Gavin Darby takes centre stage at Premier Foods

Premier Foods chairman David Beever is probably feeling in need of a holiday. He was due to start one last Friday - bags likely already packed for Jamaica - when news leaked that Michael Clarke, the man brought in 18 months ago to turn around the Hovis and Mr Kipling owner, was quitting.

For Beever, the news wasn’t totally unexpected - Clarke had previously made noises to the board - but the timing apparently was. Cue a cancelled vacation and meetings that culminated on Saturday with the signing of Gavin Darby as Clarke’s replacement - and his appointment raised almost as many eyebrows as Clarke’s resignation.

Like Clarke, Darby is a veteran of Coca-Cola (15 years to Clarke’s 12). But unlike Clarke, who joined Premier from Kraft, Darby has been absent from fmcg for some time. His most recent posting was CEO of Cable & Wireless Worldwide for less than a year, where he oversaw its sale to another former employer, Vodafone.

But the lack of recent food and drink experience didn’t put Premier off. Beever has described Darby as “the standout candidate” and says his management track record makes him the right man for the job. It’s a view echoed by senior City figures, one of whom called him as “an inspired choice”.

While it’s been 13 years since he left fmcg, Darby is described as having plenty of brand-building and marketing experience - “he understands how brands work and grow” - a useful background to bring to a business that relies on the strength of names such as Mr Kipling and Hovis.

Beever said the company’s biggest investor, private equity firm Warburg Pincus, was confident in Darby and in the business structure, although it obviously isn’t a view shared by all - as The Grocer went to press, the share price had dropped 18% over the past five days.

As well as steadying the share price, Darby will need to settle a workforce rattled by a string of senior management shake-ups. Last November, MD Iwan Williams announced he was leaving, prompting a restructure that saw group sales director Ian Deste take on Williams’ grocery division duties as commercial director. As one observer put it: “The shake-ups have left people looking over their shoulders.”

Focus on power brands

Last week, Beever said Darby had an “equal, if not better” record and CV than Clarke - but he has big shoes to fill. In March, Clarke secured a refinancing that extended the £1.2bn banking facilities of the debt-laden business to June 2016. Clarke has also reduced debt by disposing of several parts of the diverse portfolio: own-label business Brookes Avana Gales, Robertson’s, Hartley’s, Frank Cooper and Sun-Pat and vinegars and pickles including Sarson’s and Branston.

The disposals - ahead of schedule -allowed Clarke to focus his attention on what Premier describes as its eight ‘power brands’ - Ambrosia, Batchelors, Bisto, Hovis, Loyd Grossman, Mr Kipling, Oxo and Sharwood’s (Darby’s favourite). The first half of last year brought a flurry of NPD - including Sharwood’s meal kits, a revamp of Ambrosia rice and Batchelors Deli Box - supported by a £50m advertising spend. While activity has quietened since, the renewed energy in the group was obvious.

However, it is still very much a business with its problems - and arguably the largest is its milling and bakery division. In November, Premier announced plans to shut two bakeries and four distribution hubs following the loss of a £75m contract with The Co-op. And this month it was forced to strip Hovis of its USP - 100% British-sourced flour - due to continuing wheat supply issues.

Beever has said Darby would continue with Clarke’s power brands strategy, but observers this week questioned if it was the right way to go. “Premier is a muddle,” says one senior industry figure. “It doesn’t seem to make any sense at the moment - they should become either one thing or another, either an ambient food supplier or a bakery business.”

Even if it wanted to, disposing of the bakery division wouldn’t be easy. Premier has considerable pensions issues - particularly in the pensions fund of the RHM bakery business it acquired in 2007. “With this debt and pension burden, can Premier continue to support eight fairly diverse power brands?” asks one analyst.

Given such issues, perhaps it is understandable if Clarke feels he has done what he can for the business - it is certainly in a stronger position than when he arrived and has said it expects its full-year results, due next month, to be in line with current market expectations.

But exactly what prompted Clarke’s decision to leave is unclear. Beever has denied rumours that Clarke’s remuneration package was a consideration, and said there had been no disagreement - and the fact Clarke will stay on until the end of June to ease the handover suggests he remains on good terms.

A former senior colleague belives Clarke is simply looking for a more growth-focused challenge. “The role at Premier is to shrink the business. That was never likely to excite Mike for long. At Coca-Cola, it was a simple model, and all about growth. Mike loved that.”

It’s also clear his move had been on the cards for some time - one going as far as to suggest a profile piece in the Sunday Times last October was Clarke’s way of putting his CV in the public eye. Many - including Beever - have said he is not thought to have agreed a new position yet, and Clarke was this week reported as saying he is seeking a CEO opportunity in a large UK or US business.

Whatever Clarke’s reasons for departing, Premier is keen to ensure Darby stays the course. Darby has said he is putting a “significant” amount of his own money into Premier shares - matched in full by Premier, but only if he stays for at least three years. It’s an agreement Beever will be hoping ensures a steadier ride. And fewer cancelled holidays.