Premier Foods has impressed the City with its rationalisation work over recent months. At the start of November we reported that its shares had hit a four-month high following the £200m sale of its sweets, spreads and jellies business to Hain Celestial and the sale of its pickles and sauces business to Mizkan for £92.5m.

And the City’s reaction to today’s news, that the company is to close its bakeries in Greenford and Birmingham, is positive too. “We see this as a decisive and welcome move to improve long-term profitability and create option value on further rationalisation or an eventual, profitable exit,” says Investec’s Martin Deboo.

The reaction from the 900 people who are to lose their jobs as a result of the closures is of course rather different. “The joint trade unions are calling for an urgent national meeting with Premier Foods’ management to discuss the implications of today’s announcement”, says Unite national officer for food and drink, Jennie Formby. “It is a devastating blow for the 900 workers, their families and the local communities in West London and Birmingham.”

Hovis is one of Premier’s eight ‘core brands’, so the loss of its £75m Co-op Group contract was a blow, however much it insists it would rather not be tied to big, low-margin contracts. Indeed: “The Co-op contract was intensive to serve, representing close to half of direct-to-store drops in bread,” points out Deboo.

So the announcement fits with CEO Michael Clarke’s plan to focus on the profitable parts of the business. But even if it is going in the right direction, business-wise, Hovis still faces the difficulties of tough competition and high wheat prices.

It’s immaterial to the 900 - Unite’s Formby is damning: “The reality is that our members are continuing to pay the heavy price of Premier’s failure to make a success of the business and we remain extremely concerned about the future of the remaining business.”

 

 

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