Premier Foods Q1: Cake sales growth offset by grocery brands decline

New gluten-free Mr Kipling products have helped drive growth in Premier Foods’ cake division – although a steep drop in sales of grocery lines has dragged down the company’s overall performance.

The business today (20 July) announced a 3.1% year-on year-decline in overall sales for the first quarter of the year (13 weeks ending 1 July).

Sales from Premier’s Sweet Treats division – which includes Cadbury and Mr Kipling cakes – rose 3.8% to £48.7m over the period, with branded sales up 1.4%. Sales of own-label sweet treats rose 17.8% to £7.9m following new contract wins at supermarket and discount retailers.

The company said sales of its core Cadbury cake range increased volumes, sales and market share, while Mr Kipling returned to volume growth in the quarter. This was partly due to the introduction of the gluten-free range that rolled out nationwide in April.

Premier added it is expanding its cake-on-the-go range through wider distribution and the introduction of Mr Kipling Flapjacks.

Cadbury cake was also a success for Premier’s international division, with a 20% increase in division sales bringing the 11th consecutive quarter of growth. Cadbury cake grew sales, volumes and market share in Australia, said the company.

In May, Premier renewed its licensing deal with Mondelēz International to produce Cadbury cakes, stating this would enable it to extend into potential new markets, including South Africa, Canada, Japan, China, India, Asia-Pacific, Caribbean and additional countries in the Middle East.

Premier Foods international sales director Adam Buckley is one of the speakers at the Food Export Conference that takes place on 5 October and is organised by British Baker in partnership with sister titles Food Manufacture and Meat Trades Journal. For more information on this event click here.

In contrast with the Sweet Treats division, overall sales of Premier’s grocery lines – including own-label products and brands such as Bisto, Batchelors and Loyd Grossman – fell 5.8%, driven by a 7.9% drop in sales of branded products to £102.3m.

Premier reported that its cost reduction and efficiency programmes were “progressing well”, with consolidation of the group's warehousing and distribution operations into one central location in Tamworth, Warwickshire, in line with expectations. Tamworth is on track to manage a third of Premier’s volumes by the end of July 2017, with full transfer to the site expected by the middle of next year.

“Our first-quarter sales were lower than last year, as we expected, primarily due to lower sales volumes in the grocery categories, notably desserts,” said Premier Foods chief executive Gavin Darby.

“At the retail level we have continued to outperform our markets and industry peers, our international business grew 20% in the quarter, and our cost-savings programmes are on track.”

Darby added that the company expected to report sales growth in the second quarter, broadly flat sales in the first half, and that its anticipation to deliver progress in the full year remained unchanged.

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