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Abusing A Monopoly -- Premier Foods Merged

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Telegraph 4/12/14

'Premier Foods has been criticised for asking suppliers to hand over money or face losing business with the company.

Premier, which owns some of Britain’s most popular food brands, including Mr Kipling, Oxo and Bisto, has written to its suppliers requesting an “investment payment”.

Firms that do not pay up risk being taken off its approved 1,000-strong supplier list.

The Federation of Small Businesses (FSB) said Premier “should be ashamed of themselves” and claimed that one small company had been asked to hand over £1,700 to secure the chance of future business.

“Driving a hard bargain with your suppliers is one thing, but demanding a cash gift under the threat of delisting is downright unfair,” John Allan, national chairman of the FSB, said.

"If the questionable practice being attempted by the likes of Premier Foods becomes the accepted norm, it may well sink those small firms without the cash reserve to prop up their larger customers."

The FSB, which boasts around 200,000 members across the UK, said that while Premier was not the only company to ask its suppliers for such payments, it “is the first to make such an explicit link between payment and inclusion on supplier lists”.

BBC’s Newsnight claimed that Premier has received millions of pounds from the practice.

Premier Foods told the BBC: "We launched our 'invest for growth' programme in July last year as part of a broader initiative to reduce complexity in support of plans to help turnaround the business.

"This included a commitment to halve the number of our suppliers and develop more strategic partnerships focused on mutual growth.

"The programme requires our suppliers to make an annual investment to help fund our growth plans.

"In return, our suppliers benefit from opportunities to secure a larger slice of our current business.

"They also stand to gain as our business grows in the future."

It added: "In the current challenging environment, the support of all of our suppliers is crucial.

"We have had a positive response from many who are actively engaging in building a new partnership with us, including many small companies."

The company announced a profits warning in October as a supermarket price war takes its toll on food producers. It added that third-quarter sales fell 4.7pc.

It also announced a rights issue and refinancing earlier this year.'

Telegraph 19/6/14

'The weak outlook for sales in the second quarter comes after Premier, which also owns Bisto and Lloyd Grossman sauces, said that total sales slumped by 6.2pc during the first quarter to £186.3m. The update marks the second consecutive sales decline in the power brands after a 3.5pc fall in sales during the first three months.

Then the credit crisis struck and shares in Premier collapsed from £30 in 2007 to just over 50p yesterday after a painful restructuring and an axing of the dividend. Despite management’s protestations it has been a journey of value destruction for investors.


Yet, the debt pile remains. At the end of March, net debt was £513m, against a stock market value of £416m and a net asset value of £18m on the balance sheet. The pension fund deficit has also ballooned to £603m from £467m a year earlier.

Questor told investors to sell the shares last year (143.5p, September 25) and repeated that advice despite the shares rising during the next six weeks (Sell, 150p, November 1).

Questor has repeatedly warned that equity investors remain largely at the mercy of the banks and pension funds and that advice remains. Sell.'

Premier Foods 23/10/14

'The Company’s underlying sales declined by 4.7% in the third quarter of the year, with branded sales 4.1% lower. Power Brands sales decreased by 5.1% although they displayed an improving trend towards the end of the quarter. Support brands included good performances from Homepride and Cadbury cake.

The grocery market in the UK continues to experience unprecedented structural change driven by shifts in shopper behaviour from traditional large retail supermarkets to other channels such as value discounter stores, online and convenience. As a consequence, the larger supermarkets have lost share to these other formats over recent months, which has adversely affected the Company’s volume and sales performance.'

The beauty of their tunraround plan is that even if suppliers send cheques,they're not guaranteed any business and certainly at a price that'll pay.

Wouldn't fancy being a Premier pensioner.

Edited by Sancho Panza

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More people are shopping at the discounters, as we've seen. Non-big brands are prominent in the discounters - ever tried the non-big brand gold coffee at the discounters? If yes, then you are unlikely to go back to the old big brand - EVER.

The old guard big brands are now feeling the squeeze.

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The squeeze is working up the chain - starting from the lack of well paid jobs, more part time, temporary, zero hours

Squeezes

-> Big Supermarkets -> Suppliers of Supermarkets e.g. Premier Foods -> Suppliers of Premier Foods and so on.

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....the suppliers often only have one customer, if that customer fails they will unless they find new places to sell their wares....this will be hard but will turn out eventually to be a good thing.

Many of their 'branded' products bought over the years are old fashioned past their sell by date anyway...custard, creamed rice etc.....as many have already said, over priced branded stuff that is no better than other products same or better but definitely better value.

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The Government had the opportunity to stamp on Tesco and the others when they took the pi$$. They didn't and now the thing is spreading....

It's all very well dancing around the language and this firm saying they are operating this policy within the rules but at the end of the day it is still demanding money with menaces if it is not forthcoming.

Maybe they should charge the three top directors and CEO of Premier with Blackmail and let the courts make the test.....

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Why don't they just ask for a price cut? What is the advantage of asking for a cash payment?

Because they may not necessarily purchase anything from a given supplier.These businesses are effectively paying to remain on the supplier list nothing more.

Thye will no doubt suffer margin compression too if they do get an order,but that's not a given.

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The day of 'brand power' for basics is pretty much over I would say.

Agreed.It's hard for the cost conscious shopper to justify the virtual doubling of price for anything branded.More and more people are becoming cost concious.

Edited by Sancho Panza

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Why don't they just ask for a price cut? What is the advantage of asking for a cash payment?

They get the money straightaway? I.e. they are seriously cash-strapped now, this very minute.

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This reeks of desperation, naked corruption or both.

The self proclaimed 'family favourite' brands have cut their own throat in a greedy race to the bottom, the whole point of them was consistency and best quality / taste - hence why they cost a bit more which was fair enough. But by mugging us off which shrinking portions of p1sspoor quality horsemeat, cheap additives and offering us smaller packs of pretty much the same thing as the budget brands at a higher cost is just taking the piss.

I pretty much only buy branded stuff when it's on a half price / BOGOF deal nowadays, which is every few months in one supermarket or another.

I wouldn't buy Mr Kiplings cakes at any price - truly awful.

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The squeeze is working up the chain - starting from the lack of well paid jobs, more part time, temporary, zero hours

Squeezes

-> Big Supermarkets -> Suppliers of Supermarkets e.g. Premier Foods -> Suppliers of Premier Foods and so on.

Looks like they are on thin ice ,this after Morrisons asking for extended payment periods if I was one that played the markets i would be looking at shorting

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If they were a bank they would just demand the money from the government/taxpayer. As they're not they don't have that option but it's just another sign of how the UK is economically wrecked. They have massive debt that they have to pay the bailed out bankers.

It's also a form of bail-in like used on savers in Greece.

Edited by billybong

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At least Premier will know that those that pay to stay on the list are the truly desperate and afterwards they'll be able to pressure them some more for price reductions.

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They'll probably be rolling the idea out to employees next.

Good idea! All job candidates can buy a zero hours contract - then maybe they'll call you and maybe not.

This calls for an app. "ShiftApp" - the employer sends a message saying there are some shifts going and the N lowest bidders get called in. The app could let you bid on future shifts, continually lowering your price until you get the work.

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This reeks of desperation, naked corruption or both.

I agree. In the unlikely event that Lidl or Aldi have these brands I will avoid them. I do not like my money going to racketeers or gangsters.

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I bake a fair bit of bread and McDougalls bread flour does not give any better results than non branded strong flour....the only difference is the hike in the price...cooking sauces are only a tin of chopped tomatoes with a few herbs or spices added to it....who buys any of this stuff? ;)

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I bake a fair bit of bread and McDougalls bread flour does not give any better results than non branded strong flour....the only difference is the hike in the price...cooking sauces are only a tin of chopped tomatoes with a few herbs or spices added to it....who buys any of this stuff? ;)

True, but where would we be without Smash? (let's ask the Martians ...)

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True, but where would we be without Smash? (let's ask the Martians ...)

:) Excellent timing. That advert always brings a smile.

What would their response be to the Autumn Statement. There's many a time when the Martian laugh just by itself would have come in useful.

Edited by billybong

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