Arif Durrani, head of media at Campaign and editor of Media Week
Arif Durrani, head of media at Campaign and editor of Media Week
A view from Arif Durrani

Premier Foods' half-baked turnaround strategy falls flat as SMG refuses to bite

In many respects, the less-than-amicable divorce of Premier Foods and Starcom MediaVest Group after seven years is the story of our times.

Based in St Albans, Premier Foods is the quintessential British manufacturing business trying to forge a new future. As a public company, grown through acquisitions over 37 years, it entered the recession saddled with debt and vulnerable to stock-market fluctuations.

A series of management changes ensued, but it was the arrival of Gavin Darby, the former boss of Cable & Wireless Worldwide, at the start of 2013 that initiated its biggest step change. The new chief executive, known to be operationally focused, left no doubt that he meant business after axing the chief operating officer, Geoff Eaton, within his first few hours in the role.

Darby called an end to bit-part sell-offs of Premier Foods’ prestigious brands. Instead, he set his stall out as a "grower" of the business and refocused around his eight remaining "power brands": Hovis, Mr Kipling, Ambrosia, Sharwood’s, Loyd Grossman, Oxo, Bisto and Batchelors.

So far, so good. But how do you grow a business carrying £900 million of debt spread over 27 banks – and that’s before considering its heavy pension liabilities? Attention turned to its not inconsiderable number of suppliers. Despite heavy retraction over the past six years, having reduced the number by 74 per cent to 3,000, the plan is to slash that figure by half again.

'Premier Foods has tied itself in knots with this ham-fisted attempt to create new growth opportunities'

The remaining 1,500 or so suppliers will be marked out as preferred long-term partners, with the consolidation process also offering a chance to demand new investment payments, bringing cash back into the business, which can in turn be used to propel category growth.

SMG received a letter from Darby himself, requesting a payment in excess of £350,000. Yes, really. The wording of the letter implied this was to be an annual payment, and even included a payment slip for the initial transfer. After talks stalled, SMG resigned the account. The ad agencies JWT and McCann are believed to still be in discussions about their £40,000 contributions.

Premier Foods has undoubtedly tied itself in knots with this ham-fisted attempt to create new growth opportunities through leveraging the long tail of its supplier base. A spokeswoman tells me the investment request will now be dropped from its new media brief altogether, yet maintained for its creative agencies.

What a mess.