Can selling off 124-year-old Hovis stem the brand's decline?
As Premier Foods spins off Hovis into a standalone joint venture, 51% owned by US investment house Gores Group, Andy Nairn, founding partner of Lucky Generals, who was part of the team at MCBD responsible for the award-winning "Go on Lad" campaign, takes a look at the challenges ahead.
Hovis: Where is the love? Its sales are falling, as Warburtons and Kingsmill both grow (Nielsen)
I know from my time on the business that Hovis is still one of the country’s best-loved brands. It is a fundamentally good product, albeit one that has suffered from a lack of innovation in recent years.
Daily distribution of a perishable product like bread is a precarious way to make a living
It has a heritage of great advertising, from the famous "Boy on Bike" which is regularly voted Britain’s favourite commercial of all time, to our own "Go on Lad", which ITV viewers named their "Ad of the decade" in 2010.
And it still has scale – despite losing its market leadership to Warburton’s years ago. So Fernando Goni, managing director of the Gores Group, is right to say that Hovis possesses "significant untapped potential".
Of course, the brand still faces some big challenges, too. The cost of wheat has rocketed in recent years, pushing up prices at a time when everybody is talking about "the cost of living". Daily distribution of a perishable product is a precarious way to make a living, which constricts margins even further.
Meanwhile, Warburton’s is a formidable competitor: it has beaten Hovis right across the marketing mix, with the notable exception of its communications, which it has never really nailed for some reason.
Free of financial baggage
So, effecting a turnaround won’t be easy. But at least the brand will be free of some of the constraints it was operating under, when owned outright by Premier.
Under the old set up, Hovis suffered because of its parent’s broader financial problems. In particular, there was a lack of consistent investment, due to the company’s lack of cash and historical debts.
Lack of consistent investment and an ill-advised fight with Tesco are some of the reasons Hovis didn’t build on its last relaunch
Along with an ill-advised fight with Tesco (guess who won that one?), this was one of the main reasons that Hovis didn’t build on its last relaunch (in 2009, the brand was the fastest-growing name in FMCG but this momentum subsequently faded away).
The Gores Group deal should theoretically mean that new capital will be available to fund much-needed investment in the product and the brand.
Perhaps the biggest opportunity created by the new JV, though, is more intangible: all parties should benefit from greater focus.
The truth is that baking is a peculiar business which never sat very happily with the rest of Premier’s food portfolio. Now the company will be able to concentrate on its higher margin brands, like Mr Kipling, Loyd Grossman and Ambrosia. Meanwhile, Hovis will receive greater love and attention, from a newly energised and dedicated team.
Whether it will be enough, or too little too late remains to be seen. But for the sake of this cultural icon, and the many talented people behind it, I really hope it’s a great success.
This article was first published on marketingmagazine.co.uk
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