05 August 2011
Premier Foods to embark on major supply chain reorganisation
The Oxo cubes to Mr Kipling cakes group Premier Foods is to embark on a £20m a year cost saving programme as it struggles to battle against slowing consumer spending and raw material cost inflation.
Premier said that now the sale of its food canning operation was complete, it had the opportunity to simplify the business.
Logistics for its grocery business could be remodelled as canning accounted for half the volumes carried and a new supply chain would have smaller warehouses located nearer to the company's remaining grocery manufacturing sites.
However, this would "entail some onerous costs" of around £22m for leases, dilapidations, redundancy or relocation costs for the affected people and set up costs for new sites. Premier's head office would also be reduced now that its SAP computer system is in operation.
Chief financial officer Jim Smart said it was a challenging period for Premier Foods and for the food industry as a whole. The company had faced a combination of reduced consumer spending and significant raw material inflation. It was further hampered by a now resolved pricing dispute with one of its major customers – reported to have been Tesco.
Looking ahead, Premier expects that, given the state of the economy and pressure on consumer spending, slow market conditions will continue.
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