Premier Foods’s branded sales dip in third quarter

By Rod Addy contact

- Last updated on GMT

Premier is dramatically pumping cash into branded marketing for the final quarter of the year
Premier is dramatically pumping cash into branded marketing for the final quarter of the year

Related tags: Inflation

Premier Foods saw branded value sales fall in its third financial quarter (Q3) as the maker of Mr Kipling cakes and Ambrosia desserts was stung by supermarkets losing share to discounters.

In an interim management statement, the firm said increasingly demanding market conditions resulted in a 4.1% reduction in branded sales in the three months to September 30.

In addition, the company stated sales of its ‘power brands’, which it is under increasing pressure to grow, decreased by 5.1%, although they showed signs of improving towards the end of the quarter.

Premier claimed food price deflation and structural changes in the grocery market, as shoppers shifted to discounters Aldi and Lidl, online and convenience channels, had hit sales.

‘Adversely affected volume’

“As a consequence, the larger supermarkets have lost share to these other formats over recent months, which has adversely affected the company’s volume and sales performance,”​ stated Premier.

“Additionally, price inflation across the wider grocery market has fallen for the 11th​ successive month and is expected to soften further.”

In an analysts call this morning (October 23), commenting on performance, ceo Gavin Darby said: “The primary factor has been the accelerated change in shopping patterns as we have moved from the second quarter to the third quarter. The impact is a volume impact. We don’t see that as much of a value issue.”

Premier continued to simplify its ranges, having more than halved the number of suppliers it was working with since the start of 2013. It also continued to move away from unprofitable own-label business and deep-cut promotions.

Power brands down

The company reported sales of power brands down from £125.9M in Q3 2013 to £119.5M in the same period this year. Total branded sales fell from £166.7M to £159.9M, comparing the same periods.

Sales of power brands across nine months of the year dropped by 5%, from £379.1M to £360.3M on the same period last year. Total branded sales dipped from £511M to £483.3M.

However, in the analysts call, Darby stressed the fall in branded sales compared favourably with a larger 6.8% drop for its second quarter.

He also emphasised Premier’s previously stated aim to ramp up marketing spend in the fourth quarter, doubling spend in the same period last year. Power brands had perked up towards the end of Q3, he added.

Premier said trading profit expectations for the 12 months to December 2014 was still within expectations, although towards the lower end of that range.

Related topics: Business

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