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26 July 2013 | Will Green
Food giant Premier Foods has announced it will be cutting half of its 3,300 suppliers and seeking a better deal from those it keeps on.
The move is part of a drive to “reduce complexity” in the business that is aiming to save £10 million in the second half of the year.
Richard Johnson, corporate affairs director, said: “We see 3,000 plus suppliers as being too many for our business.
“We got a new CEO six months ago. One of his priorities is to reduce complexity in the business still further. That innovation has many parts, one of which relates to suppliers. We’re going to go further and halve the number of suppliers we have by the end of 2014. In addition we are asking our suppliers to contribute to the ‘invest for growth’ programme. We want a signal of supplier commitment to help us to grow the business.”
To illustrate the level of complexity in the company, Johnson said Premier had 77 catering suppliers, 6,300 different packaging items, 100 legal entities and 150 dough recipes.
“By cleaning up some of this complexity we can take cost out of the business which we can invest in the brands,” he said. The company has 1,700 stock-keeping units, of which 600 are not performing well, and “a large proportion of which will eventually be eliminated”, said Johnson.
Over the past six years Premier has cut its suppliers by 74 per cent as it grapples with changing markets and reducing its debt, which currently stands at £890 million – down from £1.3 billion last year. Most of this was taken on with the acquisition of rival RHM in 2006.
Once the UK’s biggest food manufacturer, Johnson said Premier has fallen into second place behind Kraft. Underlying business trading profit was up 50 per cent at £47.4 million in the first half of the year, driven mainly by overhead costs being £20 million lower, but overall the group made a pre-tax loss of £23.5 million, compared with a loss of £45.8 million in the previous year.
Ambrosia custard, Bisto, Oxo, Hovis and Mr Kipling are among the firm’s brands.