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Mr Kipling owner warns on supermarket pressures

The maker of some of Britain's best known food brands said sales have been below expectations as it feels the impact of weak supermarket trading.

Premier Foods reported that its portfolio of front-line brands, which includes Mr Kipling cakes, Ambrosia desserts, Bisto gravy and Loyd Grossman sauces, will fail to grow sales in the quarter to June 30.

Shares opened 5% lower as Premier said "subdued" grocery markets meant it no longer expects its leading brands to grow by 2% or 3% this year, although cost cuts have kept profits on course to meet hopes.

Pressure on prices has led to the lowest growth in the supermarket sector in 11 years, with the big four supermarkets - Tesco, Asda, Sainsbury's and Morrisons - continuing to be squeezed by discount retailers Aldi and Lidl.

The sales update came as St Albans-based Premier announced that a factory at Knighton in Staffordshire, where it makes powdered beverages and desserts such as Bird's, Angel Delight and Marvel, is to be spun off into a joint venture.

Premier will own 49% of the new business, which will be named Knighton Foods, after the agreement with Specialty Powders Holdings, a North Yorkshire-based processor and packer of dry powder food products.

The deal is expected to complete by the end of this month and will result in the transfer of all 200 staff at the Knighton site to the new venture.

Premier's chief executive Gavin Darby said the company had found a partner who was "highly successful and entrepreneurial" and committed to growing the business.

The move follows a deal earlier this year to hive off Premier's Hovis arm into a joint venture with US private equity group Gores - cutting Premier's holding to 49%.

The most recent industry figures from Kantar Worldpanel show that three of the four major supermarkets - Tesco, Sainsbury's and Morrisons - saw their market shares slip in the 12 weeks to May 25, compared to a year ago.

Discount retailers continued to make strides into the grocery market with Lidl hitting a record market share of 3.6% driven by its highest ever year-on-year growth of 22.7%.

And inflation figures yesterday showed that shoppers experienced a year-on-year decline of 0.6% in food and non-alcoholic drinks prices, the first for more than eight years and the heaviest since October 2004.

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