The company behind many of the UK’s best-known grocery brands said it has been hit by the rise of the discounter as profits slid by almost a sixth during the first half.
Premier Foods owner of cake brand Mr Kipling, Ambrosia desserts, Bisto gravy and Loyd Grossman sauces outlined a 4% market fall in its categories during the six months to the end of June as its sales fell more than 6%.
It blamed reduced price inflation, which has fallen every month since the start of this year, and milder weather for the reduction in sales, and said it would launch a string of new measures to tackle the drop.
Premier said it had reviewed its promotional strategy and sought to eliminate “deep-cut, loss-making promotions”.
While cutting the number of offers had reduced volumes and sales receipts, it had proven more profitable in an environment in which the company sought to protect margins over revenues.
New products and relaunches will also be complemented by an increased marketing push during the second half.
“The company recognises the changing nature of the grocery market and is continually adjusting priorities to reflect this challenging environment,” the Premier statement said.
Consumers were “switching away” from traditional multiples to “hard” discounters because of their lower selling prices.
“These retailers stock 75%-90% private label, which reduces the sales opportunity for the company’s brands,” Premier added.
“Conversely, ‘high street discounters’ typically stock predominantly branded products, which presents a growth opportunity.
“The company continues to develop differentiated offerings specifically tailored for the discounter channel.”
Adjusted pre-tax profits fell 16% to £17.8 million in the period, after interest charges, with sales 6.1% lower at £364.4m. Overall losses before tax more than tripled to £54.9m.
But chief executive Gavin Darby hailed a “modest increase” in trading profits.
“We are adapting quickly to the changing external environment through retaining a tight control of costs and margins, and have a strong programme of consumer marketing and new product introductions planned for the second half of the year,” he said.
“Assuming normal weather patterns, we expect an improved second-half branded sales performance, and our trading profit expectations for the year remain unchanged.”
Premier plans to cut costs by reducing product ranges and suppliers, and will explore international markets in China, the USA, Canada and Australia as part of brand growth plans which have identified “robust” opportunities.