Premier Foods says it pursuing a “game plan” of increasing marketing investment over the next year, as the business doubles down on its branded growth model.
The business saw “strong” growth in its core brands, such as Sharwood’s and Mr Kipling, over the last year, which it attributed partly to increased marketing spend.
CEO Alex Whitehouse expressed confidence the company’s branded growth model would allow its brands to increase market share in their categories, despite the impact of inflation and the cost of living crisis.
In its full year results for the 52 weeks ending 2 April, Premier Foods beat expectations by generating an operating profit of £148.3m. This figure is unchanged from the previous year, when the company says it saw an “exceptional” volume of purchases due to the coronavirus pandemic.
Our market shares are not only holding up, they’re actually increasing.
Alex Whitehouse, Premier Foods
The company’s adjusted profit was up 11.4% on last year and 37.6% on a two-year basis. Whitehouse noted Premier Foods had raised its profit expectations in January and these figures had beaten even the revised estimate.
Revenues were down 3.6% to £900.5m, something the business claims is to be expected. The pandemic meant consumers, who were largely confined to their homes, were buying more at-home food products. However, this revenue figure represents a 6.3% increase compared to two years ago, pre-Covid.
During a call with media today (18 May) Whitehouse said Premier Foods is well-equipped to face the new challenges of inflation and the cost-of-living crisis.
He explained the company had already seen prices for its products rise and expects further price rises in the low double-digits later this year. Whitehouse pointed out Premier Foods does not actually set the price for consumers, retailers do.
Despite these increases in price, Whitehouse doesn’t think consumers will move away from Premier Foods’ brands and “down trade” into private label or own-brand goods.
“Our market shares are not only holding up, they’re actually increasing…The increase is actually faster than it was last year,” he said. “So, at the moment, we’re not seeing any widespread shift into private label.
“As people face the uncertainty around prices in the wider economy, many are actually switching into our brands,” he added.
Whitehouse outlined three reasons why he this might be. The first reason he gave was that consumers reach for familiar and comforting brands during difficult times.
Earlier this month, CMO Yilmaz Erceyes told Marketing Week he believed the “emotional connection” the brands have with consumers would stand them in good stead during the cost of living crisis.
According to Whitehouse, the second reason why consumers will turn to Premier Foods products is the rise of at-home occasions as discretionary spending drops. He suggested more consumers may turn to home cooking rather than going out.
Whitehouse described many of the company’s products as “meal makers” – products that help to bring together a meal. He gave the example of consumers using Sharwood’s sauce to turn leftovers into a curry.
The third factor the Premier Foods CEO pointed to was “the ongoing success of the branded growth model”.
“It’s how we’ve been able to drive consistently strong performance,” he added.
Role of innovation
Online sales were highlighted as a particular area of growth for Premier Foods, up 71% compared to two years ago. The company’s online market share grew by 111 basis points over the year to 2 April.
The Mr Kipling brand was highlighted as a particular success, with sales up 8% on the previous year. Whitehouse said Mr Kipling had “its best year ever, benefitting from sustained levels of marketing investment and a series of new product launches.”
When it comes to innovation, last year Premier Foods launched products into the categories “adjacent” to the Mr Kipling brand, such as ice cream and biscuits.
“[Premier Foods will] leverage the strength of the equity of our brands and expand into new categories where we see opportunities to generate further value,” Whitehouse said.
These new products will continue to be supported by marketing spend, the company confirmed.
Whitehouse reiterated Premier Foods’ “medium-term commitment to keep increasing the investment behind [its] brands”. Explaining that over the past year the business had invested more in digital activations, Whitehouse noted this makes sense from the perspective of return-on-investment. However, that doesn’t mean Premier Foods is shifting away from TV.
“We tend to campaign on TV and we choose to because our brands are bought by millions of people every day and we need to get to big broad audiences quickly,” he said.
Whitehouse explained digital activations are more focused on “ideas”, such as recipes offering consumers inspiration for how to use Premier Foods’ products.