Premier Foods sales slump as appetite for groceries falls

SALES at Premier Foods fell by more than 3pc in the first quarter as the Mr Kipling maker suffered a slowdown in its grocery business.

The company said sales of groceries and desserts, which were hit by a reduction in multi-buy promotions and a warmer June, offset a good performance in its “sweet treats” range.

Premier said total group sales were down 3.1pc in the 13 weeks to July, while grocery sales fell 5.6pc. In its “sweet treats” division, Cadbury cakes and a return of Mr Kipling to growth sent sales up 3.8pc. It also reported a good performance in its international business, where sales of Cadbury cakes in Australia helped drive the division to 20pc sales growth.

In May, Premier shares spiked after it revealed it had signed a new agreement to make Cadbury cakes for the next five years. Analysts had warned it would face “unmitigated disaster” if it failed to extend the deal.

The company is expecting a strong second half of the year, saying it is starting to see more multi-buy promotions return to supermarkets, which will boost its sales volumes.

“Our first quarter sales were lower than last year, as we expected, primarily due to lower sales volumes in the grocery categories, notably desserts,” said Gavin Darby, the firm’s chief executive. “At the retail level we have continued to outperform our markets and industry peers, our international business grew 20pc in the quarter, and our cost-savings programmes are on track.”

Premier issued a profit warning in January, saying profits would be 10pc lower than hoped. The warning, which the company blamed on rising commodity costs and supermarkets ditching their multi-buy promotions, sent shares down by 16pc.

Last year, Premier rejected a series of takeover bids from US flavouring manufacturer Mccormick – which earlier this week bought Reckitt’s sauce business - including a bid of 65p per share. Premier’s shares closed at 40p yesterday, up 1.25p on the day.