Interactive Investor

Premier promises new products after sales fall

24th April 2014 09:40

Ceri Jones from interactive investor

Food manufacturer Premier Foods revealed falling sales on Thursday, which were down 6.2% in the first quarter.

The maker of labels such as Mr Kipling, Oxo, Hovis, Loyd Grossman and Bisto blamed a subdued retail grocery market impacted by milder weather and a late Easter.

The company said sales of the firm's grocery "Power Brands" fell by 3.5% in the first quarter of the year, while non-branded sales slid 12.9% due to the impact of contract withdrawals in lower margin desserts and powdered beverage contracts, although Premier said this negative trend would start to improve in the second quarter.

Premier promised a range of new products in the second half of the year, backed with extensive marketing campaigns, including an "Awesome Mums" TV campaign for its Batchelors Deli-Box items.

Sales of Loyd Grossman sauces grew during the quarter, supported by the new Lasagne sauce pouches product, while Sharwood's sales were down reflecting a particularly competitive cooking sauces and accompaniments category.

In Ambient Desserts, the company's strategy to develop the higher value-added pot segment of the market led to the launch of the new Ambrosia "Mini-pots" range and larger "Devon Dream" pots helping drive new usage occasions.

The company also said its major investment in the new Mr Kipling Snackpack line at its factory in Barnsley is developing well, with production expected to commence in early 2015.

A lot was made in the statement that the declines were forecast and as expected, but analysts such as Shore Capital have been writing as recently as last week that sales of the company's Power Brands would rise by 2.5% this year and 3% next. They also expected to see the impact of improved productivity and streamlining of stock keeping units.

Much will depend on the impact of the company's balance sheet restructure which is expected to be transformational after its eight for five rights issue earlier in April.

Gavin Darby, chief executive officer at Premier Foods, said: "Having announced the Hovis joint venture and a major and transformational new capital structure during the quarter, we can now focus all our energies on delivering our category growth strategy.

"Our expectations for the Full Year are unchanged. While trading conditions are expected to remain challenging for the remainder of the year, we have a strong programme of new product launches and consumer marketing planned for the second half of the year building on our enhanced customer partnerships with retailers and supported by continuing initiatives to reduce costs, complexity and improve efficiency".

The shares shrugged off the news however and opened up 4.1% to 63.50p.

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