Brexit: Greencore mulls plan to ‘airlift’ food ingredients to UK

Sandwich giant says decision would depend on whether clients would pay additional costs

Greencore chief executive Patrick Coveney. Photograph:  Dara Mac Donaill/The Irish Times

Greencore chief executive Patrick Coveney. Photograph: Dara Mac Donaill/The Irish Times

 

Convenience food firm Greencore said it is actively considering “airlifting” fresh food produce to Britain in the event of a disorderly Brexit.

At the company’s annual general meeting (AGM) in Dublin on Tuesday, chief executive Patrick Coveney said a decision to bring in fresh ingredients by air would depend on whether its customers, which include most the big retail multiples, agreeing to pay the extra costs.

He was speaking in the wake of a warning from the British Retail Consortium (BRC), which includes Marks & Spencer, Sainsbury’s and McDonald’s, about the potential disruption to Britain’s food supply from a hard Brexit.

The BRC quoted what it said was the UK government’s own data suggesting freight trade between Calais and Dover may reduce by 87 per cent against current levels as a result.

Mr Coveney said Greencore, the UK’s largest sandwich maker, would not be immune to such disruption and was already stockpiling ingredients to shield the company from potential disruption in the initial period after the UK exits on March 29th.

The challenge lay maintaining availability of fresh produce, such as lettuce and spinach, he said.

“There’s more products airlifted into the UK that you might think, fresh flowers being a good example,” he said.

“There are solutions to bring product [in this case food ingredients] from Africa by air directly into the UK, but they are much, much more expensive than trucking stuff from Spain and southern France,” he said.

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Currently about 20 per cent of Greencore ingredients are sourced from outside the UK while a further 10 per cent are UK-manufactured ingredients that have overseas components.

While still hopeful that some sort of deal to avoid a hard Brexit can be forged, Mr Coveney said he had become less optimistic in recent months and that the company was readying itself for a no-deal outcome.

At the agm, shareholders overwhelmingly voted in favour of a planned tender offer that would £509 million in proceeds from the recent sale of the US busines s returned to them.

Greencore had originally planned to disburse the money by way of a special dividend but changed the plan after shareholders complained about the tax implications of the scheme.

If the full £509 million tender offer is not taken up, the company said it may return the balance by way of the special dividend or keep the proceeds to further capital investment.

The level of shareholder subscription will not made known until Thursday, the company said.

In a trading update, released earlier, Greencore reported an “encouraging start to the year” with revenues for the first quarter totalling £363.5 million (€417.9 million).

The headline revenue figure was up 5.8 per cent, when disposals and units that have ceased trading are factored in to the numbers. When stripped out, revenues were down 5.7 per cent.

The “food-to-go” category, which accounts for two thirds of Greencore’s €1.5 billion annual turnover, delivered growth for the company which now operates solely in the UK after having sold its US operation in November 2018. Revenue in the food-to-go categories rose 6.4 per cent while revenue across the remainder of the group’s continuing operations increased 4.7 per cent.

In terms of its future outlook, Greencore reaffirmed the statement for continuing operations included in its results for 2018.

“The group anticipates continued underlying revenue growth in its key convenience food categories,” the company said in a stock market announcement.

On Brexit, the Dublin-headquartered company flagged that near term challenges associated with a “no withdrawal agreement” are uncertain, but said the risks from Brexit are “manageable in the medium term”.

Greencore, which is responsible for three out of every five sandwiches sold in the UK, will report its 2019 interim results on May 21st.

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