Greencore plans to close a UK soup plant during the summer as the private-label supplier eliminates less efficient factories.
Announcing first-half results to 29 March, Dublin-headquartered Greencore said today (21 May) it will shut the site in Kiveton, Sheffield, and move soup production to its factory in Bristol, located in south-west England.
The move is slated for the fourth quarter of the food-to-go and convenience foods business’ current fiscal year and is designed to “enhance performance” across the company’s UK manufacturing network, London-listed Greencore said.
Dalton Philips, who became Greencore’s CEO in September 2022, told Just Food there are three plants on the Kiveton site, with the other two manufacturing ready meals and quiche. There is no plan to close those.
Consultations with affected soup workers at Kiveton have just ended, he said, without providing a specific count.
“It’s about 10% of the overall population that will be displaced from Kiveton,” Philips explained. “We’ll do everything we can, where possible, to reallocate them into roles in our ready meals or our quiche facilities but unfortunately the actual soup plant per se will have to close.”
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He added: “These are always difficult decisions. It’s going to improve efficiency by about 16% in terms of operating efficiency.
“We were quite clear last year that each site has to cover its cost of capital and, when sites don’t, we’re going to have to take a long hard look.”
Meanwhile, the ready-meals factory in Kiveton is to benefit from a new supply deal with discount retailer Aldi, starting from September, in what Philips described as being a “very material contract”.
Greencore returned to profitability in the first half of the year, a key objective under Philips’ three-pronged Horizon strategy.
Operating profit climbed to £25.3m ($32.1m). It was £3.6m in the first six months a year earlier, a decline from the £7.2m generated the year before.
Adjusted operating profit rose to £28.3m, compared to £11.8m in the comparative period of the 2023 financial year. The margin increased 200 basis points to 3.3% having been down 90 points at 1.3% in the corresponding first half.
In what Philips said was essentially a 5% upgrade from market consensus, Greencore aims to achieve an adjusted operating profit of £86-88m over the course of 2024.
Under Horizon one, Phillips set out to stabilise the business, an endeavour he met last year, followed by the second objective to return Greencore’s adjusted operating profit to the 2019-era of £105m.
The third phase involves weighing up new channels and categories.
“The group managed a very active commercial agenda with customers in H1-24 and launched approximately 184 new products, within the group’s total SKU range of more than 2,000 products,” according to Greencore’s results commentary.
Group revenue increased 4.1% on a like-for-like basis to $866.1m but was down 6.4% in reported terms.
Food-to-go revenue, which includes sandwiches, salads, sushi and chilled snacks, rose 4.6% in like-for-like terms to £578.9m. Volume growth in sandwiches was 2.5% but Greencore noted a “weaker performances” in the salads and own-label sushi categories.
In convenience foods, which feature chilled ready meals, chilled soups and sauces, chilled quiche, ambient sauces and pickles, and frozen Yorkshire pudding, reported a 16.9% decrease in revenue to £287.2m.
Greencore said the decline was due to its sale of the edible oils Trilby business last year and the exit from low-margin contracts.
Like-for-like revenue in convenience rose 3.1%.
“The group achieved a strong volume performance in the chilled ready meals category, increasing 1.7% on a LFL basis, outperforming the wider market. This was in addition to a strong LFL volume performance across cooking sauce, table sauce and bakery categories, however much of the remainder of the grocery category saw a more challenging performance,” Greencore explained.
Philips said of the results: “Greencore delivered excellent progress against its strategic priorities in the first half and continued to outperform the market in a difficult consumer spending environment.
“The group’s accelerating financial performance is very encouraging as we focus on driving profitability and returns.”
