The British waistline is expanding and specialists are in panic about our growing girth. But if cake sales are anything to go by, most people think a little bit of what you fancy does you good. National favourite Mr Kipling makes more than 200 million packs of sweet treats annually and last year almost half the country indulged in a product from the UK's No 1 cake brand.
Worrying news for doctors and dieters. Exceedingly good news for Mr Kipling owner Premier Foods. The company makes many of the UK's best-known brands – from Ambrosia creamed rice to Angel Delight, Bisto gravy to Batchelors' Cup a Soup, and Oxo stock cubes to Bird's Custard.
Despite this portfolio of household staples, Premier Foods spent more than a decade struggling beneath a mountain of debt, onerous pension obligations and volatile sales. Chief executive Alex Whitehouse and finance director Duncan Leggett stepped into this unsavoury mix in 2019. Both had been with the business for a while but neither had been given board responsibility. Together, they have worked night and day to transform Premier Foods. Debts have been reduced, interest payments halved and the pension deficit addressed.
Removing financial millstones has allowed Whitehouse to focus on growth with clever upgrades across the business. There has been investment in production lines to improve capacity and make them more efficient. Expanding: Flourishing cake brand Mr Kipling is a hit with investors but perhaps not waistlines.
New recipes have been added to top-sellers, such as Angel Delight ice cream. And in a nod to increasing focus on diet and weight, Whitehouse has introduced low-sugar cakes and pies, reduced salt in some soups and sauces as well as adding 'healthy' options, such as Ambrosia ready-to-eat porridge.
New brands have been acquired as well, such as Fuel10K, which does not just tick the healthy box but also helps Premier extend its range into breakfast. The group specialises in protein-enriched granola, geared towards fitness fans and the body conscious.
Even gym enthusiasts find it hard to resist the sweet stuff, though. Fuel10K has grown like Topsy since Premier acquired the business but its chocolate cereal is pick of the bunch – the UK's best-selling granola last year. Whitehouse and Leggett are constantly on the lookout for new brands, scouting the country for products to complement the portfolio. The strategy has proved successful with Spice Tailor another recent acquisition, offering time-poor consumers a chance to make Indian and Asian dishes from meal kits with all natural ingredients.
Premium options are proving popular as consumers respond to the cost-of-living crisis by indulging in affordable treats, such as Mr Kipling Signature Brownie Bites or Ambrosia Deluxe desserts. In January, Whitehouse said profits to March would beat City expectations following a winning Christmas, robust growth from recent acquisitions and enthusiasm for new products. The firm is also making headway overseas with a growing business in Australia and an emerging presence in America.
Consumers have responded enthusiastically to British curry dishes, such as Sharwood's Butter Chicken and Chicken Tikka Masala. Now Premier is hoping to seduce them with afternoon tea treats from Mr Kipling. Brokers are expecting sales of £1.15 billion and profits of £164 million for this year, rising steadily next year and in 2027. Premier suspended dividends in 2008 and took 13 years to reintroduce them. The group started small, with a penny paid out in 2021, but 2.1p is expected this year rising to 2.5p in 2026.
Midas verdict: Shares in Premier Foods were 23p five years ago, now they are £1.82. Some investors might feel they have missed the boat. The price reflects a transformation of the business, however, and there should be more to come. Whitehouse and Leggett are keen to turn the group into a multi-billion-pound success story, backed by brands that consumers know and love.
With ambitious targets and a growing track record, the shares are a long-term buy. Traded on: Main market Ticker: PFD Contact: premierfoods.co.uk. Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.
