The owner of Hovis is to slash 900 jobs and close two bakeries as part of plans to restore the fortunes of its struggling bread business.
Premier Foods, which is toiling under £1bn of debt, announced the move on Tuesday following the loss of its £75m-a-year contract with supermarket chain Co-operative in October.
Birmingham will feel the biggest impact, with 511 jobs to be lost with the scheduled closure of a distribution centre and factory next year.
The St Albans-based group is in its final stages of closing distribution sites at Mendlesham and Plymouth, resulting in the loss of 95 jobs in total, whilst Hovis operations at Greenford, west London, will cease with the loss of 196 jobs.
Britain’s biggest union, Unite, has demanded urgent talks with the management of Premier Foods about the job losses.
The bread division employs almost half of Premier’s 10,000 –strong workforce and has 13 bakeries, accounting for approximately 40 per cent of the group’s revenue.
Premier, who also makes Bisto gravy and Mr Kipling, has been struggling for years with significant logistics costs and strong competition in the bread market.
It has also been hit by increasing wheat prices after droughts in the main export countries of Russia and the US.
Shareholders welcomed the decision to reduce the bread business at Britain’s biggest food producer. Shares in Premier Foods climbed about 3 per cent.
Investor Martin Deboo said: “For the employees it is very sad but from an investor’s standpoint it is a decisive and welcome move.”
He said the cuts should be sufficient for now, but suggested it could lead to an eventual, profitable exit from the bread business. In the long term this will improve profitability.
The biggest rivals to Hovis are Kingsmill and Warburtons, owned by Associated British Foods. Margins are traditionally weak and supermarkets are very cautious of how they price goods, especially in times when customers are tightening their belts.
Premier’s chief executive, Michael Clarke, who joined the group last year from Kraft, said: “Decisions will not be taken lightly but they are necessary if we are to build a strong and successful future for the bread division and those who remain with our business.”
Clarke is directing the business on eight “power brands” including, Oxo, Hovis, Bisto, Batchelor’s, Ambrosia and Mr Kipling.
Premier Foods had overloaded itself in a decade-long spree of acquisitions, most notably in 2007 with the £1.2bn purchase of RHM, previously Rank Hovis McDougall-owner of Hovis.
Recently the company had to decide a sales target with banks as part of a refinancing of its debt problem, which had come down to less than £1bn after the sales of Branston Pickle to Japanese Mizkan Group and the sale of Sun-Pat peanut butter and Hartley’s jams to US company Hain Celestial.
The job cuts at Premier Foods are another kick in the teeth for British food industry. On Monday, the Dutch company behind haggis maker Hall’s of Broxburn put its UK businesses up for sale. Vion UK has its head office in Livingston and employs 13,000 people across 38 sites in the UK. The business said it is confident it will sell its UK red meat, pork and poultry business units. Last month, Vion had announced it will shut Hall’s of Broxburn meat processing plant in West Lothian with the loss of 1,700 jobs.
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