Premier Foods plc chief executive Robert Schofield today (16 February) outlined how the UK’s largest food group plans to drive growth in the years ahead – with a focus on five “drive” categories.
The company plans to focus on its key brands in a bid to grow faster than the UK grocery market and to help pay down a debt pile of GBP1.37bn (US$2.15bn).
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Speaking as Premier published its 2009 results, Schofield listed the company’s plan to divide its brand portfolio into three categories – drive, core and defend.
Premier’s “drive” brands and categories are Hovis bread, Mr Kipling cakes, Ambrosia and Hartley’s desserts, Sharwood’s and Loyd Grossman cooking sauces and Quorn.
Schofield said Premier had chosen to focus on these businesses due to their size or potential for growth.
The Premier boss said the company would aim to grow volumes from its “drive” categories up to 2% quicker than the market, even though some segments of the drive categories were stagnant.
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By GlobalData“Bread doesn’t have growth but it’s a huge market; cake is a big category that hasn’t grown but we think it can,” Schofield said.
The second and third tier categories – dubbed “core” and “defend” – were smaller and had weaker growth prospects, Schofield explained.
The “core” list, which included brands like Bisto and Branston, were “mid-sized” with “moderate” growth, Schofield said. The “defend” tier, including Sarson’s vinegar, had “lower growth potential” and were in a category that could shrink over time, he added.
Schofield said Premier wanted to focus on the brands and categories with which the business could achieve the “fastest” growth after a year when food brands in the UK had withstood competition from private label.
“Brands are winning on value and volume versus retail brands [and] we are winning in our categories,” Schofield said. “We set out to do that in 2009 and we’ve achieved that.”
However, Schofield admitted brand-owners – including Premier – had increasingly looked to promotions to compete.
“Brands have been very competitive. Promotional activity has gone up by 6-9%,” Schofield said. “We’ve competed quite significantly with promotions in 2009. We had a lot of innovation in 2009 that needed [consumer] trial to start with. We eased back in the fourth quarter and still had a decent Christmas.”
Nevertheless, Premier’s debt pile remains a concern for some industry watchers and the company’s management was quick to insist it could make further cost-savings in 2010 after a year in which nine factories were closed.
Schofield highlighted the possibility of cost-savings in Premier’s distribution network and procurement, while CFO Jim Smart did not rule out the prospect of disposals to pay off debt. Smart insisted, however, that Premier would weigh up the gains from any disposal against whether any asset could generate better returns.
“We’re very much open-minded to disposals but it’s not a fire sale,” Smart said. “We need to look responsibly at the proceeds we would get.”
