Premier Foods expects to save £10m from consolidation of its grocery logistics network combined with a reduction in the number of SKUs and a focus on more strategic partnerships with fewer suppliers.
In its half year results, it said that this would follow on from its recently completed cost saving programme which had reduced its SG&A costs from £64.3m to £44.3m.
“The restructuring of the SG&A cost base announced at the beginning of 2012 will have delivered annual run-rate savings in excess of £70m by the end of this year. This represents a reduction of nearly 50 per cent on the 2011 exit position of approximately £155m per annum.
“This has been achieved through right-sizing both the commercial and support functions to ensure the overhead cost base better reflects the company’s scale following the major disposal activity in 2012.”
Premier has been disposing of non-core products to focus the business on its “power brands” which include Ambrosia, Bisto, Mr Kipling and Batchelors.
The group produced an operating loss of £2.6m in the first half of 2013 compared with a profit of £15.1m. However, it pointed out that the underlying business trading profit was up 50 per cent to £47.4m.
“As previously indicated, the group continues to review ways to reduce complexity across the organisation. Initial efforts have focused on reducing the number of product units (or SKUs), working with fewer suppliers on more strategic partnerships and a planned consolidation of the Grocery logistics network this year. As a result, the Group expects a further £10m annualised savings will be delivered in the second half of 2013. Additional savings across the Group are expected in future periods as we progress with business complexity reduction.”