Premier Foods plans more innovation

By Rod Addy contact

- Last updated on GMT

Premier Foods is seeing investment in its core brands pay off
Premier Foods is seeing investment in its core brands pay off

Related tags: Mr kipling, Premier foods

Premier Foods is stepping up innovation plans, after seeing gains from initial steps in the past year, ceo Gavin Darby claimed as he reported on full-year results at an analyst meeting.

Following the company’s roll out of new formats such as Snack Packs for its Mr Kipling cakes, innovation was now running at an acceptable rate, said Darby.

However, he added: “We have now set out on grocery to double it again. We need to significantly step up our rate of innovation.”

The completion of Premier’s £20M production and packing line at its Barnsley bakery, capable of making 300M Mr Kipling cake slices a year, would support this boosted level of new product development (NPD), he said. “We have been bringing that line up to speed in the last few weeks. We needed new capacity and this has given us a 2.5-fold increase in capacity.”

He claimed the site would enable Premier to offer new trade channel opportunities for consumers. “We can target cake-to-go with two packs and offer nine-packs for big hypermarkets and supermarkets. Lines are coming up to speed and serving customers with those new ranges.”

Premier also planned to take the technology it had used to create its existing Bisto Stock Melts and use it to create similar products under the Loyd Grossman and Sharwoods sauces, Darby explained.

Milkshake flavours

Other initiatives were the three milkshake flavours for its four-pack Mr Kipling Snack Pack slices, revealed earlier this month and rolling out to the trade now: strawberry, vanilla and chocolate & banana, he said.

The products claim to be a source of calcium as well as being low in fat and saturated fats. They would be in all its major customers’ stores by the end of the month, he told analysts and investors at the May 19 event.

Premier was supporting this NPD with expanded marketing, sales, innovation and international teams, Darby said. “We are also investing in people. Over the past 24 months we will have added 60 people. Over the past 12 months our customer marketing headcount has increased by more than 22%.”

Darby reported strong volume and value growth for Mr Kipling and Cadbury cakes year-on-year.

With cakes and seasonings currently the company’s strongest performers, it planned to turn its attention and investment focus on to its Batchelors and Sharwoods brands, which Darby confessed “needed more work”.

On top of this activity, Premier had allocated £35M to taking cost out of the business. One example highlighted by Darby had been its Stoke bakery, which had seen “minimal investment in the recent past”​. “Now we are through that we have been able to fund and support a number of schemes,”​ he said.

‘Brutal’

What Darby described as the “brutal”​ cutting of stock keeping units (SKUs) over the past two years was also yielding results. Just 3% of its SKUs were now in the bottom 20% of its major customers’ lines, he claimed, with its work dovetailing neatly with Tesco’s own range reduction strategy.

Premier was now a category captain in 22 positions out of a possible 30 with its top six customers, versus just one position in 2012, he said.

Commenting on Premier Foods’s full-year performance, Shore Capital director of research Clive Black said: “Premier Foods will, we sense, be glad to see the back of a year that promised so much after the transformational re-financing that took place in spring 2014, only for positive momentum to fall away amidst, frankly, very disappointing trading through the spring and summer months, the performance only really stabilising around the turn of the year.”

Research analyst Charlie Mills at Credit Suisse observed: “stabilising sales, higher marketing, profits in line, and lower (than we expected) debt and pension deficits are all generally positive …”

Meanwhile, Martin Deboo, equity analyst at Jefferies, praised Premier’s improving sales and profits and falling debt and pension deficit.

However, he sounded a note of caution: “Offsetting worries are the risk that the focus of fresh retailer pricing investment shifts from fresh and own-label categories to brands; the tougher​ [comparable trading figures] to come in​ [the second half of the coming financial year] and what looks like tough trading in wet sauces. The work continues.”

For more on Premier Foods’s annual results, click here​.

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