Weekend media reports quoted Veetee boss, Moni Varma, saying that Sharwoods was a “great brand” that would dovetail nicely with Veetee’s rice offerings (as a major UK supplier) and allow the India headquartered firm to move into other UK grocery sectors.
As one of Premier’s 'drive brands', Sharwoods Asian sauces are performing well in a cooking sauces sector – which includes wet/ambient, dry, fresh chilled products – worth £876m in 2009 (up from £606m in 2006), according to Mintel figures released last December.
No official approach
A Premier Foods spokesman said: “We’re not really sure where the story came from and we haven’t received an approach. Sharwoods is a very important brand for us, and we have great plans for it, as outlined in our investor seminar in May”
However, FoodManufacture.co.uk understands that Premier would look at offers for brands that bring value to its business, a view reinforced by Shore Capital analyst Dr Clive Black.
He said: “To be fair there’s been no suggestion of a Sharwoods sale to date, but that said, all of Premier Foods is for sale at the right price.”
Black added that it was “hard to confirm or deny rumoured interest”, but said that given Premier Foods’ indebtedness and pension deficit issues, it would be open-minded about divestments “without knackering” earnings.
Red carpet roll-out
Premier recently rolled out the red carpet to woo City analysts its first ever ‘investor day’, and asked what messages he took from the presentations, Martin Deboo from Investec said he was “generally positive on costs and operations, but more sceptical on revenues and marketing”.
“The objective to grow 'small shares of big categories' is laudable. But behaviour change on this scale is expensive to achieve, so there has to be a marketing budget to match," he added.
“But this isn't realistically available to Premier in their current situation. Their decision to stick with previous sales growth guidance of c.2% pa suggests that they also recognise that this might have to be 'job two' rather than 'job one’.”
However, Deboo and Julian Hardwick from RBS said the City welcomed Premier’s extension of its 4% target for annual efficiency savings across the whole of its manufacturing base, not just the Grocery division as before.
Deboo said that the material impact of such a step would mean a further £10m-£15 m in terms of cost benefits relative to baseline operating profits of around £270m.
Hardwick said: “The focus was on how they were planning to deliver sales growth, invest in key brands, and improve margins through efficiency. It was a credible strategy.”
We had not received a comment from Veetee Food Group as we went to press.