Branded foods key to Greencore’s US entry

Greencore’s planned entry into the US market is likely to come through the acquisition of a chilled food business supplying brands, bosses have confirmed.

Chief financial officer Patrick Coveney told Food Manufacture​ that an acquisition “with a branded element” was the preferred entry vehicle into the US chilled food market, which Greencore has been researching for more than a year. But he added: “However, that’s not to say that we wouldn’t also do some private label business.”

He added: “The US market is incredibly competitive, but UK manufacturers have a very good reputation in chilled food and we believe we have the skills, the experience and the know how to exploit the market opportunity in the US, where there is a growing market for high quality food sold through grocery stores.”

Greencore was looking to make a “modest acquisition” in the US to realise its plans, he said.

Bosses were also determined to increase its percentage of sales derived from branded goods in the UK from 13% to more than 20%. However, this would primarily be achieved through organic growth rather than acquisitions, stressed Coveney. “We’re launching a range of branded propositions focusing on the convenience-store channel. For example, the Kiverton’s Kitchen range of ready meals which is exclusively targeting the c-store channel, is already in 350 stores and is being rolled out nationally in January.”

Sharp increases in raw materials costs, labour inflation (the autumn increase in the minimum wage) and poor summer weather dented profits in Greencore’s convenience foods division by 16% in the second half, said Coveney. “At this point, inflationary pressures in raw materials markets are expected to contribute to an 8-10% increase in the division’s cost of goods in 2008.”

However, some of the damage had been offset by a “relentless” focus on reducing operating costs, he said. “Total lowest cost initiatives drove operational cost reduction of more than 2% of sales in 2007.”

There had also been a “modest reduction” in the company’s supplier base, particularly in packaging, he added.