Meat-free holds back Premier's profits

Jun 30 2009 by Iain Laing, The Journal

QUORN maker Premier Foods has warned of lower first half profits in its meat-free division due to higher marketing and manufacturing costs.

The firm, which is investing £35m in its Marlow Foods Quorn plant in Stokesley, North Yorkshire where the meat substitute is made, said overall sales and profits expectations for the six months to June 27 were unchanged.

Premier said trading in May and June was in line with that seen in the first four months of the year – which the group has already reported saw sales up 3%.

The firm said its grocery division saw “good growth”, driven by price moves and a growth in market share supported by new product launches and promotional activity.

And it said annual sales of Loyd Grossman sauces have increased by 14%, double the rate of growth of the total sauces category and its bread business continued to see “excellent” sales and market share growth as the group invested in its Hovis brand.

It has run a nostalgia-led relaunch of Hovis, boosted by its “Go on Lad“ advertising campaign. The brand now holds a market share of more than a quarter, up from 22.2% a year ago.

Sales of bulk flour have dropped from last year, due to Premier’s previously announced exit from a low return contract, although it said profitability in the division was unaffected by the move. It said that while sales of Quorn and retailer branded products had increased, its meat-free business had seen profitability slide.

Graham Jones, of Panmure Gordon, estimated profits in the meat-free products division could be £4m to £5m lower in the first half. He said this was because of “a combination of higher consumer investment, a tougher environment and manufacturing issues” at its Methwold facility, which packages Quorn and manufactures the other meat-free Caldron range.