Premier’s disputed pay-to-stay plan ‘a success’

By Nicholas Robinson

- Last updated on GMT

Premier's profits are down £8.9M
Premier's profits are down £8.9M

Related tags Management

Premier Foods’s boss Gavin Darby has once again vehemently defended the company’s so-called Invest for Growth plan, despite trading profits being down £8.9M on last year.

The food manufacturer had “made mistakes” ​in some elements of the programme, Darby wrote yesterday (June 9) in Premier’s annual results for the 52 weeks to April 4 2015.

“But the programme has been successful overall in helping us halve our supplier base and enabling us to develop more strategic partnerships with fewer suppliers,” ​he said.

“Our remaining suppliers have benefitted as a result, including many small and medium sized businesses.”

Premier Foods had sent letters to suppliers informing them that they would have to make “an investment payment” ​to work with the company, a BBC Newsnight Investigation revealed last December.

Good of the business

Premier Foods's 2014/2015 figures

Revenue: £767.4M (-£35.9M)

Trading profit: £131M (-£8.9M)

Sales volume: +9%

Sales value: +3.3%

The plan was for the good of the business​ as well as the suppliers, Darby told in an exclusive interview earlier this year.

Supplier numbers were reduced by more than half to 1,230 by the beginning of 2014, Darby said.

Each year Premier was spending more than £500M with its UK suppliers and farmers, which represented around 88% of its total procurement budget, he added.

At the end of April, the company was supporting 644 small and medium sized businesses, which accounted for more than half of its total supplier base, according to the report.

“In response to criticism raised at the end of the year about the way some elements of our Invest for Growth programme had been implemented, we simplified our supplier negotiations to focus on more conventional arrangements,” ​it said.

Signs of success had also started to emerge from plans to reduce cost complexity, the report claimed.

Reduced costs

Year-on-year improvements had been made across the company’s manufacturing and logistics operations, while additional opportunities to reduce cost were being explored, it added.

“Working smarter by improving our business processes and use of technology is another way we are improving effectiveness and reducing costs,” ​the report said.

“We replaced eight different legacy systems enabling faster and more efficient operational processes from supplier orders, to managing stock levels, production runs, meeting sales orders and delivery to our customers.”

Meanwhile, Darby confirmed Premier would do away with its power brands and support brand distinction.

It was no longer useful to distinguish between the two, he said. “As our strategy evolved to a broader approach of driving growth, we’ve been successfully investing more in the wider portfolio, including brands such as Homepride cooking sauces and Cadbury cakes.

“These are brands with significant potential given the right support,” ​Darby added.

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