Premier Foods to accelerate brand investment as marketing push pays off

Premier Foods boss Gavin Darby is confident the company’s significant investment in marketing and innovation will pay off as it arrests declining sales.

The company, which owns brands including Bisto, Ambrosia and Mr Kipling, saw sales declines at its ‘power’ brands slow to 1.6% for the quarter to 4 April, from a 3.8% drop a year ago. Total branded sales were flat.

For the full year total branded sales fell 4.1%. Sales at its ‘power’ brands were down 4.6% while ‘support’ brand sales fell 2.5%.

Speaking on a conference call following the results announcement, Darby claimed there is “evidence” the firm’s strategy is working and that the business is “gaining traction and momentum”.

“We are accelerating investment behind launches and brands. We feel optimistic and encouraged by the trends we’re delivering – there is momentum in the business.”

Gavin Darby, Premier Foods CEO

“We are accelerating investment behind launches and brands. We feel optimistic and encouraged by the trends we’re delivering – there is momentum in the business in share and revenue,” said Darby.

Darby quoted IRI figures showing that Premier Foods has seen 9% volume growth in the quarter – compared to 1.9% in the wider market – and 3.3% value growth in a “flat market”.

“There is a strong correlation between where we’re investing and the return on the brands and categories in which we’re doing it,” says Darby.

Brand relaunch

Premier Foods underwent a major relaunch in the second half of 2014 investing in product innovation across ranges including Mr Kipling, Bisto and Oxo and in multimillion pound TV campaigns.

That resulted in an increase in consumer marketing costs, up 31.9% to £33m, while its total investment in its brands grew 82%.

That includes a 22% increase in “customer market-facing staff” in its marketing, sales, innovation and international divisions.

Premier Foods is promising a further increase in consumer marketing spend this year – to between £34m and £38m for its financial year 2015/16 – as it looks to repeat its brand investment with Sharwoods and Batchelors, as well as put more support behind Ambrosia.

It will also double Premier’s rate of innovation from 11.3% in 2014 to 20% this year. The ad investment will also continue with Premier planning to be on TV screens with eight of its brands – up from six last year.

Marketing investment pays off

Mr Kipling was the first Premier brand to receive the investment – including new product ranges and a high-profile return to TV advertising. Darby claimed the results have been “fabulous”, with a 19% increase year on year in volume growth, 8% sales growth and market share increases.

Overall, the cake category is growing at 3.8% he said, compared to 1 or 2% declines prior to the investment.

“We have a perfect set of KPIs – volume growth, revenue growth, share growth, penetration growth and frequency of purchase growth. This is the result of investing, bringing in innovations, the advertising relaunch, seasonal products at Easter. The category is growing due to investment,” he added.

He also pointed to growth in Bisto, its Cadbury range and Oxo following strong Christmas advertising and a marketing push in early 2015.

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