The UK manufacturer – target of a takeover bid by US flavorings giant McCormick & Company – is eyeing what it sees as a gap in the US market for its ‘unique’ cake offering, and is about to embark on a national roll-out of products and merchandising to target the UK on-the-go food category.
Premier revealed its plans in a presentation that will be made to its main institutional investors over the next few days. It is designed to give them further insight into the business, including the “value creation potential of the strategic initiatives”.
Criticized by shareholders
Some shareholders had criticized Premier - which also produces brands including Bisto gravy and Sharwood’s cooking sauces - for not giving McCormick’s earlier approaches sufficient consideration.
Following McCormick’s third approach – with an offer of £0.65 ($0.94) a share - Premier Foods this week met with McCormick senior team for what it has described as “constructive” talks.
US growth plans
For the US market, Premier said it was accelerating its activity following a successful trial with a major US retailer last year, when it rolled out Apple, Fruit and Mississippi Mud Pies to 250 stores.
According to the presentation document, there is a ‘white space’ to be tapped between the existing $10.7bn (£7.6bn) fresh prepared cakes & pies category and the $4.4bn (£3.1bn) market for ambient cakes & pies with a long shelf life. The company said it would use its “differentiated offering with unique formats and packaging” to access this white space.
Premier added it plans to leverage its existing relationship in the US and build on its experience from the 250-store trial.
The manufacturer also said there was an opportunity to drive growth in the Middle East through its Cadbury cake products, produced under license from Mondelēz International.
Targeting on-the-go opportunity
And Premier revealed ambitious plans to grow the cake in the on-the-go market in the UK through smaller formats such as twin-packs of cake slices.
Citing Kantar Worldpanel data, Premier said on-the-go products accounted for just 5% of cake sales, versus 11% of biscuits and 35% of confectionery. The company also stated it currently undertrades in the convenience channel, holding a 16% share of branded cake sales in convenience stores versus its 58% share in major UK supermarkets.
A four-week national trial had been conducted in 21 convenience stores in September/October last year. The trial, which included the use of small ‘parasite’ merchandising units attached to confectionery fixtures, resulted in a rate of sale ahead of its cake competitors, said Premier.
In one store, in Manchester, the manufacturer said its Angel Slice twinpack outsold confectionery brands Snickers and KitKat.
National roll-out from next week
From next week, Premier is launching a national roll-out of on-the-go products including slices twin-packs and two-packs of Cherry Bakewell tarts and Cadbury Mini-Rolls.
The slices packs are being produced on a line at the manufacturer’s Carlton plant following a recent £20m ($28.2m) investment, while the Mini-Rolls are made in Moreton and the Cherry Bakewells in Stoke.
Premier is also recruiting a 10-person ‘cake-on-the-go’ team and is employing a third-party field team.
Key tactics will include boosting visibility of cake at front of store and food-to-go areas, with the ambition of growing awareness and market share through new channels. Key targets for the first year of the initiative include listings in more than 4,000 high street, forecourt and food service sites.
Premier also revealed other growth plans, including potentially extending into chilled categories through soups, pies and light meals; and expanding its noodles business through a partnership with Japanese manufacturer Nissin Foods.