T he merger of RHM with Premier Foods (pgs 4,12) will create a massive new food company. It’s early days, but at the moment it looks a great fit with enhanced buying power. What if, perish the thought, milling and baking go a bit pear-shaped? Because they are the sectors feeling the pressure most from increased grain costs on the one hand and supermarket price pressures on the other.
Well as milling and baking are going into one division, as expected, it will be easy to retain or, though unlikely, divest.
Robert Schofield Premier’s chief executive told me: "Our plans are strong innovation and investment in products." So it looks like the plant baking ’battle of the brands’ will really hot up in 2007 between Warburtons and Hovis, while Allied’s Kingsmill also has promised to come out fighting.
The City reaction to the proposed merger sounds positive and you only have to look at the table on page 12 to see that as a brand Hovis is at the top of the acquisition tree. It fits in comfortably with Robert Schofield’s patriotic quote that "The acquisition brings Premier more great British brands."
For employees, takeovers can be both hugely motivating and deeply unsettling. The city’s leading analyst for bakery and milling, David Lang of Investec, tells us that Premier is likely to to strip distribution and administrative costs from the bakery division. It is also promising to extend the Hovis brand into categories more such as biscuits and cereals.
Remember, Robert Schofield was the man who formerly headed up United Biscuits as MD and then joined Premier in 2001. He actually tried to buy UB two months ago and was trumped by private equity firms Blackstone and PAI. But breakfast cereals perhaps under the Hovis brand? That might be an interesting development! So we wish all at RHM well and look forward to tracking their progress.
Elsewhere this week British Baker has been busy too. We have launched our own website with the latest news and links (pg 16). And our owners, William Reed, have launched a new ’Baking Industry Exhibition’ to take place in 2008 alongside the popular Convenience Retailing Show, Food & Drink show and Foodex Meatex (pg 4). Around 70,000 people including craft bakers and supermarket buyers attended the shows this year, so it should be a busy new event.