Cakes help boost Premier, while sugar and ingredients lift ABF

By Rod Addy contact

- Last updated on GMT

Premier Foods said sales of Mr Kipling and Cadbury cakes, Bisto, Sharwood's and Nissin noodles did well
Premier Foods said sales of Mr Kipling and Cadbury cakes, Bisto, Sharwood's and Nissin noodles did well

Related tags: Finance, Ambient, Bakery, Ingredients & nutrition

Growing sales of Premier Foods' Mr Kipling and Cadbury cakes have helped it continue to wipe out debt, while increased sugar, ingredients and grocery sales helped ABF offset rising commodity costs.

Premier Foods

Mr Kipling continued to be the great success story for Premier Foods in its third financial quarter, according to a trading update.

In the 13 weeks to 1 January, the manufacturer grew sales of sweet treats by 6.3% compared to the same period last year and 11.6% versus the same period two years ago. The performance offset falling non-branded foodservice and out-of-home sales and the discontinuation of lower margin non-branded sweet treat contracts.

"Cadbury cake grew sales across its range of existing and new product ranges, the latter driven by Fudge and Crunchie cake bars,"​ Premier Foods stated. "Mr Kipling enjoyed its best ever Christmas trading period, due to increased sales across all its core cake ranges and also healthier products such as reduced sugar Angel Slices. In overall terms, the group’s healthier product ranges grew ahead of the wider market, up 13%."

Branded grocery

Branded grocery sales fell slightly against last year's numbers, but were up 11.2% compared to two years ago.

"In particular, further sales growth in Bisto was driven by strong execution instore and consumers trading up to premium Bisto Best gravy for Christmas,"​ the company reported. "Sharwood’s also grew strongly across its wide portfolio, due to continued growth of healthier ranges such as 30% less fat cooking sauces and accompaniments, including Poppadoms and Chutneys.

"Nissin noodles exceptional momentum continued unabated, driven by excellent consumer repeat purchase rates, with revenues in the quarter up over 150% compared to two years ago."

Overseas sales

Overseas sales grew by a third over two years ago, driven by Ireland, Australia, the US and Europe, with Sharwood's and Mr Kipling again leading the charge and US trials of Mr Kipling starting.

Premier Foods chief executive officer Alex Whitehouse said: “This performance continues to underline the popularity of our brands but also demonstrates the strength of our established branded growth model, with many of our brands supported by advertising campaigns and new product innovation during the quarter.”

Commenting on the update, Clive Black, director and head of research at Shore Capital, called Premier: "A group with a credible and achievable medium-term strategy. That strategy is centred upon considered development of its portfolio of grocery and sweet treats brands, where market share is being gained across the board, taking Mr Kipling and Sharwood's into international markets, with an ambition for global status, plus brand extension into additional categories.

"With scope for bolt-on acquisition, Premier Foods is demonstrating that its performance is not a one-off function of Coronavirus lockdowns and so it is a group with multi-year growth prospects.

"... Premier is now embracing the sustained focus on advancing its assortment, stepping up brand extension into adjacent categories - most of Premier's range is midday onwards centred - what of the morning? - while progressive internationalisation and the potential for bolt-on acquisition make for a quite complete menu to sustain growth in our view."

ABF

Elsewhere, in an update issued by Associated British Foods (ABF) for the 16 weeks to 8 January, the company reported total food sales up 5% on the same period last year to £2.9bn. Group sales rose 16% to £5.6bn.

Twinings Ovaltine performed well, with strong Ovaltine revenue growth and higher volume sales in emerging markets. Twinings revenue growth was driven by rising sales and new product launches in Wellbeing teas which offset a reduction in some retail sales from the high COVID-19 affected volumes last year.

Sugar and ingredients were the big winners. Sugar was 12% ahead of last year, driven by stronger European sugar prices, higher Illovo domestic sales and improved pricing for bioethanol produced by British Sugar at Wissington.

Ingredients sales were 10% ahead of last year, fuelled by volume recoveries in a number of speciality businesses. However, margins were lower than the same period last year as significant inflationary pressures hit costs ahead of planned price actions.

AB Mauri

AB Mauri revenues were ahead despite lower demand for retail yeast and retail bakery ingredients compared to last year when COVID-19 restrictions were boosting the popularity of home baking. The businesses in ABF Ingredients performed well, with good growth in enzymes, yeast extracts and a recovery in extruded cereals.

ABF stated that it was tackling cost increases across its business: "In our grocery, sugar, ingredients and agriculture businesses we have seen an escalation in the cost of energy, logistics and commodities. We have been implementing plans to offset these through operational cost savings and, where necessary, the implementation of price increases.

"We expect an increase in the adjusted operating profit for sugar. We expect reduced adjusted operating profit margins in grocery and ingredients at the half year, due to phasing in fully recovering cost but a recovery in the run rate of these margins by the financial year end."

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