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Premier Foods sees positives in supermarket wars

Jan 23 2015 13:19

London - The owner of Mr Kipling cakes and Bisto gravy, Premier Foods, could gain shelf space in the intensifying battle for shoppers among Britain's "big four" supermarkets, its chief executive said.

Big supermarkets including market leader Tesco have lost market share to discount chains Aldi and Lidl. But now they are fighting back with price cuts, improved customer service and simpler ranges to woo shoppers.

Supermarkets' simplified product ranges will create greater shelf space for products from established manufacturers like Premier Foods and strip out smaller rivals, Chief Executive Gavin Darby said on Friday.

"I am extremely interested in supporting a retailer who wants to take 20% to 40% of their product lines out because it will benefit the faster selling lines and we typically have those," he said, referring to Tesco.

The impact of Britain's changing grocery industry still showed in the company's fourth quarter sales, however, which fell 4.6% year on year, reflecting shoppers' penchant for discounters and more own-brand products.

Full-year trading profit fell 6% as expected to £131m.

Like Tesco, its biggest customer, Premier Foods has spent 18 months simplifying everything from its number of suppliers to recipes and product lines.

It has cut slow sellers in favour of a greater focus on its big seven brands - Mr Kipling, Bisto, Oxo, Ambrosia custard, Batchelors, Loyd Grossman and Sharwoods. Many of its brands are staples in British kitchens.

"The stage is set for the beginning of a beautiful relationship (with Tesco), if Premier Foods plays its cards right," Jefferies analyst Martin Deboo said, reiterating a buy rating on the stock.

Shares rose 8.9% to 40 pence in early trade, boosted by improved sales and market share for its top brands, led by a re-launch of Mr Kipling, and a lower than expected pension deficit. Shares are down 58% on a year ago.

"The environment will be challenging in 2015 but after 30 odd years in this industry I have rarely seen an alignment of the stars in terms of where the big retailers are going and big branded manufacturers," Darby said.

After a costly acquisition spree between 2002 and 2008, Premier Foods has spent the past few years selling assets, reshaping its business and cutting costs to help reduce debt, which fell £263m to £567.6m in 2014.

retail  |  consumers
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