Theoretically, the bee is an aerodynamic absurdity that shouldn’t be able to fly. Theoretically, Premier Foods, in the throes of paying £1.2bn for RHM, is a company with a basket-case strategy that couldn’t succeed; but it has, spectacularly.
For who, a few years ago, would have dreamt that good old-fashioned ambient food brands could ever hold out against the massed ranks of chilled food producers, own-label, concentrated supermarket buying power and Jamie Oliver?Yet Premier, the ultimate scavenger, has made a specialty of ruthlessly tracking down and acquiring these heritage Imperial brands, many of which first saw the light of day on our great-grandmothers’ kitchen shelves. And to Hartley’s (1871), Ambrosia (1917), Branston (1917) and Crosse & Blackwell (well beyond living memory, 1706), Premier will now be adding Hovis (1886), Bisto (1908), Paxo (1901), Sharwood’s (1889) and Roberston’s (1864). Mr Kipling is a comparative newcomer (1967) in this company, though it apes the "tiffin in Simla" image of a bygone age.
What exactly are the ingredients of Premier’s success? Clearly the vision and drive of its chief executive, Robert Schofield, should be considered key. Witness, for example, the contrasting fortunes of Premier, since it floated in 2004, and RHM, the bigger company it is now taking over. Among Schofield’s firm beliefs is that he is running a UK-focused company. Tastes, he says, are not universal; in this he espouses the polar opposite of Unilever’s approach to global branding. Another conviction is that acquired brands must have market scale, with a value of at least £100m.
But what of the individual brands; what exactly has he done to turn them around? Much is down to time-honoured market insights, brand extensions, repackaging and repositioning.
Take, for instance, Branston which Premier has extended into relishes and baked beans (thus neatly covering off a problem with the HP Baked Beans licence, which it was about to lose because of Heinz’s HP acquisition). Or Ambrosia, traditionally sold in tins, which the company spotted was ready for the Muller treatment. Small flavoured snackpots of the stuff now find favour with a new market: kids taking them to school in their lunchboxes.
RHM has already done a good job of modernising and broadening the appeal of Hovis, but Premier is evidently savouring the possibility of extending the brand into cereals and biscuits. With Mr Kipling, RHM has clearly lost the plot and allowed itself to be pincered between own-label and Jamie Oliver. A radical improvement in ingredients, which no longer live up to the brand promise, seems on the cards. But Premier would also do well to address the advertising positioning, which abandoned heritage for trendiness in a desperate and unsuccessful bid to shore up sales.
Indeed, careful control of ingredients and their provenance would seem to be an important part of Premier’s future. Whatever its other strengths, the Premier food portfolio (Hovis and Quorn excepted) does not shriek "health".
Another issue that Premier will need to address is the sheer size of the RHM acquisition. Historically, Premier’s acquisitions, however large, have always been bolt-ons. This time, it is faced with a company-wide transformation. As Britain’s biggest food company to be, all eyes will be feasting upon it.
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