Premier Foods Cadbury Cakes Choc Tarts

 

Short-term capacity constraints” have hindered UK sales of its Cadbury cakes

Premier Foods has been a long-term victim of the supermarket price war and discounter-driven market disruption. But this week more evidence emerged that Premier is tapping into discounter growth to boost sales even as past branded star performers Mr Kipling and Cadbury cakes stall.

The Oxo and Bisto supplier reported a 4% increase in group sales to £261.4m in the 13 weeks to 30 December - a performance above consensus expectations for the second quarter in a row.

However, the sales growth was overwhelmingly driven by non-branded sales, which soared 17% in the quarter as booming sales of its mince pies via the discounters and other seasonal contract wins propelled growth. In contrast, branded sales rose a more modest 0.7%, amid a worrying 7.3% decline in its branded sweet treats division. Sales of Mr Kipling cakes fell in the quarter as a result of the move in promotional activity, while Premier also pointed to “short-term capacity constraints” that hindered UK sales of its Cadbury cakes.

Analysts at Jefferies said the 4% top-line growth outstripped its expectations of a 2.8% sales rise and noted the 3.4% gain in the company’s core branded grocery business. “At the sales level 4.0% is good to our minds, no doubt boosted by price momentum,” the broker said. “Year-to-date sales growth of 2.6% is now within the guidance range (of 2%-4%) given in the aftermath of the McCormick bid, with the underlying quantity and quality of delivery improving, in our view.”

One of the grocery division’s strongest performers was Batchelors, delivering its fourth successive quarter of sales growth driven by Premier’s partnership with Nissin Foods. Weekend reports suggested Premier is considering selling the noodle brand to its Japanese partner - a story Premier sought to downplay. Shore Capital noted: “What this story may reveal is that new chairman, Keith Hamill, is flexing his muscles early in his tenure.”

Premier shares rose 2.9% to 44p on Tuesday, but had eased back to 42.5p by Thursday lunchtime and remain 0.5% down year-on-year.