Premier Foods plc CEO Michael Clarke has insisted the UK food manufacturer will pass on the higher wheat costs it expects to incur after extreme weather conditions in the US and the UK.
The worst drought in the US for 50 years and the wettest April to June period on record in the UK has put pressure on grain stocks. Clarke said the Hovis bread owner believes it will see “an exceptional increase” in wheat costs but claimed the company would pass on the bill to its retail customers.
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“Clearly what’s happened in the wheat market is an exceptional circumstance given the drought in the United States and the wet weather here in the UK. All the signs are that it is going to result in an exceptional increase in the cost of wheat, which we will pass on,” Clarke said.
Premier claims Hovis is the “only major bread brand” to use only British wheat, with the small caveat that it excludes products baked in Northern Ireland. The company claims its commitment contributes GBP208m (US$325.7m) to UK agriculture a year.
Clarke said Premier believed it would continue to use British wheat. “We feel pretty comfortable we’ll continue to be able to purchase UK wheat, which is a clear differentiator. We have a stated policy to support British farmers, British jobs, with British brands,” he said before, smiling, adding: “We hope that British analysts, British consumers and British retailers support us in turn.”
However, profits from Premier’s bread business fell 27% in the six months to the end of June. After the company issued its first-half results on Tuesday (7 August), some in the City warned Premier faces a challenge absorbing higher grain costs.
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