Next year (2014) Coveney expects to announce plans to build or acquire new production facilities in the US to help the company extend its geographical reach and achieve its growth ambitions.
“We will still want to have a pathway to build our business to somewhere between $0.5bn and $1.0bn over the next five years,” said Coveney. “How it gets delivered is less certain because it will be a combination of customer growth, some new builds and further acquisition activity.
New pieces of business
“We would hope to have significant incremental pieces of business [before the end of 2014], which we can manufacture out of our existing footprint,” said Coveney. “The strong expectation is that we will add some significant new pieces of business – either with Seven-11 and Starbucks or with somebody else – during this year.”
Coveney added: “In parallel to that, we will also be looking at whether or not we can add to the assets that we have – either by building another facility or if not that then by acquisition, which is what we have done four times in America already.”
Last year the Irish chilled foods group achieved sales in the US of around $200M and profits of about $2.5M. This was built mainly around new business won with retail outlets Starbucks and Seven-11, which began in earnest in 2012 as Greencore strategically refocused its activities on food-to-go rather than ready meal sales.
Starbucks and Seven-11
Around two-thirds of Greencore’s business in the US is now with Starbucks and Seven-11, said Coveney. Greencore’s sales are currently primarily focused on the north east of the US and it does not supply the West Coast at all with chilled products.
In an upbeat report issued last Monday [December 16] Investec analyst Nicola Mallard predicted Greencore had scope for further margin improvement as its US business moves “properly into profit” and also as the mix of group revenues moved more towards food-to-go with higher returns.
“The run rate of the business [in the US] as we finish the year was about $250M and we would be hopeful of taking that up to over $300M [in 2014],” said Coveney. “But we would also expect to finish this year [2013] bringing our margins in America broadly into line with what we are earning in the rest of the business.”
Over the past few years Greencore has spent around $60M acquiring MarketFare Foods and Schau and their production facilities in the US to service the food-to-go market there.
It now has six manufacturing sites in US. Four are on the east coast – two in Massachusetts, one in Virginia and one in northern Florida in Jacksonville. Then it has a plant in Chicago and one in Salt Lake City.
“We have six sites but work in five geographical regions: New England supplies both Seven-11 and Starbucks; Mid Atlantic, we supply both Seven-11 and Starbucks,” said Coveney. “In Florida and Georgia, we are just supplying Starbucks; in Chicago we are supplying both of them and in Salt Lake City we are just doing Seven-11.”
East of the Mississippi
But, Coveney admitted that Greencore’s current production facilities left it with gaps in its ability to serve important parts of the US market.
”We don’t have a good solution for Manhattan today; we don’t have a good solution for Ohio today; we can just about get to Atlanta,” said Coveney. “There are three or four regions within the collections of states or centres – east of the Mississippi – which we could in time fill in production solutions for. And, you’ve also got the West Coast.”