Premier boss reveals recipe for revival

By Nicholas Robinson

- Last updated on GMT

Darby has taken Premier beyond survival and into global expansion
Darby has taken Premier beyond survival and into global expansion

Related tags Premier foods Gavin darby

Gavin Darby is using his strongest assets, he tells Nicholas Robinson

Key points

Premier Foods looks vastly different from what it did two years ago when Gavin Darby took over as its chief executive in a bid to return the failing giant to growth.

It was on the eve of his two-year anniversary last month (February) when we met in central London. Darby was running late after an appointment with investors in the City.

Before Darby took over on February 4 2013, City analysts had praised former boss Michael Clarke's efforts to “allow Premier to survive”.​ However, Clarke’s shock exit the previous month paved the way for Darby who, despite two years of declining sales, an almost crippling supermarket price war and a supplier row last year, has catapulted the firm beyond survival and into global expansion.

Not Dwelling on the past (Return to top)

Darby brushes aside the negativity of 2013 and 2014 and announces that 2015 is going to have “less of that turmoil”.​ He doesn’t deny the company has had its share of failings over the past 24 months, but avoids dwelling on the past.

“I think the unique opportunity is to turn the difficulties of 2014​ [and 2013] into new opportunities,”​ he says. “We have a good foundation to move forward – we’ve refinanced, so nobody is worrying about the banks, and we’ve simplified our business model.”

Yet, it’s difficult to leave the past behind. 2014 was a difficult year that saw the discounters erode the power of the big four in a supermarket price war that has changed the food sector.

Many in the industry agree that the price war has been crippling for most food manufacturers, but not Darby. He believes it could benefit branded businesses, such as Premier. “I think it aligns the interest of the supermarkets and the branded manufacturers more than ever,”​ he says. “Although 2014 was a challenging year where a lot has changed in the sector our biggest customers have never been more interested in working with branded suppliers.”

Brands set the big four apart from the discounters, “it’s their main point of difference”,​ claims Darby. “The discounters are about the opposite of brands, which makes our customers want to work with us more.”

Changing retail landscape (Return to top)

The changing retail landscape may be driving supermarkets to Premier’s door, but it has also forced the firm to reduce the number of stock keeping units (SKUs) it makes in a bid to take cost out of its supply chain.

Premier’s past commercial structure had led to supply chain complexity and more SKUs, Darby explains. As a result, the firm's ‘power brands’ – Hovis, Mr Kipling, Bisto, Oxo, Ambrosia, Batchelors, Sharwoods and Loyd Grossman – weren’t receiving enough focus from Premier, consumers and retailers.

“We set out 18 months ago to take away 40% of our SKUs: it sounds very easy to do when you say you’ve got a revenue of X underpinned by 1,700 SKUs and then you need a revenue of X underpinned by 980 SKUs,”​ he explains. “But, to take out more than 700 SKUs without losing lots of revenue is quite a challenge.”

It may be hard to reduce SKUs without damaging revenue, but Darby’s convinced he’s got it right and says it’s another area where Premier and the supermarkets are aligned.

There was a period when supermarkets had products developed for the sake of providing choice, “but consumers can’t buy choice”​, he adds. Now retailers have to edit their selection to give consumers what they really want.

As a result of too much choice, retailers have been left with a trail of poor-selling products. “But you can argue that manufacturers played a role in this too,” ​claims Darby. “They launched new things, but didn’t chop them if they didn’t make it ‘over the hurdle’ – it contributes to the issue of SKU proliferation.”

Despite retailers and manufacturers reducing SKUs to counter years of over-producing new products, Darby doesn’t think the cutting is overdue, because consumers did want choice in the past.

“The difficulties the whole industry faced in 2014 created an environment of change,”​ he says. “As a result, people are prepared to be more radical to address the core issues and I can see 2015 being very different from last year.”

But, will radical change from the supermarkets benefit branded manufacturers? The big four are attempting to counter discounter growth by imitating their emphasis on own-label products and ditching brands. Darby says he isn’t worried.

Premier Foods at a glance


Bakery: 16

Milling: 3

Sauces and powdered: 4

Power brands

Ambrosia, Batchelors, Bisto, Hovis, Loyd Grossman, Mr Kipling, Oxo and Sharwoods


More than 4,000 staff work across Premier Foods’s 23 manufacturing facilities


£856.2M (2013)

Future of brands (Return to top)

Even Tesco's announcement of plans to axe 20,000 SKUs earlier this year doesn’t undermine Darby’s belief in the future of brands in supermarkets and he says the move will benefit branded manufacturers such as Premier.

“Supermarkets cutting SKUs is an opportunity for the strong brands and perhaps the strong number two brands; supermarkets rely on us as a point of difference,”​ he affirms, but doesn’t explain what the role for smaller brands will be.

“Supermarkets are thirsting for more great brands to help them grow and they need more genuine, new product development to help them generate that growth – they’ve probably never been more accommodating and supportive of major brands.”

Now the price war appears to be easing somewhat, Darby believes it is time for food manufacturers to invest in their own growth, innovate their products and move their existing ranges. “Standing still and sticking with what you’ve got isn’t going to be enough to generate that growth,”​ he says.

Investment (Return to top)

Darby has already taken his own advice. Following a £120M refinancing deal in 2013, £20M was invested in the company’s Mr Kipling snack pack line at its plant near Barnsley last year to double output. Oxo, Bisto and Home Pride factories also received factory investment and marketing spend, he adds.

There is a stark contrast with two years ago when Premier Foods’s ability to invest was severely limited, admits Darby. “There are three classic things people stop doing when they are resource constrained: they stop marketing; they stop investing in people; and they stop investing capital into their sites.”

Premier will continue to invest in its sites this year, he reveals. “Our total capital investment for 2015 is £20M to £25M and that will be focused on factories,”​ he says. “We’ve got our foot on the gas in terms of investment.”

Sharwoods, Premier’s Asian sauce range, will be the next brand to receive investment, followed by the rest of the portfolio. As well as capital investment in their production facilities, advertising campaigns for key brands will be cranked up, he adds.

Another area receiving Darby’s focus this year will be Premier’s international business, which accounts for just 5% of the company’s revenue.

Last year, Premier separated its international business after launching three new ‘strategic business units’ (SBUs), which it did to strengthen its focus on major growth opportunities. The SBUs are: Grocery, Sweet Treats and International.

The international business is focusing on China, North America and Australia, but all of the products for these markets, such as Ambrosia for China and Sharwoods for the US, will be manufactured in the UK and exported, he says.

“We’re not going to be pumping any money into infrastructure though, just into people,”​ he adds. “We need to put in the sales and marketing support structures in the new areas and we may contract pack in those areas too.”

Revenue (Return to top)​   

Although it’s early days, Darby aspires to boost Premier Foods’s international revenue to 15–20% of the overall business, which he says is expected for a company of its size. However, he won’t commit to a time-frame for achieving this goal.

By boosting the company’s international business, Darby hopes to see an improvement in Premier’s overall sales. In the final quarter of 2014, its sales had fallen by 4.6% to £255.3M and power brand sales fell by 3.5% to £158.6M.

However, sales picked up a little in December and Darby attributes this to a good Christmas performance by Mr Kipling. He claims that the other power brands are finally starting to hold their own too.

Meanwhile, City analysts have predicted sales of Premier’s power brands would provide the company with its first real growth opportunity for years. Sales of the brands were predicted to rise by 3% this year and by 3.5% in 2018.

Such predictions are inevitably well received by Darby, who says: “We feel very positive at the moment, we’re investing and we’re growing. We’re going to keep investing in and refreshing our brands, their presentation and in innovation, and work with the biggest customers we can.”

For now, Premier Foods’s future appears secure. But, as Darby knows more than anyone, things can quickly change.

For instance, the media critically pounced on Premier’s ‘invest-to-grow’ programme last December after alleging it was forcing suppliers to invest in its growth if they wanted to continue doing business with the manufacturer.

“We executed it incorrectly and I put my hands up very publicly and quickly,”​ Darby admits. “I’m happy with the programme, but not the way we were running it. That was a painful weekend.”

His ability to quickly admit his mistakes may be beneficial for the giant’s growth, but only time will tell if Darby’s recovery plans will yield the desired results.

Watch this video​ in which Darby gives an overview of how Premier Foods’s recovery is going. He also reveals the firm’s future investment plans.

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