Premier Foods has mitigated the impact of private label competitors by offering consumers what its CEO claims are “genuinely superior products” as a result of innovation and branding.
Speaking to investors today (21 January), CEO Alex Whitehouse detailed a “very good quarter” for the three months ended 28 December 2024. Its group sales were up 3.1% versus the prior year to £360.1m, while sales on its brands increased 4.6% year-over-year.
The company, which owns brands including Bisto, Mr Kipling and Sharwoods, highlighted its volume-led growth as a particular success.
Premier Foods grew volume sales of its branded products by 9% year-on-year in the quarter. Whitehouse highlighted that volume growth in 2024 had been partially driven by increased levels of promotional pricing. He flagged that the company is now lapping that step up in promotional activity, meaning the gap between volume and value growth is “narrowing”.
“Eventually we’ll get to a point… where we’re increasing our prices year-on-year, and you’ll see that flip then where we’ve got more value growth than volume growth,” he said.
Striking a balance: Marketers on navigating the price promotion ‘tightrope’
Given the success Premier Foods has seen through deploying greater promotional pricing, the leadership team was asked by an investor if the company wanted to ramp that up even further. Whitehouse said that the company is broadly happy with its approach to promotions, stating it is “mathematic” in its approach.
“We run econometric modelling in order to understand just exactly what any small change in price or indeed position in store from a promotional activity would give us, and we constantly fine tune accordingly,” he said.
He added that, prior to the disruption of post-pandemic inflation that the past four years has brought, the company knew the effect changing its promotion would have “inside out”, and that in recent years there has been a process of “recalibrating the model so [it] can get back to that keen understanding”.
As with any company deploying promotion, Premier Foods needs to balance driving volume, value and margins.
“We’re always trying to balance that triangle to get to the ultimate long-term profit delivery,” Whitehouse stated.
Desire for ‘genuinely superior product’
An increased level of promotional pricing has made Premier Foods’ brands “more competitive” versus private label competitors than the previous year. The company is seeing consumers trade up into its brands accordingly.
What that doesn’t explain, noted Whitehouse, is consumers trading up into the premium segments of the company’s brands. Something it saw lots of over Christmas.
This is less related to pricing and more related to what Premier Foods is doing with its brands, in terms of advertising spend, visibility and innovation.
“If you offer a genuinely superior product, people are prepared to pay a bit more for it,” said Whitehouse.
On all our categories, we tasked our marketing team with developing new products that are suited to consumers’ changing needs and trends.
Alex Whitehouse, Premier Foods
He credited the company’s innovation in particular as being a key factor in persuading consumers to trade up to more premium products. As the company brings better quality products to market that meet consumer needs, those consumers will be prepared to pay more compared to a private label alternative to purchase that innovation.
This is something that is being led by the marketing function, the CEO noted.
“On all our categories, we tasked our marketing team with developing new products that are suited to consumers’ changing needs and trends,” he said.
‘All works together’
Premier Foods looks to drive future growth through its ‘branded growth model’. This has multiple components including innovation driven by consumer insight, “meaningful” advertising, and “excellent” execution with the company’s retail partners.
In many ways, the branded growth model is similar to the full marketing mix; encompassing product, promotion and place with the goal of driving growth.
Whitehouse was asked by an investor to call out a single element of the mix that had driven what was a notably successful period for Premier Foods.
He was reluctant to highlight just one aspect, noting how the levers “all work together”.
“It’s quite difficult to deconstruct the elements of the model, because they all complement each other,” he said.
He did highlight the physical availability of the company’s brands stating it had “more products in more stores” than it had a year ago. But he also highlighted the company’s investments in its brands’ mental availability.
Premier Foods ups marketing focus in Christmas push as profits rise
“We’ve always said we’ll continue to increase the investment that we make in the brands in order to keep them relevant for consumers,” he said.
This year, Ambrosia, Bisto, Batchelors, Oxo, Sharwoods and Mr Kipling all “benefited from advertising support in the run up to Christmas”, which he said demonstrated “continued commitment” to Premier Foods investing in their brands for the long-term.
Another “pillar” for the company’s growth is its expansion into new categories. Sales in new categories were up 38% in the company’s third quarter.
Breakfast has been one area for growth for the business. It has utilised both its existing brands, like Ambrosia, which has launched a successful porridge pot innovation, and its more recently acquired brands, like Fuel10K to allow it to expand into new categories.
