Premium Brands Holding is one of the leading Canadian food companies and one of the largest sandwich companies in North America. The company owns a wide range of specialty food manufacturing and food distribution businesses.

The company has a network of 49 facilities and distribution platforms in Canada (more than 60% sales) and the US serving more than 22,000 customers. Exports accounted for 1.7% of sales. The company has two reportable segments: Specialty Food (~ 64% of 2020 sales) and Premium Food Distribution (~ 36%).

Premium Brands operates in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nova Scotia and Arizona, Minnesota, Mississippi, Nevada, Ohio and Washington. Premium Brands Holding is known for its leading regional brands and product differentiation and is driven by customers’ preference for local food.

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Investment data

Sales growth and market presence

Premium Brands is highly diversified across companies, products, customers and regions. This diversification significantly reduces each individual business risk. Customers include regional and specialized food retailers, restaurants, hotels and institutions.

Premium Brands trades in specialty foods with regional local brands that offer a high degree of product differentiation. Specialty food companies are characterized by higher and consistent sales margins compared to other types of food manufacturers. The specialty food business faces less competition from large food companies and has higher sales growth compared to them.

The know-how in the production of special foods with strong own brands in the leading niche market and the differentiated distribution of food are the most important competitive advantages of premium brands. In its differentiated food distribution business, Premium Brands offers not only logistical solutions but also specialized products and services. The company enjoys a significant advantage to capitalize on emerging consumer trends.

Premium Brands has developed a good understanding of consumer tastes and preferences over the years. With increasing awareness of consumer health, the company has invested in specialty stores that focus on great tasting foods made from healthy ingredients. Premium Brands has a portfolio of valuable brands such as Harvest Meats, Piller’s, Freybe, Expresco and Deli Chef etc.

The company has grown aggressively through acquisitions. Premium brands’ revenues have increased by more than 22% CAGR over the past decade. The pandemic continues to affect sales of Premium, particularly in the gourmet, airlines and cruise lines.

However, the company saw sales growth of 10% in the most recent quarter and also in fiscal 2020. The acquisition of Allseas Fisheries as well as Starboard Seafood, Distribution Cote-Nord and a 50% stake in Clearwater Seafood was completed after the end of the quarter. Premium Brands aims to achieve revenue of $ 6 billion and Adjusted EBITDA of $ 600 million by 2023.

Dividends

Premium Brands is a Canadian dividend aristocrat with a solid history of dividend payments. The company has paid more than $ 400 million in dividends since 2005 and has grown that to an impressive 10% CAGR over the past five years. The current dividend yield is ~ 2% but has a high payout ratio. Premium Brands has a proven history of increasing sales and increasing cash flow. Earnings have increased 8% + CAGR over the past decade.

Premium Brands’ share performance has been excellent, with average annual shareholder returns of more than 22% over the past 15 years. The company recently increased its quarterly dividend by 10%. It offers good opportunities to benefit from cross-company synergies, specialist knowledge, leading brands, sales and presence.

Premium Brands is well positioned to capitalize on the potential of its various transformation acquisitions that are beginning to bear fruit. With the acquisition of Clearwater Seafood, Premium Brands strengthens its offering in the Seafood Group and becomes the only vertically integrated seafood company in North America. The company now has five strategic platforms comprised of Canadian protein, seafood, sandwich, US protein and Canadian distribution groups with the potential to generate $ 1 billion in annual sales.

Company acquisitions contributed 11% and 67%, respectively, to 2020 sales increases in the SF and PFD segments. The company continues to invest in product innovation initiatives such as single-serving meals, plant-based breakfast rolls, etc. For 2018, it had a five-year goal of $ 6 billion in revenue and an adjusted EBITDA of $ 600 million.

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competition

The food industry is extremely competitive. The company competes with many local, regional, and national food manufacturers and distributors. Premium Brands faces competition from Saputo Inc., Maple Leaf Foods, SunOpta Inc., Neptune Wellness Solutions, etc. Saputo Inc. is one of the ten largest milk processors in the world and the largest cheese manufacturer in Canada, while Maple Leaf Foods is Canada’s largest food processor and a leader in consumer protein.

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Bottom line

Premium Brands’ premium grocery distribution business enables them to generate and maintain additional margins. As a leading North American specialty food company, Premium Brands is well positioned to benefit from new product launches, US sales opportunities and a robust pipeline of business acquisition opportunities.

While the company continues to experience lockdowns, travel restrictions, and social event closings, it is well positioned to achieve high growth rates once the Canadian and US economies fully recover.

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