Premier Foods’ volume recovery has moved along the curve to “double-digit growth” as pricing gives way to promotional activity to drive sales.
The Spice Tailor meal kits and Mr Kipling brand owner said today (14 November) that volumes accelerated in the second half across both branded grocery items and sweets treats such as cakes, with further market share gains.
Growth across most key metrics, including revenues and trading profits, did slow from the year-earlier half but CEO Alex Whitehouse stressed that was down to some tough comparatives linked to previous pricing actions.
Volume growth is, however, expected to “moderate” as the year progresses as Premier Foods laps the effects of previous pricing implementation.
Pricing is “on average, lower than last year”, Whitehouse said on a media call today, as he brushed off any meaningful impact from the UK’s budget measures, particularly the increase in employee national insurance contributions for businesses.
“Last year, we were on the tail-end of that huge inflation period, and so our pricing was higher than the prior year, and that's not the case this year,” Whitehouse explained.
“We've sharpened our promotional pricing. We've got double-digit growth in our volumes on both grocery and sweet treats. That's happening at a slightly lower price per unit, whereas last year was a higher price per unit.”
Premier Foods notched up growth of 4.6% in the six months to 28 September as group revenue reached £498.7m ($630.1m). That represented an easing from the year-earlier pace of 19.2%.
It was similar for branded grocery, such as Sharwood’s sauces, as sales rose 7%, compared to almost 25% in the comparative period. Sweet treats gained an edge, up 6.1% versus 5.4%.
“One of the key trends we've seen in the first half is that as inflation has eased consumers are more willing to spend just a little bit more to treat themselves,” Whitehouse said.
“And we've seen this quite clearly in our sweet treats and desserts businesses that are more premium ranges.”
While Premier Foods tends not to provide forward guidance, Whitehouse provided a nugget of what he expects through the back half, when the company rolls out its mince pies Christmas campaign.
“As we go through the second half, we'll eventually start to lap the lower pricing we put in place a year ago. You'll probably start to see a normalisation of those very strong volumes,” he said.
“You'd also expect to see price per unit becoming flatter than a year ago, rather than lower.”
While Premier Foods reported a 7.5% drop in statutory profit after tax to £39.5m, Whitehouse said the decline was “entirely the result of an accounting entry which is applied due to the surplus on one of our pension schemes”.
It had “nothing to do with our trading performance”, he added.
The budget announced two weeks ago by the new Labour government was a key topic of discussion but Whitehouse framed his response in the context of the “resilience” of Premier Foods’ business model to past events.
He said the added national insurance costs are “not particularly significant for us in the grand scheme of things, when you compare us to other industries, because we're quite automated, and so we're not seeing that as a particularly big issue”.
Some UK supermarkets and other retailers have recently quantified the actual impact from the extra budget-linked costs, but Premier Foods, with more than 4,000 employees, played it down.
“We're very different from a retailer. If you look at the number of employees retailers have got compared to their revenue, we're in a very different place,” Whitehouse said.
“The impact for us is much less significant. ‘Do we know what it is?’ Yes, of course we do. We’ve worked that out and the maths is quite simple. What we're working on is how we'll mop that up.”
