Blog: Dean BestWhy Premier Foods is in a pickle

Dean Best | 1 September 2008

Life is hardly proving a cakewalk for Premier Foods, the UK's largest food manufacturer, right now.

The company saw its shares get hammered last week despite posting first-half profits in line with expectations and insisting that it had finally got a handle on rising commodity costs.

The market got the jitters over Premier's rising levels of debt - which stands at GBP1.8bn (US$3.2bn) - and sent the Mr Kipling maker's shares tumbling. One analyst told us that Premier is a "very strategically-constrained business", with its level of debt holding the company back from making any further acquisitions, while potential moves to reduce the level of debt - such as issuing new shares or selling off businesses - have their drawbacks.

One company apparently feeling upbeat after its own set of first-half results was Ireland-based Kerry Group. The company saw sales rise by over 7% during the first half of 2008 and, although pre-tax profit inched up by only 0.1%, the Wall's sausages owner admitted it saw some "very interesting opportunities" as it looks to expand via acquisition.

Alas, one deal that appears to have slipped through the net is Kerry's planned purchase of Ireland's Breeo Foods. Last week, Ireland's competition watchdog announced it would block the deal over fears that a sale of Breeo to Kerry would reduce competition in sectors including meat and cheese. Back to the drawing board for Kerry, then, it seems.

One idea that has got off the drawing board and into the market is the range of breakfast cereals from UK snack bar maker Eat Natural. The move into breakfast is a significant one for a company formed only 11 years ago and one which has enjoyed success in the snack bar market. In our latest just-food interview, we spoke to Eat Natural co-founder Preet Grewal to find out how he hopes the company can compete in a category housing some of the most established names in the UK packaged food market.


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