just the answer - Greencore CFO Alan Williams
Alan Williams talks to just-food on the prospects of food-to-go in the US
Ireland-based food group Greencore announced yesterday (27 June) it has struck a deal to acquire US sandwich-to-sushi manufacturer HC Schau & Son. In this month's just the answer, Greencore CFO Alan Williams tells Katy Askew that while the deal is "relatively small" for the company it remains an important step in the group's long-term growth plans for the US.
just-food: Can you tell us about the opportunity that Greencore has identified in the US food-to-go market?
Williams: We've been in the US for about four years now. We started with a small business in Boston and we are gradually trying to build out from that. We made the acquisition of Marketfare in April and what that did for us was expand the business geographically further down the east coast. Because obviously it is a large market, doing short shelf-life product you can only go a nine or ten-hour truck drive from your plant. So we couldn't get much beyond the New York, Pennsylvania area from Boston. We made the Marketfare acquisition to get into the mid-Atlantic states. We've been discussing new business opportunities and, at the same time, we identified another small acquisition - Schau - which will bring us sites in Chicago, so in the Mid-West, and in Florida. This completes our ability to service the whole of the east coast plus also covering the Mid-West.
just-food: Are you looking to expand your geographic reach further?
Williams: We are very comfortable with what we've got. It makes a consistent geographic picture. We have capacity within those sites to service US$350m-worth of business. Our run-rate revenues, on a pro-forma basis taking into account the two acquisitions this year [and the] new business gains we've got, we are probably running at around $240m on an annualised basis. So we have plenty of expansion capacity in the sites that we have already got.
just-food: And you see your food-to-go business expanding into that capacity?
Williams: The area that we are focusing on is what we call food-to-go, which is largely about sandwiches but it is also about food on-the-move opportunities in short-shelf life product. We are then focusing on doing that for smaller stores, convenience channel outlets. What we are finding in the US is that there is a considerable amount of growth in that area at the moment. And we are looking to grow and profit from that expansion in the market.
just-food: When you announced both the Marketfare and Schau acquisitions you highlighted the deals strengthened your relationship with 7-Eleven. How important a customer are they for you?
Williams: We have a very strong relationship with 7-Eleven. They have been serviced in the US by numerous suppliers in the past and that has made it difficult for them to roll out their innovation programmes quickly in a consistent manner across the US. So they are very comfortable with what we have done and the way that we are looking to grow as they expand their fresh food offer in store. There will be opportunities in time to service more products into 7-Eleven stores.
just-food: What products and categories does your US business focus on?
Williams: It is all private-label business. It is primarily sandwiches and for 7-Eleven we also do some snack salad products. In the US there is also a sandwich occasion at breakfast time - whereas in the UK it is firmly a lunchtime occasion, there are some sandwich style products that are sold at breakfast as well.
just-food: Does the focus on value-added mean you are able to balance your margins more effectively?
Williams: We have had slightly less input price pressure in the US than the UK. We are able to make a decent return from that business. If we didn't think we could meet the return hurdles that we have set for the company, then we wouldn't be investing there.
just-food: How significant is the US market for Greencore's future growth?
Williams: It is a massive opportunity. But surprisingly what we recognise in the UK as chilled convenience food is under-developed in the US. There is a very large frozen presence and then there are also chains like Subway on every street corner. So from a prepared sandwich side of our business, first of all, a lot of the convenience stores are looking to expand what they have traditionally offered. If you go into a convenience store in the US they wouldn't traditionally have a fresh food offer - it would be like what you would expect in a newsagents in the UK, so confectionery, beverages and tobacco was the mainstay of their profitability. As that tobacco revenue is declining for them they are looking to replace it with a fresh food offer to get people into store. At quite a lot of the convenience stores in the US now you can get fresh coffee and they are wanting to bring in a food complement to that. So we think that is a great opportunity to expand and it is something that we excel at in the UK.
just-food: Do you plan to take the know-how that you have developed in the UK and export it to the US to fuel product development?
Williams: That is very much a part of the plan. [Product development] is absolutely critical, particularly in what the convenience stores are trying to do in developing a fresh food offer. When you think of what your lunchtime choices are in the US - you can go and have something made up in a Subway or whatever - you have got to have some pretty good quality, innovative and value for money range if you want to have something that is preprepared.
just-food: Do you view your competitors as foodservice providers - Subway and the fast food outlets?
Williams: You have several sets of competitors. You have people who are trying to do what we are doing in servicing the convenience stores, the supermarkets, with fresh product. But then you have got the other meal occasions, just as in the UK I would view part of the competition for our UK business being the other lunchtime products that you could buy.
US c-store retailer 7-Eleven has acquired more stores, this time adding to its business in North Carolina....
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