Premier Foods has reported a notable recovery in volume sales, achieving “double-digit growth” as it shifts from pricing strategies toward increased promotional activities to stimulate sales. On November 14, the owner of the Spice Tailor meal kits and Mr. Kipling brand disclosed that volume increases accelerated in the latter half of the year across both branded grocery items and sweet treats like cakes, resulting in enhanced market share.
Even though growth across key metrics such as revenues and trading profits decelerated compared to the previous year’s performance, CEO Alex Whitehouse emphasized that this slowdown stemmed from challenging year-on-year comparisons linked to previous pricing strategies. Volume growth is anticipated to “moderate” as the year unfolds, particularly as Premier Foods navigates the impacts of its earlier pricing decisions.
During a media call, Whitehouse noted that current pricing is “on average, lower than last year.” He dismissed concerns regarding the impact of recent UK budget measures, including an increase in employee national insurance contributions for businesses. He explained, “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.”
“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,” Whitehouse elaborated.
In the six months ending September 28, Premier Foods experienced a revenue increase of 4.6%, reaching £498.7 million ($630.1 million). This represents a significant decline from the previous year’s growth of 19.2%. Brand grocery sales, including popular items from the Sharwood’s range, increased by 7%, compared to a staggering 25% in the same period last year. Sweet treats continued to perform well, rising 6.1%, a slight improvement over the 5.4% increase observed previously.
Whitehouse remarked, “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.” He noted this trend was particularly evident in the premium ranges of sweet treats and desserts.
While Premier Foods generally refrains from offering forward-looking guidance, Whitehouse hinted at expectations for the second half of the year, particularly regarding their Christmas mince pie campaign. He stated, “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 normalization of those very strong volumes.”
Despite encountering a 7.5% decrease in statutory profit after tax to £39.5 million, Whitehouse clarified that this decline was primarily due to an accounting adjustment related to surplus on one of the company’s pension schemes and did not reflect the company’s trading performance.
The recent UK budget, unveiled by the new Labour government, prompted discussions within the industry. Whitehouse commented on Premier Foods’ resilience, noting that the additional costs associated with national insurance are not particularly burdensome given the company’s automated processes.
He pointed out, “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.” He reassured stakeholders, saying, “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.”
In summary, Premier Foods has successfully navigated the evolving food and beverage industry trends, reflecting resilience amid changing consumer preferences. With strategic promotional pricing and continued innovation, the company is well-positioned to align with current food and drink business dynamics and capitalize on consumer trends in the sector.
