Premier's promotion of Hovis puts sales on the rise

Oct 16 2009 by John Cranage, Birmingham Post

Premier Foods’ relaunch of the iconic Hovis brand has closed the gap on market leader Warburtons.

The Oxo-to-Branston foods group yesterday said Hovis branded sales were up 22 per cent on last year in the 13 weeks to September 26.

Premier splashed out on an advertising campaign celebrating the 122-year heritage of the bread brand last year and has brought in new products including rolls and a Farmhouse soft loaf.

This pushed its market share to 26.2 per cent in the third quarter – more than three per cent above the same period last year. Hovis stands second behind Warburtons, which has about 30 per cent of the market, while Kingsmill is third with about 19 per cent.

Chief executive Robert Schofield said: “Our brands have continued to take market share through a combination of innovation and advertising, supported by strong promotional campaigns.

“Hovis has consolidated its market share gains and the division is now benefiting from the branded sales growth achieved over the last year.”

Despite the success of Hovis, own-brand bread volumes fell as Premier pulled out of unprofitable contracts, while bulk flour sales were two per cent down on last year due to lower wheat prices.

Exiting more low-margin contracts in its grocery division also dampened overall group sales, which rose by just 1% in the third quarter against three per cent for the first nine months of the year.

But the company, which employs some 16,000 people in the UK, is on track to meet market expectations of pre-tax profits between £162 million and £186 million.

Mr Schofield added that there were signs of improving conditions among consumers. These include trends back towards branded products and standard own-label rather than value goods, as well as more ‘multi-buy’ promotions – signalling customers were willing to spend more for better value.

“In the early part of the recession, up to the first six months of this year, promotions were all about discounts on a single purchase,” he said.

Shares in Premier fell in early trading yesterday as analysts worried over the decline in own-label business despite stronger branded sales.

Investec’s Martin Deboo said: “Our concerns over long term organic growth remain.”