Hovis boss must look at bottom line, say analysts

Analysts have warned that the boss of Premier’s new bakery division must focus on the bottom line and not be "seduced" by brand-building, if he is to turn around Hovis.

Premier’s chief executive officer Michael Clarke announced a management shake-up last week, dividing the firm into separate grocery and bakery divisions with their own managing directors. The move follows a profit warning, which saw Premier’s share price plummet by 35%.

Iwan Williams is the new boss of the £1.1bn bread, cake, milling and Brookes Avana businesses. His previous roles included strategic marketing director of Coca-Cola in Asia-Pacific, as well as stints at Cadbury Schweppes and McCormick spices. Williams’ experience of such major brands fits with Clarke’s plan to reverse Premier’s fortunes by focusing on its eight ’power brands’ Hovis, Mr Kipling, Ambrosia, Batchelor’s, Bisto, Loyd Grossman, Oxo and Sharwood’s.

However, analysts said it would take more than branding to revive Hovis, which saw value sales fall 6% in the three months to 30 September. Martin Deboo, an analyst at Investec, said: "Williams obviously has big brands like Coca-Cola on his CV, and Premier has included Hovis as one of its eight power brands. But he shouldn’t get too seduced by the idea that the core issue with Hovis is to do with branding. It’s not. It is a structural one of over-capacity in the industry.

"What Williams needs to worry about now is addressing the bottom line by looking at the production assets, customer service levels and optimising costs to the hilt. Brand-building is not the panacea. He needs to focus on the cost equation."

Darren Shirley, an analyst at Shore Capital, added: "In the longer term there are structural issues that need to be tackled. Premier’s balance sheet is constrained by debt and pensions liabilities, so resources going forward will be limited."

Williams will take over the bakery division this month, while the £1bn grocery business will be headed up by Graham Hunter from early 2012. He joins from 2 Sisters, which acquired Northern Foods this year.