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Premier Foods strengthened by acquisitions and marketing

By Anita Awbi , 07-Mar-2006

UK manufacturer Premier Foods has achieved flat sales but a year-end like-for-like grocery profit rise of 5.4 per cent - bolstered by rewarding acquisitions and a huge marketing drive.

In line with expectations, the maker of Bird's custard and Sarson's vinegar has weathered the difficult trading environment to achieve an overall 13.3 per cent rise in trading profits, excluding exceptional items and amortisation.

This follows a strategic year for the company, which acquired Bird's desserts from Kraft, Quorn meat-free range from Marlow Foods, Gedney's fresh vegetable supplier and Cauldron's vegetarian range.

 

But the grocery division's like-for-like sales were flat. They increased by a nominal 1.6 per cent to £603.8m, supported by strong demand for newly-acquired brands, but offset by "weak trading conditions experienced in January and the un-seasonally warm Autumn" claimed the company.

 

The launch of Branston Baked Beans did help lift the division however, bringing strong possibilities for future growth. The product achieved a 6.2 per cent market share within 12 weeks, but a massive fourth quarter £3.5m marketing strategy blunted profits.

 

The firm's chief executive Robert Schofield said: "2005 has seen another robust performance by our grocery business with our drive brands growing strongly and our operating margins improving in line with our targets."

 

"We have invested heavily in our brands, increasing our marketing spend on our existing brands by £5m," he added.

 

But like-for-like trading profit of mature brands in the convenience, pickles and sauces category was £34.3m - declining 1 per cent on last year's £34.6m. This was largely attributed to adjustments made for the damage caused by a fire at the Bury St. Edmunds factory in 2004, and rising fuel and commodity costs. Sector sales fell from 2004's £347.5m to last year's £347.1m.

 

During 2005 Premier Foods fought to maintain its position, as the potato business continued to decline and impact on performance. But the company is preparing to profit from its string of acquisitions that are now successfully consolidated.

 

It increased it's total marketing spend by £5m to £27.7m, using the budget to push existing brands and run a television advertising campaign for newly-acquired Quorn and Cauldron Foods.

 

And the firm recently announced plans to enter the brown sauce and ketchup sector as a direct rival to Heinz-HP. It will launch the products under its flagship Branston range, encouraged by the successful launch of Branston Baked Beans.

 

The company aims to reverse a current stagnation in the table sauces sector, which it claims saw the market decline by 1.3 per cent in value and 3.3 per cent in volume in 2005. It expects to take 20 per cent of the brown sauce market and 10 per cent of the tomato ketchup market by 2008.

 

Overall, Premier Foods reported an annual group turnover of £789.7m, up 6 per cent from 2004's £744.7m - making it Britain's fourth largest food producer.