Premier Food’s £20m piece of cake

The cake manufacturing site in Fish Dam Lane in Carlton, Barnsley, specialises in making Mr Kipling cake slices.

The new line will be capable of producing 300 million cake slices a year, doubling the company’s current capacity, to meet growing consumer demand for its snack pack format of individually wrapped slices.

Premier’s corporate affairs director Richard Johnson said: “This is very good news for the Carlton factory. We are bringing in a very sophisticated piece of kit, particularly the robotics.

“This investment will help secure the future of the site. It’s a big plus for the factory.”

He added that the move will safeguard the future of the site’s 680 workers.

The group employs a further 300 in the run-up to Christmas, which is one of its busiest times of the year for the brand.

Mr Kipling, which makes retail sales of £158m a year and is the brand leader in its sector, introduced snack packs in 2011 to provide a convenient, on-the-go format suitable for lunch boxes.

Mr Kipling snack packs are available in six different flavours and Premier Foods said they have proved a “runaway success” since their launch.

“It’s a big, booming part of the business,” said Mr Johnson.

“The manufacturing facility at Stoke was running at full capacity so we decided to put a new line in Carlton.”

The investment will take 12 months to complete and will involve the installation of a mixing station, oven and sophisticated packing robotics, which will add significant volume to the site.

Jason Ramsay, factory general manager for the Carlton site, said: “This investment is a strong vote of confidence by Premier Foods in the Carlton site and the Carlton workforce.

“We have been manufacturing Mr Kipling cake at Carlton since 1975 and this latest news is a huge boost for all of us.”

Mr Johnson declined to comment on speculation over the weekend that Alec Gores, who heads up US private equity firm Gores, is set to take a majority stake in Premier Foods, which also makes Hovis bread.

Premier Foods is struggling to overcome a combined debt mountain and pension deficit of £1bn. Such a move by Gores would see off potential interest from PAI Partners, which owns Yorkshire’s R&R Ice Cream, and Sun European Partners.

Analyst Clive Black, at Shore Capital, said: “We continue to see merit in Premier Foods reducing its exposure to the low margin and at times struggling Hovis, whilst with new partners it could potentially re-energise the bread operation.

“In due course we do not rule out the possibility of Premier de-merging, spinning off or selling Hovis to shareholder benefit, although over-coming the substantial pension responsibilities should not be under-estimated.

“We believe that a refinanced Premier Foods, with lower and less costly ongoing debt, embracing a more manageable banking structure, to be highly desirable for its share price.” He added that once the balance sheet engineering is out of the way, management can firmly concentrate on “the day job”.

“Making progress with Hovis’ ownership structure and resourcing would be very helpful to the development of the Premier Foods equity appreciation story in our view,” he said.

Last month there was speculation that the group would ask shareholders to stump up £300m.

The group was reportedly considering the fundraising rights issue as part of a revamp to address its debts and to see off the attentions of Wall Street vulture fund Apollo.

Reports said that chief executive Gavin Darby, who took the helm 10 months ago, was also mulling a further pension payment holiday and substantial bond issue.

A place in 98 per cent of households

Premier Foods has sold a number of businesses in the last year, including Sarson’s vinegar and Haywards pickles.

The company’s remaining brands include Ambrosia desserts, Batchelors convenient meals, Bisto gravy, Hovis bread, Loyd Grossman sauces, Mr Kipling cakes, OXO stocks and Sharwood’s Asian foods.

Last year, over 98 per cent of British households bought one of Premier Foods’ products and all of its brands are either the best selling or the second best selling in the categories they operate in.

The firm said that Mr Kipling’s cakes are bought by more than 60 per cent of UK households every year.

Branded products represent over 80 per cent of group sales.