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Premier Foods (PFD) is to continue manufacturing Cadbury cakes and desserts after renewing its partnership with Mondelez International.
The agreement will be a relief to investors as the licenced range of Cadbury branded products is an area of growth for struggling Premier.
Shares in the listed group jumped 3% to 44.3p as markets opened this morning as the City welcomed the news.
Once finalised, the new licence will run until 2022, with an option for the Premier to extend this to 2025, subject to meeting certain performance criteria.
Premier said the global strategic partnership was expected to unlock new growth opportunities in a range of markets beyond the core licenced territories of the UK, Ireland, Australasia and United Arab Emirates bringing the total number of licenced countries. New potential markets include South Africa, Canada, Japan, China, India, Asia Pacific, Caribbean and additional countries in the Middle East.
The business is already developing plans to launch Cadbury cake in two new “significant” markets in 2017/18.
In addition, the partnership will provide for the possibility, subject to approval, to use the full range of Cadbury brands such as Flake, Crunchie, Caramel and Marvellous Creations, as well as the Oreo brand, opening the door to further growth opportunities in cake in the UK and overseas.
Premier CEO Gavin Darby said: “I’m delighted we’re entering into a new long-term global partnership with Mondelēz International which will unlock exciting new growth opportunities for both partners.
“This will give us a great platform to invest in developing the Cadbury cake brand in the UK and around the world and represents a major boost to our fast-growing international business.
“The new global partnership is good news for our colleagues and good news for British exports.”
Glenn Caton, president of Northern Europe for Mondelēz International, added: “We are very proud of our long-term partnership with Premier Foods and look forward to continuing to work together to nurture and develop our well-loved portfolio of brands and products. The future is bright for Cadbury cakes and for the people that love them.”
The strategic deal has been outlined in a detailed document known as ‘heads of terms’, which is expected to be finalised in definitive agreements in the coming weeks.
Premier has had a relationship with Cadbury for more than 30 years and now makes one million Mini Rolls every day at its manufacturing facility in Merseyside.
Cadbury cakes have an estimated 8.3% share of the £1bn ambient cake market in the UK and have grown sales value 19.5% in the past two years [IRI for grocery outlets 52 w/e 22 April 2017].
Morning update
The FTSE 100 is currently trading 0.1% lower than Friday’s close at 7,293.11 points. It had opened a touch higher as stock markets across Europe and in Asia rallied as France rejected Marine Le Pen and elected Emmanuel Macron as its next president.
It’s mostly good news for grocery and fmcg shares this morning, with Tesco (TSCO), Morrisons (MRW) and Sainsbury’s (SBRY) up 0.6% to 180.5p, 0.1% to 239.4p and 0.1% to 265.2p.
SSP Group (SSP) is up again by 0.7% to 455.4p, with Fever-Tree (FEVR), Greencore (GNC), WH Smith (SMWH) and PZ Cussons (PZC) all among the risers, up 1.1% to 1,658p, 0.5% to 230.8p, 0.5% to 1,777p and 0.4% to 335.8p respectively.
Coca-Cola HBC is down 0.5% to 2,153p so far, and Ocado (OCDO) has slipped 0.1% to 259.3p.
This week in the City
There will be another indication of how the high street is faring this week as the latest BRC-KPMG Retail Sales for April is published first thing on Tuesday. Flavouring manufacturer Treatt also puts out its interims on Tuesday.
Tyrells US owner Amplify Snacks releases Q1 earnings on Tuesday afternoon, with more US results to follow on Wednesday as Sodastream reports on its first quarter figures and Whole Foods Market publishes an update for the second quarter.
Catering giant Compass will report its first–half results on Wednesday and European Coke bottler Coca-Cola HBC has a trading update scheduled for Thursday.
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