Hovis profit climbs 75% behind branded sales

by Eric Schroeder
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LONDON — The Hovis division of Premier Foods P.L.C. posted profit of £42 million ($65.8 million) in the year ended Dec. 31, 2009, up 75% from £24 million in fiscal 2008. Hovis total sales fell 4% to £742 million ($1,163 million).

The Hovis division, which is comprised of baking, milling and frozen pizza base operations, experienced a 2% increase in bakery sales, led by a 14% gain in branded bakery sales, which helped to offset a 16% decline in retailer brand bakery sales.

“Sales benefited from growth in white loaves where Hovis has traditionally had a lower market share,” the company said. “Growth also came from increasing distribution of existing products.”

Premier said it increased market share of the branded bread market to 26.6% in 2009, and plans for 2010 include continuing to innovate in the bakery category.

“Working in conjunction with farmers we have now sourced high quality red wheat from the U.K. to enable us to replace wheat that would have otherwise had to be imported,” the company said. “As a result, in 2010, our branded range will be made from 100% British wheat. These and other product launches should continue to improve the brand image and drive growth. Growth is also available from expanding in segments of the market in which Hovis in underrepresented, such as white bread.”

Premier attributed the decline in retailer brand bakery sales to an 11% fall in the market for retailer brand bread as consumers switched to branded bread as increased promotional activity improved value. The remainder of the decline was due to the expiration of certain contracts, the company said.

Sales in the milling operations portion of the Hovis division fell 17% due to a decline in the cost of wheat in 2009.

Overall, Premier Foods posted trading profit in the year ended Dec. 31 of £323 million ($506 million), up 5% from £309 million in fiscal 2008. Sales totaled £2,661 million ($4,170 million), up 2.2% from £2,604 million.

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