Food for thought
Greencore Chief Executive Patrick Coveney tells Stephen Dineen about the convenience food and ingredients company’s recent expansions and comments on the prospects for the Irish economy.
“One of the features of growing up in a political family,” Patrick Coveney, son of the late Hugh Coveney (TD and Minister), tells eolas “is that you get used to good days and bad days, in terms of whether it be media sentiment or public sentiment, on what you’re trying to do.” This has “been helpful” since he took up the role as CEO of Greencore in December 2007. “There are days when sentiment seems to conclude I’m doing a nice job and there are days when sentiment concludes I’m doing an awful job.”
While many historically associate it with sugar (Irish Sugar was privatised and renamed Greencore in 1991), the company is now primarily a manufacturer of convenience foods. It has 16 sites in the UK and six in the US. Its food range covers food-to-go (e.g. sandwiches), ready to cook meals, recipe products (customer and private label), desserts and chilled foods. Sugar production ceased in 2006.
Since its entry into the US market in 2009, it has expanded from the chilled prepared meals into convenience foods. Irish operations are in the areas of vegetable oils, molasses and managing property it has retained from the days of sugar production. It sources €100 million each year of Irish ingredients for UK manufacturing.
Coveney has faced criticisms during his tenure. Shareholders condemned his €1.4 million remuneration package during the 2011 financial year. The company’s share price has dropped from a peak of £3.68 in July 2007 to 80 pence today.
In his defence, he argues that the company’s markets and portfolio have greatly changed, i.e. the end of sugar production and a decline in ingredients production and in the value of its land bank. Sterling’s value has decreased.
“I would be very comfortable that we actually have a better business today than we’ve had before,” he defends.
The Corkman remains upbeat and his company is looking both east and west. Recently, Greencore acquired the UK-based International Cuisine Limited from the Hain Daniels Group, in a deal understood to have been worth €12.7 million. The UK purchase has meant moving into new categories such as salads and chilled desserts. This year it has acquired two US businesses, including sandwich maker MarketFare, which it bought for $36 million.
American acquisitions have forced Greencore to change some of its processes to facilitate cultural norms such as longer shelf-life for food than in the UK. This has meant devising “more innovative packaging technology” for product life extension.
Macroeconomically, the convenience food sector in the UK has withstood the recession well, according to Coveney. “Food and food sold at retail has held up very well in volume terms over the last three or four years.” This is not surprising due to “a fair bit of historic evidence” of two trends from other recessions. Consumers spend more on food relative to other items during a recession and food becomes a greater proportion of retail food spend because it is cheaper than eating out.
In the first half of the 2012 financial year, Greencore’s convenience food category in the UK (pre-Uniq acquisition) increased its revenue by 11.2 per cent to £383.4 million.
Consumer trends
Greencore’s microeconomic focus is on identifying product categories with faster growth than overall food sales. This means facilitating “very long-term demographic and behavioural trends towards easier food preparation” and recognising “that people have less time and less cooking skill.” Despite his confidence that convenience foods will remain in high demand, “the exact products that match against that need is harder to predict”.
The company is working within a changing consumer environment of smaller household size, greater female participation in the workforce and greater concern with health, manifested through interest in portion size, ingredient type and freshness. Portion management is important to consumers, “both in terms of what people consume but also what they throw away.”
Another feature is “more fragmentation of meal occasions,” as “a lot of the traditional segments of consumer actually coexist within one person”. While someone “might want to cook from scratch on a Friday or Saturday when they’ve got more time”, they will want an easier to prepare food product mid-week.
Greencore’s food-to-go range, which represents 45 per cent of its revenue, requires a “tight” supply chain because of its short shelf life.
“We’re sitting here at half-eleven on a Monday,” Coveney points out. “We have no product for Wednesday now and actually we’ve got very little of the ingredients we need in order to have product for a Wednesday.”
These demands occur within the “hugely exciting space” that is the general food market, which features a growth in global population and affluence “which feeds through probably more tangibly into diet than almost any other aspect.” He predicts “massive escalations in the volume and quality of food to deal with those two trends.” However, companies must contend with land and water scarcities, he notes, and the need to consider carbon.
Greencore’s UK manufacturing sites have reduced water consumption by 18.1 per cent.
This year, Coveney is President of Dublin Chamber of Commerce. He is upbeat about the country’s prospects as “the exports sector and what’s happening in terms of underlying business sentiment do provide a basis that I think can feed through to the other areas over time.” This is not to “trivialise or downplay” economic difficulties such as “getting the domestic economy moving, balancing income with expenditure at government and facilitating more and cheaper flows of credit into particularly the small business sector in Ireland.”
A source of economic hope is Ireland’s “very competitive, very well regarded globally, food industry,” he says. “Under any scenario of growth and recovery in Ireland the food industry is going to play a huge role.”
Profile: Patrick Coveney
A former Rhodes scholar at New College, Oxford, where he gained an MPhil and DPhil in management studies, Coveney worked at McKinsey & Company as managing partner in Ireland. He was chief financial officer of Greencore for two-and-a-half years before being appointed CEO in December 2007.
Married with four children, Coveney lives in Rathmines. A former rugby player who represented Ireland and Munster at underage level, he enjoys the gym and playing golf.
Coveney’s brother Simon is the Minister for Agriculture. “I’ll certainly either meet or talk to Simon several times a week about something,” he says. “I think he’s very good at taking advice on the food sector and he gets multiple inputs from all over the industry.”
