Business

The creation of the UK's largest food company could be bad news for some packaging suppliers, analysts have warned.

Patrick Groarke, a partner at Livingstone Guarantee, said Premier Foods would be likely to rationalise its supplier base once it completed its proposed £1.2bn acquisition of rival food manufacturer RHM Premier. This could be good news for some providers but bad news for others.

Groarke said this pain would not be felt for at least six to 12 months because Premier would initially have other priorities as it integrated the firms.

However, it could hurt glass manufacturers that supply jars and bottles to Premier brands such as Branston (28m jars sold each year) and Sarson's (22m bottles), and RHM's Sharwood's and Robertson's lines.

John Spayne, a partner at Spayne Lindsay, an investment company that advises food companies, said the deal would give Premier more negotiating power on prices.

"Premier is known for being lean and I expect pressure will be put on suppliers to keep costs down," he said.

Premier said it could cut £85m of annual costs by integrating the businesses and would look to make further acquisitions in the UK and Ireland.