Premier Foods moots supermarket price rises as Brexit bites into costs

Mr Kipling cakes firm Premier Foods is in talks with supermarket giants over plans to hike prices after the Brexit-hit pound sent its costs soaring.

The owner of Oxo and Batchelors confirmed it was considering "mid-single digit" price increases on average across its ranges, less than two months after it said it would take action to limit the impact of cost pressures on the consumer.

Premier is in talks with retailers - including major supermarket chains - over the move as it battles against surging prices of important commodities since the Brexit vote sent the pound tumbling.

The group said it was looking at a raft of measures to offset these cost increases, with price rises a last resort.

A Premier Foods spokesman said: "We look to manage our own efficiencies, adjust promotional mechanics and formats where appropriate and finally look at limited price increases where these can't be avoided.

"The situation on pricing differs between our different categories and brands and is currently under discussion with our individual retail customers.

"However, on average we are considering rises around the mid-single digit mark."

The impact of a slump in sterling since the EU referendum came into sharp focus in October when Tesco and Unilever became locked in a stand-off over the cost of key products, before the dispute was resolved.

Britain's biggest supermarket pulled some Unilever products from its website, including Marmite after reportedly refusing to bow to the consumer goods giant's demand for a 10% price rise following the collapse in sterling.

It is thought shoppers will face a new year inflation shock as other food firms follow suit, with figures revealing food price inflation for the first time in more than two years over the Christmas quarter.

Kantar Worldpanel said prices rose by 0.2% across the grocery sector in the 12 weeks to January 1, bringing to an end a long run of price deflation which began in September 2014.

But the Big Four chains - Tesco, Sainsbury's, Asda and Morrisons - will be reluctant to increase prices and lose out to discounters Aldi and Lidl.

The pound has fallen by more than 18% since the Brexit vote, increasing the price of imported commodities, such as sugar, wheat and dairy.

Premier Foods said on reporting interim results in November that 89% of its spending is with UK suppliers, but it is still exposed to currency fluctuations between the pound and the euro.

It saw losses widen to £8.7 million in its first half from £5.1 million a year earlier after warmer weather in 2016 triggered a drop in gravy, soup and stock sales.

Total sales were down 4% to £250.3 million for the 26 weeks to October 1, while underlying sales dropped 1.8%.

Premier, which fought off takeover attempts last year by Schwartz spice US owner McCormick & Company, said none of its main grocery brands grew in the second quarter, as the warm weather took its toll on sales.