Patrick Coveney: Greencore's honest crust
The boss of the world's largest sandwich maker is toasting bumper Jubilee sales. Laura Chesters hears his recipe for success
Friday 08 June 2012
Every morning in the industrial, grey and drab landscape of west London's Park Royal, more than 700 people are busy making the City's lunchtime sandwiches. At 2am, legions of hairnetted and scrubbed-down staff – made up of 49 nationalities – expertly spread egg and cress, tuna or prawn mayo onto bread before the slices are carried along conveyor belts into giant metal machines that deftly add the other side and cut the sandwich into neat triangles before neatly depositing it into recyclable packaging.
Once the sandwich-spreading is mastered, workers get the chance to try their hand at wraps. Filling and folding a wafer-thin tortilla, slicing it just so, placing it into the standard issue box to show beautifully the fresh inner, is harder than it looks.
You may not have heard of Greencore, but it is the world's largest sandwich maker, and you may well have eaten one of its Marks & Spencer or WH Smith sandwiches, or a Waitrose quiche, a Tesco ready meal or a Pizza Hut salad.
Greencore makes 400 million sandwiches a year, 100 million ready meals, six million Christmas cakes and 600 million Yorkshire puddings.
Its six-foot six-inch tall Dublin-based chief executive, Patrick Coveney, spends most of his time squeezed in to plane seats travelling between the sandwich makers in Park Royal, pudding makers in Somerset or Shropshire, ready-meal factories in Warrington or shareholders in London.
Mr Coveney has just overseen the production of thousands of Jubilee packaged products – and Greencore received a boost in sales at the weekend. Quiches for Tesco Finest using only British ingredients in Union Flag packaging, cream cheese or coronation chicken sandwiches in commemorative packaging flew out the shops despite the rain spoiling some picnics.
"The Jubilee led to big increases in parties – in the street, at home and in villages. Out-of-home eating means products such as quiches and salad saw volumes jump very strongly last week. We tend to sell well when the country celebrates," Mr Coveney says.
He is now adding regular trips to the US to his schedule after Greencore boosted is presence there in April with the £25m purchase of Marketfare, which makes sandwiches and frozen hot dogs for 7-Eleven convenience stores.
The deal is the latest in a line of acquisitions the once Irish-based company has made. When Mr Coveney joined in 2005 as chief financial officer, the business was part way through a makeover. It had already moved from being state-owned – it started life as Irish Sugar – and was privatised in 1991. Sell-offs of the non-core businesses, from toilet paper to nappies and fish to bottled water, increased.
By the time Mr Coveney took over as boss in 2007, it was already well on its way to being a convenience food specialist. The group, now fully listed in London after moving from Dublin this year, said last month that sales rose nearly 50 per cent to £567.7m and operating profits 36.7 per cent to £31.7m for the half-year to March.
The acquisition plan has seen it swallow a series of businesses – the most significant were last year's takeover of Marks & Spencer supplier Uniq and last month's purchase of Marketfare Foods.
The US is a small but growing area for the food group and more attractive than anywhere in Europe, Mr Coveney says. Marketfare has sales of £40m, which brings its total US sales to £100m – still only 10 per cent of its overall business.
Sitting at Greencore's sandwich facility in Park Royal the sports-mad, overachieving (he was a rugby player while finding time for degrees at Oxford and Cork) 41-year-old Mr Coveney is rattling through the advantages of being in the US as he tucks into sandwiches from downstairs – one platter from the 7,500 deliveries made every day by Greencore's 220 vans from its Food to Go arm across the UK. He even has a favourite sandwich in both countries. "In the UK, I go for BLT sandwiches and in the US it is a six-inch Italian sub roll."
Greencore entered the US market in 2008 when it bought Home Made Brand Foods. Mr Coveney says America has huge potential. "Traditionally the US has been very good at fresh foods but not freshly prepared food. The skills in the UK in this sector are highly valued overseas."
Expansion for the group will concentrate on the eastern States, and "there are plenty of legs in the business to expand overtime", Mr Coveney says. But we won't see US delights of meatloaf or BBQ products over here. Mr Coveney explains: "The US is a very different market with different tastes. It has a huge divergence on consumer types – either extreme levels of health or incredibly indulgent calorific intakes."
But one thing Greencore will be learning from the US is shopper experience. Mr Coveney says: "US retailers certainly invest more on experience and the techniques they have will give us an opportunity to work with this."
Mr Coveney, who joins the meeting at Park Royal straight from a conference with Tesco, is coy about how much Greencore might work with it in the US. In the UK, Greencore supplies the supermarket giant with ready meals, and Tesco's struggling US business might have been a perfect opportunity for the pair to come together Stateside.
But Tesco has focused on the west coast – California, Nevada and Arizona – for its Fresh & Easy chain while Greencore is mainly on the East Coast, bar Salt Lake City in Utah, and there are no current plans for a partnership.
But in the UK Greencore certainly sees further opportunity with Tesco, whose planned overhaul to broaden ranges and improve prices could enable Greencore to win more business.
However, Mr Coveney is concentrating on finishing the integration of Uniq in the UK this year before he grows an appetite for expansion again. Greencore bought Uniq after its proposed merger with Northern Foods at the end of 2010 failed when the frozen chicken expert Boparan Holdings beat it to the pizza-to-biscuits prize.
The consumer goods sector is in the midst of consolidation and takeovers. This year Müller UK bought Robert Wiseman Dairies, China's Bright Foods bought Weetabix. Birds Eye is on the market and Greencore was subject to bidder interest last year.
Shares in Greencore have risen from 63p to around 75p since it moved to a sole listing in London – moving from the Irish Stock Exchange – in January. And analysts are happy. Clive Black at Shore Capital says: "Sales performance in the core convenience foods division could be called excellent to our minds and we reiterate our positive stance on the shares and the business."
Its focus on convenience food is backed up by industry statistics on consumer spending habits. Rabobank's EU Consumer 2030 report says as people become more time constrained, the need to save time on food preparation will rise and by 2030 considerably "more food will be consumed on the go".
But although the convenience sector is growing, consumers are cutting back just as food cost prices are rising. The food retail sector is cumulatively down by 14.5 per cent so far this year, so it is still nearly the worst performing sector in the whole retail sector.
Mr Coveney confirms: "There has been a huge jump in egg prices, there is pressure on sugar, and seafood increased last year. Our model means we have to get that back through the price."
Cakes and baked products have been hit the most and sales are very difficult. But despite the tough economy Mr Coveney has spotted that some of the high-end products have been doing very well in spite of penny-pinching.
"It is eating in versus eating out. If you choose to eat in rather than go out for a meal, you want that experience, the 'in' experience, to be better." Upmarket versions of ready meals and cooking sauces and stocks have been flying off the shelves. Mr Coveney is a safe pair of hands to steer the company through the difficult times.
His time at advisory firm McKinsey means he is well-connected, and he is part of a well-known family in Ireland. His father was a businessman and politician, and his brother Simon is Ireland's agriculture minister.
Pat Butler, a former colleague and now friend of Mr Coveney, who worked at McKinsey for 25 years, says: "Patrick is incredibly open and optimistic. His confidence translates into optimism, not ego which is rare.
"He is great with people – when he moved, having been in Atlanta, he got two people to move from Atlanta to Ireland – and these were people with no Irish roots or connections. That is the power he has. He can really motivate people."
Mr Coveney needed his people skills to settle the Uniq integration – merging operations is a sensitive task. But with his ambitious streak, if Greencore keeps filling the sandwiches, rolling the wraps and baking the quiches, it might whet the appetite of even more investors.
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