After two successive quarters of growth, Premier Foods boss Gavin Darby was back under pressure this week. The September sunshine was blamed for plummeting gravy sales at the Bisto and Oxo supplier, leading to a 12.4% slump in branded grocery figures in the 13 weeks to 1 October.
A 6.4% jump in sweet treats in the second quarter was not enough to stop the share price hurtling back towards 40p. The stock fell as much as 18% in the morning to 43p - before recovering to just 6.4% down at 48.9p by the end of Wednesday - as the City weighed up what could have been with the 65p-a-share offer from McCormick. The Premier board rebuffed the US suitor earlier this year in favour of a tie-up with Japanese noodle maker Nissin Foods, which Darby claimed would lead to long-term growth of 2%-4%.
Premier left that target unchanged for the medium term but scaled back its full-year forecasts to 1%-2% thanks to the worrying slump in the past three months. Profit expectations were also kept in place but at the expense of the planned £8m increase in marketing.
Clive Black at Shore Capital said slashing marketing budgets was “absolutely the wrong strategic decision”. He also balked at Premier’s excuse for tumbling gravy, sauces and custard sales. “September was demonstrably warm in the UK, but hardly frazzle country,” he said.
Jasper Lawler, analyst at CMC Markets, added that there remained lingering market dissatisfaction over the deal that never was with McCormick. “Premier Foods’ collaboration with Nissin Foods has not delivered the goods and pressure will begin to mount on Gavin Darby if that continues over the holiday season,” he said.
Unilever shares also fell 4.2% to 3,566.5p on Thursday morning, but investors remain more concerned with challenging global trading conditions than the current price dispute with Tesco. Underlying growth was up 3.2% in the third quarter, but this was driven by price hikes, mainly in Latin America, as volumes fell in emerging markets and sales declined in deflationary Europe.
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