Premier Foods feels pinch of tough UK grocery sector

Premier Foods, the British maker of Mr Kipling cakes and Bisto gravy, said a tough grocery market and the later timing of Easter had hit sales in its first quarter.

The firm said, as it expected, total sales in the three months to March 31st fell 6.2 per cent to £186.3 million with sales of its eight key grocery brands, which as well as Mr Kipling and Bisto include Batchelors and Ambrosia, down 3.5 per cent.

Sales of support brands slumped 10.4 per cent mainly due to lower Cadbury cake sales as a result of Easter falling in the company’s second quarter this year, while non-branded sales fell 12.9 per cent as the group puts more focus on branded products.

“Our expectations for the full year are unchanged,” Premier Foods chief executive Gavin Darby said in a statement. “While trading conditions are expected to remain challenging.. we have a strong programme of new product launches and consumer marketing planned for the second half of the year.”

Retailers are facing the slowest rate of growth in Britain’s grocery market since 2005, illustrated by tough trading at UK supermarkets like Tesco and Morrisons.

After a costly acquisition spree, Premier Foods has spent the past few years selling assets, reshaping its business and cutting costs to help reduce debt, pinning its prospects on growing a streamlined group of high-margin grocery brands.

Last month, the firm unveiled a £1.13 billion refinancing package designed to reduce its borrowings, and also struck a new pensions agreement.

The deal follows a decision in January to hand control of its struggling Hovis bread business to US investment firm The Gores Group.

Premier Foods said the deal would allow for greater investment in the division, and free-up its focus on groceries. Shares in Premier Foods closed at 63.50 pence yesterday, up 31 per cent on a year ago, valuing the group at £524 million.

Reuters