Premier Foods: Catalysts, closures and consolidation…

By Kacey Culliney

- Last updated on GMT

Related tags Economics Hovis

Co-op contract loss sparks significant changes to Premier's operations
Co-op contract loss sparks significant changes to Premier's operations
Premier Foods will shut two bakery sites and remove 130 distribution routes at a cost of £28m ($44.5m); a move sparked by its lost Co-op bread contract.

Proposals to close bakery sites in Greenford and Birmingham and remove 130 distribution routes across both towns and Mendlesham and Plymouth have been drawn up. The actions will cause approximately 900 job losses across the company’s bread division.

Premier Foods will enter a 90-day consultation period with employees over the coming days.

Lisa Attenborough, director of communications for the firm, told the move forms part of a long-term strategy to drive efficiency but was sparked by the bread contract loss in October.

Retail contract loss was the ‘catalyst’

Premier Foods announced the cut of its £75m ($119.3m) bread contract with the Co-op in its interim management statement in October. The contract was later secured by rival Allied Bakeries. See HERE​.

“We’ve never kept the fact we had to make bread more efficient a secret… this decision was about efficiencies we had to make and the fact we lost the bread contract,”​ Attenborough said.

“The bread contract loss takes volume out and that is a catalyst for us to be able to make changes and manage the bread business in a different way,”​ she said.

“As a company we’re always looking at how to be more efficient,”​ she added.

The firm’s CEO Michael Clarke said that by simplifying the company’s cost base, increased focus could be dedicated to not only improving efficiency but also quality and service levels to help grow the core Hovis brand.

“We recognise the impact these actions will have for our employees at the sites affected. Decisions will not be taken lightly but they are necessary if we are to build a strong and successful future for the bread division and those who remain with our business,”​ Clarke said.

‘Sensitive’ distribution issue

Attenborough said the move would not be a wholesale move but rather current bakery sites would take on the additional capacity. No machinery will be moved.

The distribution cuts, she said, are a direct result of the lower volumes following the bread contract cut.

Clive Black, director and head of research at Shore Capital, pinpointed distribution as a business issue that needs to be addressed by Premier Foods and the wider UK bread industry.

He said that distribution held opportunities for firms to cut costs and rationalize. See HERE​.

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