The UK’s Premier Foods has cut prices on some products in response to input cost inflationary pressures easing.
The Oxo stock cubes and Angel Delight desserts brands owner said it has already lowered prices on some Batchelors and Mr Kipling products and other brand price reductions are likely to follow this year.
As the company issued its half-year results today (16 November), CEO Alex Whitehouse said: “We know how challenging the past year has been for many consumers and so it’s good to see the rate of input-cost inflation falling. This has now given us the opportunity to lower promotional prices across a number of our major branded products such as Batchelors Super Noodles and Mr Kipling Slices.”
In July, Premier Foods said the spate of input-cost inflation was past its peak and that would reflect on the company’s pricing strategy for the rest of 2023.
Whitehouse reiterated that point on a post-results call with analysts today.
“We wouldn’t expect to be moving prices up in the second half of this year,” he said.
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Figures released by the Office for National Statistics (ONS) yesterday showed grocery inflation pulled back for a seventh straight month in October. The annual rate of price increases for food and non-alcoholic beverages eased to 10.1%, the lowest level since June 2022.
Whitehouse denied Premier Foods’ price reductions were linked to what its peers were doing.
“The changes we are making to our pricing are not coming from any external stimulus of what our competitors are doing. It is about us wanting to drive volume and profitability,” he said.
“We haven’t seen our competitors doing the same. Some of them still seem to be on the way up.”
He said price reductions already introduced on the Batchelors and Mr Kipling products have “led to some significant volume increases as a result”.
He told an earlier media call today that price cuts are likely to follow for its Bisto, Ambrosia and Cadbury Cakes brands.
Premier reported revenues of £484.4m ($601.1m) for the 26 weeks to 30 September, an increase of 19.2% year-on-year. Adjusted profit before tax was up 21.2% from £47m a year earlier at £56.9m.
Whitehouse commented: “We’ve had a really good start to the year, making strong progress against all our strategic pillars. We delivered branded revenue growth of nearly 16%, again maintained our trading profit margins and we continue to grow faster than our markets, gaining 113 basis points of share in our grocery categories.”
Quizzed by analysts, he said elasticity as a result of pricing actions has been less than anticipated.
“Our grocery brands turned out to be a lot less price-sensitive than we thought,” he said, adding that Premier Foods benefited from cash-strapped consumers making meals from home rather than eating out or ordering takeaways.
Last month, Premier Foods expanded its breakfast offering with the acquisition of local protein-rich cereal, snack bar and milk drinks business Fuel10K for £34m.
It was its second acquisition in just over a year, having bought local meal-kit business The Spice Tailor in the summer of 2022.
Today Whitehouse said The Spice Tailor is on track this year to deliver returns ahead of its original acquisition plan and told analysts the Fuel10K integration is “well under way”.
Asked if Premier Foods might be “less selective” in terms of its acquisition targets in the future given those early positive signs, Whitehouse said: “I don’t think we will be less selective but we might start to look at things that aren’t so modestly priced”.
Clive Black, vice chairman and head of consumer research at Shore Capital, described house stock Premier Foods' half-year performance as a “very good set of results”.
He added: “Organic and inorganic growth are now evident in an investment thesis to be augmented by pension funding benefits in due course. There remains an awful lot to like now and we sense for the foreseeable future.”
Premier Foods expects full-year trading profit to be around 10% ahead of last year’s £157.5m. In July, it had said it expected it to be at top end of market expectations of £162.0m-£165.4m.
First-half trading profit was £67.5m.