has a handcrafted sourdough starter as a base. Incidentally, it is also a core ingredient in our Promise Gluten Free range. That sourdough starter as a base enables us to make bread that is lighter, fluffier and great tasting. Our sourdough starter delivers a mild flavour which is suitable for everyday use. It also delivers better nutritional benefits than the bread products that are currently available in the market. Sourdough is rich in prebiotics, minerals and vitamins. Everyone experimented with sourdough during the pandemic, but bringing it into everyday bread usage was the real opportunity.”
Brand Building & Distribution
While the Gallaghers Bakehouse brand is solely focused on the Irish market, Promise Gluten Free has a global presence - Ireland is its number one market, but the UK and Canada are also key markets.
The Promise Gluten Free brand is available in Lidl stores.
“We are delighted with the support that both brands have received from key retailers across the country,” he says.
“We have experienced exponential growth since they were launched in the market. Our results have exceeded our expectations so far, but conventional bread is a big category and gluten-free has low levels of consumer penetration, so there is a lot more to aim for. Growth on both brands should be continuing for many years to come.”
The goal is to make both brands household names.
“We are currently moving from being a regional to a national brand with our Gallagher’s Bakehouse brand,” he says. “We want to build a nationwide brand and that means investing heavily in vans and people, working with all retailers in the country, expanding our distribution, and building awareness for this new brand.”
However, brand building is expensive, and it is all about balancing the investment required to increase brand awareness with the constraints of a traditionally low margin category. “It is a challenge, and you need to be very clear on your plan before you enter the category,” he says.
“Firstly, you need a very supportive and aligned board that provides the business with the resources and time to deliver on the ambitious plans. Building brands is a multi-year journey. We were entering a category with very strong national and global players and established consumer buying patterns. Secondly, and this is critical, you need a truly distinctive offering to bring to the category, not something that is an incremental improvement or a copy of something that has gone before. And thirdly, you need the capability to launch, execute and communicate the brand in a very disruptive way. These are critical factors when you are entering any category, but they are particularly important in a big category like bread."
The ‘Secret Is Out’ - The Communications Strategy
Gallaghers Bakery has run some very creative social media and radio promotions with well-known Irish singer Daniel O’Donnell.
“We have a great relationship with Daniel, and we enjoyed working with him on the ‘secret is out’ campaign,” says Patrick.
“We hope to partner with him again in the future. He is an iconic Donegal man who is loved locally and internationally, and our bakery in Ardara is located near his hometown, so it was a perfect match, and one that gave the brand a fantastic awareness boost across the country when we launched. Daniel’s high profile across the country made him a perfect fit for the brand. Our summer campaign will kick off shortly and that will continue some of the content that we developed with Daniel. We are also bringing some new Gallagher’s Bakehouse products to the market for the summer, such as brioche sliders, a gourmet burger bun, and a 50% lower carbohydrate loaf product. The latter is a new innovation, which was a challenge to crack, but I think it really delivers against a key consumer need in the bread category. To support these new products, there will be a lot of focus on in-store displays, and we are also investing in communication on social media and on radio.”
No More Cheap Bread
The bread industry is facing massive challenges with input costs such as energy and wheat escalating at a level that was unplanned for. Some price increases are filtering through to shoppers and Patrick doesn’t think it is realistic to expect manufacturers to absorb the scale of the costs that are coming through.
“Most of the bakery industry is comprised of medium sized regional players, so it just isn’t feasible,” he says.
“The scale of the increases that we are seeing, particularly with flour and utilities, is just not sustainable for manufacturers to absorb. Fuel prices are also a massive cost for bakeries due to the requirement to deliver direct to stores. While people sleep through the night, there are 40-foot trucks delivering bread to depots for onward delivery on vans to stores, and that route to market has become a real challenge for every bread manufacturer. I think most manufacturers will tell you that the current cost situation is unprecedented. I think the days of cheap bread are gone. Prices are rising and will continue to do so. However, as brand owners, we also have a responsibility to continue offering value and quality to our consumers every day.”
The Value Proposition
Will the unprecedented cost inflation pressures facing consumers force them to choose value over quality over the coming years?
“I think consumers are very good at quickly figuring out the value equation and assessing a product to see if it delivers value,” he says.
“However, value isn’t just about buying the cheapest product on the shelf. Taste, quality and functional benefits are quickly becoming big differentiators for consumers. We believe our brands are well positioned to offer consumers something unique and of value. Yes, we are positioned at a higher price level than some of the other brands in the category, but our focus is to continue delivering high quality, great tasting products every day. With both brands, we are meeting consumer needs and delivering category growth where it had not previously existed. We pride ourselves on being a disrupter in both bread categories. We start out with high quality, innovative products and that is at the core of how we will win with our brands going forward.”
Love Irish Food actively promotes and supports Irish-produced food and drink brands and Patrick is convinced that carrying the Love Irish Food logo on pack is helping to get the locally-produced message across to shoppers.
“Consumers want to know more about the products they are buying from a sustainability point of view and also because they want to be sure they can trust the brand when it comes to provenance and traceability,” he says. “Irish consumers have always been supportive of home-grown brands and I think the Love Irish Food logo on pack makes the decision easier for shoppers as it helps them to identify Irish- produced products in-store.”
According to Patrick, having the Love Irish Food logo on pack has added value to the Gallaghers Bakehouse brand. “The logo helps to communicate that we are an Irish business with two great ‘better for you’ Irish brands,” he says.
Earlier this year, the Love Irish Food Retail Partnership with Tesco saw up to 109 Tesco stores actively supporting a great cross section of Love Irish Food member brands on FSDUs. “An initiative like this helps smaller, starter brands to get a foothold in the market and operating under the Love Irish Food platform with a top retailer is a great way to do it,” he says.
“Most start up Irish brands are small businesses with limited resources who are trying to get distribution and support, so there is an opportunity for retailers and Irish food companies to look more holistically at how they partner with each other to ensure long-term success. Irish food businesses create very innovative food products that are successful in Ireland and internationally. However, taking a product from the idea stage to full commercialisation can be a risky and expensive journey. The challenge is finding the right support model to encourage the development and success of more high-quality Irish food products.”