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Premier Foods to take ‘big step in different direction’ as it turns attention to cutting calories and sugar

The maker of Mr Kipling and Cadbury Mini Rolls is set to launch a flurry of healthier cakes in the final quarter of the year driven by consumer health concerns as it reveals its turnaround strategy of increased marketing spend on core brands has delivered sweet returns.

Premier Foods will begin to roll out a new range of ‘Wholesome’ cakes under its most profitable Sweet Treats category as it embarks on a calorie and sugar cutting drive, similar to its five-year long salt cull, which has seen the company remove over 1000 tonnes of salt from its savoury brands including Oxo and Bisto.

“It would not be appropriate if I didn’t talk about health and nutrition,” Gavin Darby, Premier Foods chief executive, told analysts this morning (10 November). “This is a big subject in society. We feel cakes relative to other sweet treat competitive categories has got a positive story but it is crucial that the industry leans into what is a big subject.”

“Some examples of these are a commitment to calorie caps and investment in single portion sizes. Premier is one of the leading companies in traffic lights [fat and calorie content labelling] and we believe information is a big part of the story.”

Darby added that he is also working with a slew of industry bodies to make moves to “tighten up marketing targeting guidelines”.

The move comes as the onus on food and drink companies to sell healthier products becomes ever greater. Coca-Cola was recently the subject of a Jamie Oliver documentary where the TV chef suggested that the sugary drink is partly to blame for the fact that Type 2 diabetes is Mexico’s leading cause of death in a country where the average diet is dominated by high-calorie processed foods and sugary drinks. The company has made moves to release more health-conscious ads focussed on its sugar free brands Coke Zero and Diet Coke.

Elsewhere, Premier Foods is reaping the rewards of a marketing investment drive which has seen the company swing from a £12.8m loss to operating profit of £23.3m in the first half. Total sales for the 26 weeks ended 3 October 2015 were £341.2m compared to £339.7m in the prior year, an increase of 0.4 per cent.

Premier Foods has invested £13m in consumer marketing in the first half of the year although it expects to spend £36m - £38m in the full year following the key festive period. Among the gains, sweet treats sales for its Cadbury licensed products were up 11 per cent, while Mr Kipling sales jumped 9 per cent in the second half.

“We set out down the road with a clear and radical strategy and I would commend to you that it is working,” said Darby. “We are growing in revenue and we are reflecting that in profit growth and we are confident enough to say that we will have a good third quarter driven disproportionately by sweet treats.

“The sweet treats business is moving forward very well and we have an awful lot more advertising and marketing to invest in in the second half than the first. The bottom line is that we feel very confident that our strategy is working and very confident of the trajectory that the business is heading in.”

In terms of advertising and marketing channels, while the emergence of social and digital media has increased relevance, Premier foods said television advertising remains the most effective medium for the company to communicate its brands to consumers.

The cake maker has also been working to turn around the negative effect on its brands by the rise of the discount retailers, most of which sell non-branded products. It introduced some brands into the likes of Aldi et al in the period, generating an 8 per cent rise in penetration among the discounters.

A new range of Paul Hollywood baking mixes, both sweet and savoury, will also launch towards the end of 2015, marking 20 years since Premier Foods has introduced a new brand in to its portfolio.