Premier Foods plc has said that it will focus on rejuvenating its power brands and rebuilding its relationships with retailers as it looks improve profitability.
The embattled UK firm has struggled under high levels of debt and this morning (19 March) booked a 29% drop in full-year profits for 2011.
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However, under new CEO Mike Clarke, who took the helm at the Hovis and Sharwoods maker last summer, the group has successfully renegotiated its loan agreements.
Premier has received backing from its banks and pension scheme partners for a four-and-a-half year re-financing package, which will extend its bank facilities of GBP1.4bn (US$2.2bn) until June 2016, the company confirmed. This, Clarke said, would provide the “breathing space” needed to turn Premier’s fortunes around.
Commenting on Premier’s 2011 performance during a call with analysts, Clarke said that the past 12 months had been a “pretty awful year” that highlighted a number of underlying problems at the company.
Clarke said that Premier had failed to provide sustained investment behind its brands and had not invested the time in building relationships with its business partners, in particular its retail customers.
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By GlobalDataWhile Premier had cut consumer marketing last year – causing a drop in volumes – the firm’s new management team revealed that it would double its investment in advertising over the next 12 months, increasing its marketing spend to more than GBP50m. Advertising will focus on the group’s eight “power brands”, seven of which are currently on television for the first time in Premier’s history.
Premier will also leverage these brands as it looks to expand them into neighbouring categories, creating umbrella brands, Clarke said.
For example, Clarke revealed that upcoming product development would see Mr Kipling expanded into the sweet treat category, “taking on confectionery”. Likewise, Clarke added that Premier has plans in the pipeline to expand Hovis “beyond bread” in the back-half of the year.
Meanwhile, Clarke said that an important focus for Premier going forward will be to rebuild its relationships with retailers and regain shelf-space that was lost during 2011 as the firm clashed with customers over pricing issues.
“When you get taken off the shelf you are replaced by a competitor brand. To get re-listed you have to prove you will get better sales,” Clarke said. “We will regain availability and distribution in the market place.”
In order to achieve this, Premier has abandoned a “one-size fits all” approach to its customer supply agreements and is instead developing joint business plans that allow the food group to convince retailers that it is capable of driving category growth and driving sales.
“This is not a broken company. This is a company that needs repairing, needs nurturing, needs focus,” Clarke insisted.
