What’s a company to do when it’s wrapped up a quarter of the UK’s manufactured sandwich trade in over a quarter of a decade? Why, take over the US market too, obviously. Greencore’s declared - and frankly, long-awaited - ambition to get involved in convenience foods in the US, a country with untapped potential for large-scale chilled foods manufacture, is finally nearing fruition. A small team has been busying itself with this project for the past year and a decision is due in the "relatively near future," says chief operating officer Tony Hynes.
The firm has been touted as a takeover target - including, most recently, Exista, the Icelandic financial muscle behind the massive food group, Bakkavör, although Exista has since denied this. In the meantime, speculation about overseas expansion or take-overs aside, Greencore has been making do expanding its UK and continental operations. "Bakery is an area of significant growth for us; it’s an area where we will invest more," states Hynes.
A sign of this came in December 2007, when Ministry of Cake was snapped up, marking out Greencore’s ambitions in the foodservice cakes sector. Any future acquisitions are likely to come with diversifying the foodservice portfolio in mind, he says. "That’s very much the focus of our development," he says. But, given the current cost climate, is it perhaps not the best time to be buying bakery businesses? "It has been a bad year! It’s been very tough in the baking industry. But I don’t think that should necessarily influence our long-term strategy," he adds.
Greencore will have felt the pinch of soaring ingredients costs as acutely as anyone, operating as it does hand-in-hand with the supermarkets, as a predominantly own-label supplier. So how is it dealing with those cost pressures - by reformulating products, perhaps? "I don’t think there’s one simple solution to this," ponders Hynes. "We’ve had to get price increases - our customers have understood that and we have responsibility ourselves to try and do things better. Re-engineering of products has not been a key part of our agenda at all - the consumer has an expectation in terms of what they want. We’ve managed, through reasonable discussion, to get a proper result for ourselves."
What the drama of rocketing ingredients prices has done is sharpen the focus on driving out costs and improving staff management - something that has transformed the business over the past three years. "I think there are others (food companies) that have not even engaged on that agenda so far. We don’t see ourselves as simply food manufacturers," says Hynes. By this he means Greencore is drawing on good practice from other industries, as opposed to just the food sector. "Unless you look beyond that, you’re not going to find new or better practices, but in so doing, we’re leaving behind some of the jargon of the other industries."
Not that Greencore is beyond corporate-speak. It has its own ’Lean Greencore’ and ’Total Lowest Cost’ programmes, part of a lean manufacturing drive. These are the firm’s answer - alongside tighter purchasing - to cost hikes. They entail making sure lines are running at the right speeds, changeovers are efficient, downtime is analysed and people are given more responsibility; 1,000 staff across Greencore’s business have undergone foundation training for leadership skills.
The management structure has been streamlined and Hynes admits that there were too many layers of management in the past. The line of command has been tightened and he wants the workforce as close to the MD of each business category as possible. Involving the workforce at the line-leader/operator level, and establishing a clear set of values, has paid off with a more engaged staff, says Hynes.
The high employee turnover of three years ago has been halted, and crucially so, given that people come third only to ingredients and packaging costs on Greencore’s balance sheet. "Quite frankly, if you’d seen our business three years ago, you’d have found that the workforce was there to do what they were told, rather than to engage their brain to any great extent. We’re very much focusing on a few key areas, keeping our business very simple, investing in line leaders and getting much greater engagement in that area, and it has been phenomenally beneficial."
This involves simple initiatives, such as bagging waste and piling it up so that workers can appreciate the scale of wastage, and then strive to reduce it. "We do it for learning, not as a bollocking," says operations director at the main sandwiches site in Manton Wood, Graham Burley, of this new measure. "Two weeks ago, there was twice as much waste. We want to be the best-in-class and we want to take the cost out of everything, where we can, but only in a format that doesn’t risk anything." On a grander scale, Greencore is investing in a conversion plant for generating electricity from food waste, which should be online in 2009.
== Growing desserts business ==
All of which is underpinning Greencore’s push into bakery. "We like to think that our desserts business will grow very significantly over the next three-to-five years," says Hynes. Part of that may be through further acquisitions, he says. "Certainly it will involve more food-service activity. But it will also mean us getting involved in the more creative side of things." For example, a range of cakes that have their origins in Eastern Europe, in recognition of those growing populations in the UK, are due to launch in the very near future.
He describes Greencore’s food-to-go business - not unreasonably - as a ’powerhouse’. "We have big ambitions for that, with more and more links to the bakery business," he says. Convenience is still as big a driver as ever, and Greencore’s 50% product churn gives some idea of how people are exploring more food-to-go formats. "Growth in Christmas cakes is not because people are eating more of them, it’s because the old skills of making the Christmas cake are disappearing and more people are now buying them."
Hynes also talks with enthusiasm about his ambitions for developing the Weight Watchers brand in sandwiches, quiches and desserts. "On the health front, the development of the Weight Watchers agenda is now encroaching into our bakery businesses, and we think that’s a credible way to deal with some of the obesity issues that are out there." Intriguingly, he alludes to another future launch that’s "different from anything else in the market" on the healthy, balanced diet front.
Balance seems to be the watchword going forward: "It’s going to be a tight year, but we’re happy with the balance we’ve got."
=== Size matters ===
l Following a spate of acquisitions, the firm has grown from being a state-owned business - the original company Irish Sugar was privatised in 1991 - to become the chilled and convenience foods goliath it is today. The step change was buying Hazelwood Foods in 2001. Hazelwood comprised a ragbag of businesses - toilet paper, nappies, fish - but Greencore slimmed it down, keeping sandwiches and convenience foods at the core.
l Following four years of disposals, acquisitions came in 2005 with specialist sandwich maker Oldfields and, latterly, the sushi business Sushi San, as well as foodservice cakes supplier Ministry of Cake, last year.
l Greencore makes over a quarter of the manufactured packaged sandwiches eaten every day in Britain, supplying (in no particular order) Co-op, Asda, Sainsbury’s, Boots, Morrisons and Somerfield. It supplies Tesco, Waitrose and Marks & Spencer with other goods, such as ready meals and quiches.
l At the forefront of much of Greencore’s best practice is Manton Wood, the site of the biggest sandwich facility in the world. It makes around half of the 4 million sandwiches Greencore supplies every week; the rest are split between two London sites in Bow and Park Royal. The firm employs around 2,000 across sandwich manufacture in total.
l BB was given a tour of Manton Wood, which has up to 18 production lines running - one of which has been beefed up by a Lieder line (an automated sandwich line with two robots and ultrasonic sandwich-cutting). "This cost us a lot of money, but it pays for itself by allowing us to take people off the line," says operations director, Graham Burley. Between £5-6million capital expenditure has been ploughed into Greencore’s sandwich businesses each year for the past three years.
l But that’s only part of the story. Greencore’s cakes and desserts facility in Hull is four times as big as Manton Wood, at 250,000sq ft. It’s the UK’s biggest supplier of Christmas cakes and non-dairy desserts. Greencore also commands 43% of the quiche market and a third of Yorkshire puddings.
=== Tony Hynes CV ===
l 57 years old and lives in Derbyshire
l Worked in senior management positions with Essilor - a French ophthalmic optics group - in Ireland, the USA, China and France, before becoming MD of Green Isle Foods, part of Northern Foods
l He joined Greencore in May 2001
l As Greencore Group’s COO, he is also chief executive of Greencore’s convenience foods division and has responsibility for the group processes functions, which encompass purchasing, communications and technical, including health, safety and the environment
l As a family man, Hynes enjoys canoeing and fishing, and is a keen supporter of Chelsea FC