Having had a presence in the US for five years, Ireland-based convenience food group has been busy scaling up the business up over the last 12 months in what it has described as “a big undertaking”. Michelle Russell found out more.
Greencore set out with ambitious plans for the US when it first entered the market in 2008, eyeing a target to double the business every year. It has not all been plain sailing but CEO Patrick Coveney suggests the company is now comfortable with where it is and may have the formula right.
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Greencore’s US business, which includes Home Made Brand Foods and MarketFare, accounts for around 10% of group turnover and is growing, in its own words, “disproportionately faster” than the rest of the business. That is some feat given the company has had a somewhat bumpy ride since it decided to take its chances across the Atlantic.
In early 2012, the company warned its US business was potentially under review if its performance did not improve. Greencore decided to exit its Cincinnati test facility following the termination of the lease. It also quit production of WeightWatchers ready meals.
The company has since shifted to a “tighter food-to-go proposition” through its two customers, convenience store giant 7-Eleven and, more recently, Starbucks.
The outlook improved and the business may have been bolstered with the acquisition of sandwich and sushi manufacturer HC Schau & Son in June of that year, bringing in a US$50m business win.
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By GlobalDataThe Schau deal, together with its purchase of food-to-go producer MarketFare in the same year, meant Greencore was on a roll and for fiscal 2012 recorded revenues of over $200m in the US.
Speaking to just-food in Dublin, Coveney concedes the US has been “a difficult market to crack”, despite all the “analytic work” it carried out before its entry.
“There can be a tendency because it’s an English-speaking market, because there’s a lot of cultural overlap between Ireland, Britain and the US, to think it’s a quite straight-forward and somewhat analogous market to the UK, and it isn’t,” he says.
“We’ve really forced ourselves to keep learning on the way and what that has done actually, is it’s bought us to a very different place in terms of our strategy than we thought we were going to be in.”
That strategy has gone from one principally based around home meal replacement – i.e. a ready meal type product delivered through a grocery channel with a regional focus – to building on the opportunity in food-to-go. So sandwiches, rather than ready meals, are now the focus for Greencore in the US.
“We learnt the differences in terms of how grocery chains, grocery stores and grocery supply chains operate and we’ve learnt and observed very material differences in food regulation and differences in consumer food preferences and purchase shopping behaviour. You have to tailor something and take the time to produce something that really works for that market.”
And Greencore appears to have now found the right formula. From its initial “very low base” of $40m, its run-rate of sales today is $250m.
Coveney says: “From there will be further opportunity but we’ve tried to shy away from putting ourselves on a treadmill of saying we’ll be at this particular revenue number by this period because it’s driven by some things we can control and a lot of things we can’t.”
Others, however, haven’t been as successful as Greencore across the pond, highlighted in recent months by Tesco’s decision to exit the US.
Speculating on the reasons for the failure of Tesco’s US chain Fresh & Easy, Coveney says: “It was a combination of the consumer proposition, the competitive response, which I think was extremely important, and connected to both of those, the pace at which they were able to get it to scale. They formed a view that maybe they could make it work eventually but the path to getting there just looked too long.”
Fresh & Easy was not a Greencore customer, so for Coveney its failure doesn’t affect the business. But given the grocer’s sole West Coast presence, it begs the question as to whether Greencore may also have it sights set on that region.
“In time yes. But in order for us to do that it would have to be on the back of strong support from our existing national customers. So if we can do that then we certainly would.”
How about further afield? Say, Canada or Mexico?
“Not in the short term. One of the really important things for us in the US business is maintaining a tight focus on what we’re trying to do. We’re very tight on our product, we’re very tight on channel and we have very clear and quite narrow customer priorities. If we execute well against those three things, that will enable us to then quite rapidly deliver a new regional growth. I think diluting that by extending our North America footprint to either south or north doesn’t make sense.”
At the present time, Greencore operates six facilities in the US, all acquired through its four deals in the country since 2008. They provided the private-label manufacturer with an initial footprint and relationships from which to grow.
Since then, Greencore has made significant investments in its facilities, including its Jacksonville and, more recently, its Virginia plants.
“Our model has been to try to find a pretty well-invested initial site that has a starting footprint with a team and ideally an existing customer base and then scale that up.”
Coveney’s gives little away as to whether more M&A will be on the cards. But he offers a comfortable and rather safe outlook for the business, suggesting its plans will be “somewhere between” having an end-goal and building as it goes.
“We have a very clear internal vision as to where we’d like to end up. It would be a larger national footprint than what we have today but it would be staying pretty tight to the product channel and customer mix than we have at the moment. If we do that well, we’ll have no difficulty, at least doubling our business over the next five years.”
There is no doubting Coveney’s ambitions for what has become an integral part of Greencore’s business. While he says his priority for the US division is to take it “to a greater scale than it is at the moment”, his aspirations for the UK market are less ambitious and, in his words, “may sound a bit boring”.
“We have a very large food footprint and employee footprint in the UK now and, it’s hard to be absolutely precise, but we’re certainly feeding more than half of the UK population each week with our products.
“There are opportunities for us to grow that business quite a bit more. But in order for us to do that we have to stay centred around having very good food offers and we have to be delivering to our customers such that they’re supporting our growth.”
Part of that plan, Coveney says, is to widen its food footprint to include new food-to-go offerings.
“The sort of things I’d like us to be doing would be to have a better proposition for breakfast than we do at the moment and we need to be better at hot eating, both products and technologies for food-to-go than we are at the moment. There are also a number of product categories that we’re not in that I’d like us to try and get into over the next year or two. We could be doing more in salads than we do at the moment, we could do a lot more with our soup business.
“Those are two examples but we’ll definitely widen some of the areas in which we participate in ready meals as well.”
