Bread firm hopeful of regaining big slice of Tesco sales

Premier Foods said it was hopeful of resolving a dispute with Tesco that has led to the supermarket dropping 11 of its 18 lines of Hovis bread.

The row erupted after the Hovis owner tried to pass on price hikes, which it blamed on the 50 per cent increase in wheat prices this year.

Premier chief executive Robert Schofield said: "Tesco has delisted some of our smaller lines and we are talking to them to try to resolve that."

The update came as Premier Foods reported that sales were down by 4.2 per cent to 606m in the three months to the end of September, a period which it described as the most difficult since 2007.

The UK's biggest food producer owns brands including Mr Kipling, Sharwood's, Branston and Ambrosia.

One analyst said Premier was missing out on "hundreds of thousands of pounds a week" as Tesco has a 31 per cent share of the grocery market.

"This is a big deal for Premier," said Clive Black at City firm Shore Capital.

"Tesco won't run out of bread but Hovis is missing out on sales in the biggest supermarket in the country.

"They will also be losing out to their rivals Warburton's and Kingsmill."

British wheat prices have soared by 54 per cent from the start of 2010 to their peak at the end of September, after a severe drought in Russia and Eastern Europe caused a poor harvest and speculators pushed up prices, according to commodity analysts Mintec.

Wheat costs account for roughly 25 per cent of the cost of a loaf, which would cause a price hike of about 10p.

A spokesman for Tesco said: "We can not comment on our commercial agreements with suppliers. We always look to provide our customers with great value bread."

Premier said sales of its frontline brands were down 0.5per cent in value, although volumes were up 4.6 per cent.

Sales of non-branded products decreased by 10.4 per cent in value and 6.4 per cent in volume.