Ireland-based convenience food group Greencore said it sees “attractive” levels of revenue being generated by its US operations as it continues to scale-up the business.
Greencore yesterday (21 May) reported an 18.3% increase in half-year earnings despite sales inching up only 0.9%. Tough trading conditions in the UK, including poor weather and the impact of the horsemeat contamination scandal, weighed on revenue.
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However, in the US, where Greencore is building an own-label business, sales more than doubled. The division benefited from the acquisitions of MarketFare and Schau, as well as portfolio rationalisation in its “legacy” business, particularly in Newburyport.
CEO Patrick Coveney told analysts on the firm’s earnings call the scale-up of its US business has been “a big undertaking” for Greencore over the last 12 months.
“We have invested in the team and in the organisation with quite a lot of hiring of local leaders. There were also a lot of transfers from our UK and Ireland businesses. Our US business has obviously and necessarily changed and changed for the better in the period.”
Coveney said the company has shifted the business to a “tighter food-to-go proposition” through its two customers, 7-Eleven and, more recently, Starbucks.
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By GlobalDataGreencore’s legacy business in Newburyport and Brockton experienced some planned revenue declines during the year as it quit several unprofitable product lines. That left a much tighter product portfolio, the company said, concentrated on food-to-go and salads.
“We think that has set us up well for success,” Coveney said. “As we go forward the centrepiece of what we’re doing is a small store proposition with our two customers. Those customers and formats are different from eachother but they do share some characteristics that we like. We’ve been supplying 7-Eleven for many many years but we think there is lots of potential to do more with them as they increasingly prioritise their fresh food offer.”
Coveney added there will be some cost savings associated with its MarketFare Phoenix office in Arizona. The savings, he said, will be reinvested in the upgrading its US team and systems.
“We now have that fixed cost in place and as the revenue comes through from Starbucks you will see a pretty good conversion of that revenue into attractive levels going forward.”
