Greencore loses Starbucks sandwich contract

Starbucks has dropped Greencore as supplier of sandwiches to its British cafe empire, a move that removes the group's products from more than 530 outlets in England, Scotland and Wales.

Greencore made light of the setback, stating that it had compensated for the entirety of the lost business through four new contracts in Britain to supply Shell's forecourt garages as well as shops trading under the Spar, Londis and Budgen's brands.

It is believed that Greencore supplied some 10 million sandwiches per year to Starbucks before the unwinding of its contract last December led to the cessation of supplies in April. This represents some 5 per cent of Greencore's total annual production of 200 million sandwiches.

Instead of Greencore, in which multi-millionaire developer Liam Carroll has a 29.5 per cent stake, Starbucks has selected Food Partners UK as its main sandwich supplier in Britain.

However, Greencore also said it was in advanced talks with Starbucks in relation to new business. A spokesman said the possibility of winning new contracts with Starbucks was not included in Greecore's recent prediction that it will beat consensus forecasts of 25.8 per cent earnings per share growth this year by some 10 per cent.

Starbucks, whose cafes in Ireland are supplied by Bitegroup, said its decision to switch suppliers in Britain reflected "changing" business needs.

"Starbucks Coffee Company UK Limited appointed Food Partners UK to undertake the production of sandwiches, paninis and salads and to distribute chilled food to Starbucks' UK stores. The partnership took effect from the end of March 2007," Starbucks said in a statement.

"Starbucks' decision to award the contract to Food Partners UK reflects the changing business needs in the UK market."

Greencore's relationship with Starbucks dates to 2005 when it acquired British sandwich business Oldfields for €17.3 million. Oldfields, which then produced 25 million ready-made sandwiches per year, had an exclusive contract with Starbucks.

Greencore shares have been trading near record highs since Mr Carroll increased his stake this month, a move widely interpreted as a prelude to a possible bid. The stock closed 0.76 per cent higher at €5.29 last night on the Dublin market.