Premier Foods renews relationship with Mondelez

Premier Foods has renewed its relationship with Mondelez International.

The maker of Mr Kipling said on Monday that it has signed a 'heads of terms' for a strategic global partnership with Mondelez to renew its long-standing licence to produce and market Cadbury branded cake and ambient dessert products.

Once finalised, the new licence will run until 2022, with an option for Premier to extend this to 2025, subject to meeting certain performance criteria.

The 'heads of terms' is expected to be finalised in definitive agreements in the coming weeks and builds on the company's relationship with Mondelēz and Cadbury established for over 30 years.

Premier reckons the deal will unlock new growth opportunities in a range of markets beyond the core licenced territories of the UK, Ireland, Australasia and United Arab Emirates, bringing the total number of licenced countries to 46. New potential markets include South Africa, Canada, Japan, China, India, Asia Pacific, Caribbean and additional countries in the Middle East.

The partnership is also expected to provide for the possibility, subject to approval, to use the full range of Cadbury brands such as Flake, Crunchie, Caramel and Marvellous Creations, as well as the Oreo brand, opening the door to further growth opportunities in cake in the UK and overseas.

Chief executive officer Gavin Darby said: "I'm delighted we're entering into a new long-term global partnership with Mondelez International which will unlock exciting new growth opportunities for both partners.

"This will give us a great platform to invest in developing the Cadbury cake brand in the UK and around the world and represents a major boost to our fast growing International business.

"The new global partnership is good news for our colleagues and good news for British exports."

Shore Capital said: "The new agreement is clearly welcome to Premier Foods’ shareholders as it removes a degree of uncertainty over an important component of the group’s branded product portfolio; one where speculation as to the future has risen, it should be said, in recent times."

Still, the brokerage said that until it has a better feel for the robustness and visibility of Premier Foods’ earnings, in a market where cost-recovery may not be a walk in the park whilst inflation can bring with it volume reactions, it reiterates its cautious stance on the group’s shares.