Premier Foods targets American sweet tooth with Mr Kipling US launch
Premier Foods PLC (LON:PFD) is not wasting time and took advantage of the lockdown-fuelled strong sales to take its Mr Kipling sweets to the US.
In fact, the FTSE 250 firm has recently signed an agreement with Weston Foods to sell and market the famous British cakes across the pond, with the first shipments to start from April onwards.
Weston Foods is a North American bakery company “with substantial distribution presence in both retail and foodservice” according to house broker Peel Hunt, part of the wider US$15bn George Weston group.
“This agreement materially expands Weston’s breadth of product in the cakes segment. We see Weston as an ideal partner as it has experience in bakery, broad distribution and expertise in marketing and pricing,” analysts commented.
“This is potentially a material breakthrough for the international business and a demonstration that it can become a material growth driver for the company.”
Mr Kipling has been doing well outside of the UK in the quarter to December 26, delivering “very healthy” sales in Australia while the Canadian in-market test showed an “encouraging” rate of sale metrics.
Factoring in Brexit, the food producer did not experience major disruption in its supply chain and it doesn’t expect any material impact from tariff changes.
Sweet performance across the board
Looking at the wider group, sales in the period jumped 9% buoyed by people turning to comfort foods while stuck at home during lockdowns, with grocery brands such as Bisto gravy and Oxo stuffing in demand during the Christmas period.
Meanwhile, the high levels of debt that have been crippling the company for a while are disappearing, especially after activists investors Oasis and Paulson & Co pressured to sort it out, for example by using the £37mln generated by the sale of a stake in breadmaker Hovis.
Peel Hunt forecast a net debt pile of £320mln at the March year-end date, down from £408mln in March 2020 and £469mln in March 2019.
“But what happens when lockdown comes to an end permanently and vaccines pave the way to a reopening of society? There will be a lot of pent-up demand for people to eat out again, and for the return of ‘food on the go’ to satisfy people’s hunger,” said AJ Bell investment director Russ Mould.
“Premier Foods will be hoping that some of the home cooking habits will remains for a lifetime, yet it is hard to see a permanent structural shift in how people source meals.”
“By spending money on marketing now, all Premier Foods can do is make its products front of mind when consumers shop so post-lockdown people still recall its brands when they are deciding whether to cook themselves or go for the ready-meal option which was so popular before Covid-19 struck.”
Shares dipped 4% to 103.92p despite the good news, following a solid, steady 171% rally since January 2020.