Premier Foods (LON:PFD) said first-quarter sales rose as growth in its branded portfolio offset continued pruning of lower-margin non-branded grocery contracts, and the company left its trading profit expectations for the year unchanged.
Chief Executive Alex Whitehouse told analysts that the update covered the 13 weeks to June 27 and said the company was “on track at this early stage in the year.” Group sales increased 2.7%, while U.K. branded sales rose 3.8%. Overall branded sales were up 4%, which Whitehouse said was ahead of the market and helped the company gain further market share.
Sweet Treats Led by Mr Kipling Growth
Branded sweet treats sales rose 6.6% in the quarter, led by Mr Kipling, which grew by more than 9%. Whitehouse said Premier Foods’ branded sweet treats have now grown by an average of 8% over the last 11 quarters.
He said innovation continued to support the category, alongside strength in the core product ranges. Recent launches included Mr Kipling Birthday Cake Slices, which followed the company’s Birthday Cake Tarts, and a new range of Mr Kipling Whirls in flavors including Cookies & Cream. Whitehouse said the birthday cake flavor was inspired by a trend observed in the U.S., while the Whirls range was designed to appeal to younger consumers.
Other recent innovation included Mr Kipling Cake Bites, aimed at sharing and portion control, and Mr Kipling Breakfast Bakes, which the company said target a different time of day from much of the brand’s existing consumption.
Grocery Brands Grow, Non-Branded Business Still Being Reshaped
Premier Foods’ branded grocery sales increased 3% from a year earlier. New products included Ambrosia custard pouches, which Whitehouse described as convenient lunchbox options containing 100 calories per pouch; Loyd Grossman premium cooking sauce kits in a three-step format; and Nissin Kanzen meals in a pot, which he said contain more than 20 grams of protein and 26 essential vitamins and minerals.
The company also cited contributions from products launched last year, including OXO Bone Broth and Angel Delight Bubble Jelly, which Whitehouse said supported sales growth and share gains.
Non-branded sweet treats sales increased 5.3%, helped by stronger volumes in pies and tarts and a contract win for cake slices. Whitehouse said the company now expects modest growth in non-branded sweet treats for the year.
Non-branded grocery sales were GBP 2.5 million lower in the quarter as Premier Foods continued to exit some contracts. Whitehouse said the company has been “right-sizing” that part of the business, with a medium-term aim for non-branded operations to be flat or deliver modest low-single-digit growth.
In response to a question from Jefferies analyst Andrew Wade, Whitehouse said the exited contracts represented “relatively hollow revenue” with little or no profit impact. He said the non-branded grocery business is now smaller but “significantly more profitable,” though it will take longer to complete that process than in sweet treats.
Acquired Brands and New Categories Continue to Expand
Sales in new categories increased 16% from last year, following 38% growth in the comparable period a year earlier. Whitehouse highlighted Cape Herb & Spice as a strong performer, saying it had become an established presence in the market and helped reduce seasonality in the grocery business by supporting meals and barbecue occasions.
He also pointed to FUEL10K yogurt and granola, a chilled product launched last year that combines protein-enriched yogurt with granola in a separate lid.
Premier Foods said its three acquired brands — The Spice Tailor, FUEL10K and Merchant Gourmet — each grew sales by double digits in the quarter. Merchant Gourmet saw growth across its range, including new Gourmet Baked Beans. FUEL10K continued to gain share in granola, with Whitehouse noting that its Chocolate Granola remained the No. 1 granola product in the U.K. market. The Spice Tailor’s core Indian kits range also performed strongly, with brand sales growing in the teens percentage range.
Whitehouse said the company continues to look for acquisition opportunities in “future focused brands” where it can apply its branded growth model, while noting that Premier Foods remains selective.
International Sales Rise as Australia Stabilizes
International sales rose 6% at constant currency and 7% on a reported basis. Whitehouse said Premier Foods’ focus markets remain Australasia, North America and EMEA, with attention on Mr Kipling, Sharwood’s, The Spice Tailor and FUEL10K.
In Europe, sales grew by double digits, supported by the launch of FUEL10K in the Netherlands, Germany and France. Whitehouse said the Netherlands had achieved the most significant distribution, with granola and porridge pots listed in Albert Heijn.
North America also delivered double-digit growth. In Canada, Premier Foods saw higher sales of The Spice Tailor, while in the U.S. growth reflected new distribution for Mr Kipling slices and pies that began in the second half of last year, as well as more recent listings.
In Australia, The Spice Tailor sales grew more than 20%, helped by a multi-channel marketing campaign that included television advertising and a retail experience in a major shopping center. Whitehouse said cake sales in Australia had stabilized as retailer stock levels began to normalize.
Asked by Investec analyst Matthew Webb why international growth was 6% despite double-digit growth in several regions, Whitehouse said Australia is a much larger and more established market for Premier Foods, and overall sales there were “pretty flat” as stock levels continued to normalize. He said the outcome was better than expected and that the company had made progress working with retailers on logistics and ordering levels.
Q&A: Ireland, Input Costs and Easter Timing
Peel Hunt analyst Charles Hall asked about Ireland, where Premier Foods moved from a distributor arrangement to direct retail delivery with a significant retailer. Whitehouse said the change created a one-off first-quarter impact as distributor stocks were run down, amounting to “a couple of million GBP or so” of branded grocery sales. He said the direct relationship is more efficient, saves money and gives the company more control.
On input costs and pricing, Whitehouse said the picture was similar to previous guidance. While the company was monitoring developments closely, he said it did not currently appear to need pricing action.
Wade also asked about the cadence of innovation. Whitehouse said there had been a “subtle change” over several years, with Premier Foods focusing less on the absolute number of new products and more on ideas with greater potential scale. He cited OXO Bone Broth as a product the company expects can scale to several million pounds of turnover.
Webb asked about the timing of Easter, noting prior comments that some sales had benefited the previous fourth quarter. Whitehouse confirmed that deliveries ahead of Easter had boosted the fourth quarter at the expense of the first quarter, and said first-quarter branded grocery and sweet treats would have been stronger on a like-for-like Easter timing basis.
Whitehouse closed the call by saying the first quarter is not Premier Foods’ largest period, with demand typically stronger later in the year when weather turns colder, but said the company was “off to a good start” and reiterated that there was no change to the outlook for the year.
About Premier Foods (LON:PFD)
Premier Foods plc, together with its subsidiaries, manufactures and distributes branded and own label food products in the United Kingdom, other European countries, and internationally. The company operates through Grocery, Sweet Treats, and international segments. It offers a portfolio of product categories, including flavorings and seasonings under the Bisto, OXO, Paxo, and Saxa brands; cooking sauces and accompaniments under the Sharwood's, Loyd Grossman, Spice Tailor and Homepride brands; quick meals, snacks, and soups under the Batchelors and Smash brands; ambient desserts under the Ambrosia, Bird's, and Angel Delight brands; and ambient cakes under the Mr Kipling and Cadbury brands.
