Premier Foods has announced its intention to slash its supplier numbers in half in a substantial shake-up of procurement practices.
Half of the 3,300 suppliers currently used by the food giant will be cut by the end of 2014, while Premier will also be seeking to negotiate better deals with those it decides to keep. The move is part of a campaign to simplify business operations and save as much as £10 million in the second half of this year.
Richard Johnson, corporate affairs director at the food giant, told Supply Management that the company had 77 catering suppliers, 100 legal entities, 150 dough recipes and as many as 6,300 different packaging items. By streamlining individual elements of the business, the firm is seeking to save cash that it can invest in big brands such as Mr Kipling, Oxo and Hovis.
But the company also plans to tighten up its transportation networks as a means of generating efficiency savings. In the firm’s half-year financial results statement, Premier said that it would be reducing overheads by “working with fewer suppliers on more strategic partnerships and a planned consolidation of the Grocery logistics network this year.”
Controversially, the firm is also believed to have asked suppliers to contribute to a new mutual investment programme as part of a broader scheme to stimulate growth by injecting funds into the firm.
Premier has fallen behind Kraft as the UK’s largest food manufacturer, Mr Johnson explained. Although underlying profit shot up by 50 per cent in the first half of this year on the back of a £20 million reduction in overheads, the firm still made a pre-tax loss of £23.5 million. However, chief executive officer Gavin Darby says that he expects full year profits to be “around the top of market expectations”.
The company is still struggling with huge debts, mostly acquired after Premier took over its rival RHM in 2007. After reported debts of £1.3 billion last year, the figure currently stands around £890 million.
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