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Premier Foods, the UK's leading supplier of grocery products, gained 1.4 percent during 2007 according to figures revealed today.

Total sales were up 165 per cent for the year, reflecting its recent acquisitions of Campbell's in August 2006 and RHM in March 2007. The news shows the relative strength of the food industry compared to other retailers over Christmas.

The biggest gains were made in its sales of cakes and customer partnerships, adding on seven per cent and six per cent respectively, while this was offset by an eight per cent decline in retailer branded sales in the second half.

The boost is in line with other food retailers, such as Sainsbury's, which also posted a gain today.

But Premier shares dropped by more than 11 per cent to a year-low of 166p on early trading this morning.

"After a slow first half, we have seen sales growth improve during the second half, although this has been held back by the decline in retailer branded sales in the core Premier business," said Robert Schofield, Premier Foods chief executive.

"We are delighted by the progress we have made in the transformation of Premier in 2007. The integration of the Campbell's business was completed in March 2007 and the integration of the RHM Culinary Brands division was completed in October 2007."

The maker of Hovis bread has encountered 'significant cost pressures' on primary inputs, such as wheat. However, it is not expected to eat into profits, today's trading statement said, as it has raised the price for a loaf of Hovis.

"We mentioned earlier in the year that we foresaw considerable raw material and packaging inflation led by wheat but also affecting dairy, fruits and vegetables in particular," said Mr. Schofield.

"Whilst these additional costs have had an impact in the second half of 2007 we have now recovered a large proportion of these cost increases through pricing and cost savings, which should provide a solid platform for the development of the business in 2008."

The company also closed two factories in 2007 and has flagged seven more for closure in 2008 and 2009 to streamline production and increase competitiveness, the company said in the statement.

Looking ahead, the company expects the market to remain 'highly competitive' through 2008. Nonetheless, the company believes that its portfolio will keep it 'in good stead'.