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Premier Foods cooks up cost-cutting deal for Bird’s Custard, Angel Delight and Marvel

  • @LauraHChesters

Premier Foods’ so-called power brands failed to grow as hoped, as the food group today spun off the making of its Bird’s Custard, Angel Delight and Marvel brands to help ease costs.

The manufacture of Bird’s Custard, Angel Delight and Marvel dried milk powder have been put into a joint venture with food group Specialty Powders Holdings.

The jv, called Knighton Foods, will see Specialty give its Phoenix Foods and Agglomeration Technology businesses and expertise in return for a 51% controlling stake and a loan to repay its existing debt.

Premier Foods will contribute its Knighton site for a 49% stake. Premier will invest £16 million of its private label sales to the jv but will keep the majority of the sales from its brands from Knighton and will retain all its other brands that are made at the site.

The products will be processed and packed by Specialty at Premier’s Knighton factory in Staffordshire while two production lines will transfer from Knighton to Premier’s Ashford facility in Kent.

The deal also includes the licensing of the Brown & Polson brand of home-baking ingredients to the JV and follows Premier splitting off its bread business this year.

The JV will help Premier to focus on its “power brands” and ease costs for the group which earlier this year completed a £1.13 billion refinancing deal — sorting out more than six years of escalating debt and a complex lending structure.

Gavin Darby, chief executive at Premier, said: “This innovative agreement will help to improve the efficiency of Premier’s grocery infrastructure while allowing us to benefit from a dedicated team with expertise.”

The Mr Kipling cakes and Bisto gravy group today said sales for the second quarter for its “power brands” are anticipated to be negative and below expectations because of “subdued grocery markets” but it said its profit for this year should remain as expected.

Shares fell 6% to 54p amid concerns about the performance of these “power brands” that comprise Ambrosia, Mr Kipling, Oxo, Bisto,Lloyd Grossman, Batchelors and Sharwoods.