The acquisition of Merchant Gourmet looks like another exceedingly good buy for Premier Foods, with the grain and lentil specialists on the pulse when it comes to ongoing health trends amid the ultra-processed foods backlash. It also moves Premier Foods beyond cooking sauces and into carbs for the first time, and the versatile nature and ambient format of those carbs provides a platform for growth via further NPD, as well as deeper listings.
But it’s not just about the growth opportunities. It also enables Premier to further diversify the portfolio away from HFSS products. That’s going to be important for all large food suppliers, with mandatory reporting on the way under health secretary Wes Streeting’s 10-year NHS plan. And to be fair, Premier said in its annual report in June that HFSS now accounts for only 45% of sales, thanks to the acquisitions of Spice Tailor (2022) and Fuel 10K (2023), as well as reformulation of some Mr Kipling and Ambrosia rice pudding lines.
Targets and enforcement
But with Nesta’s successful lobbying of Streeting also securing a commitment to mandatory targets for further reductions in HFSS, there’s no doubt Premier Foods will be looking for more bolt-on acquisitions to fit a healthier profile. And those mandatory measures are surely going to be a game-changer for M&A strategy among suppliers, with M&A (alongside disposals) key to lowering exposure.
It’s a particular challenge for single-category manufacturers. And while multinational companies might be tempted to ignore rules imposed from one of its markets, GSCOP-style fines as proposed by Nesta for those that miss targets will test their resolve.
The professors behind last week’s report on the effectiveness of the HFSS promo ban are also demanding legislation to force suppliers and manufacturers to provide data via a new ‘Open/Live’ composition database, based on the nutrient profiling model – the same model Streeting has promised to review via a ‘healthy food standard’ with the potential to reclassify thousands of further products as HFSS.
Pressure is also coming from major investors, spearheaded by ShareAction, calling on the government to set healthy sales targets, covering all large food companies including manufacturers, retailers and out of home.
Some in the industry are wishing this will all just go away, but the health lobby has the bit between its teeth and investors have no intention of letting go either as they steer Streeting in a new direction for health policy.
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