Sandwich maker Greencore is battling to claw back soaring costs as input inflation accelerated into double digits, while a recovery in its food-to-go markets gathered pace.
CFO Emma Hynes told The Grocer the group had recovered more than 95% of two waves of inflation up to the end of January and was two-thirds of the way through the latest wave, which includes the impact from the conflict in Ukraine.
She said the numbers involved were “substantial” and includes soaring costs “across the board”, with chicken and packaging prices making up a large component, along with the tightness in the labour market and the jump in energy prices.
Hynes, who is steering Greencore through the challenging environment along with executive chairman Gary Kennedy and deputy CEO Kevin Moore until newly appointed boss Dalton Philips joins in September, added: “We have a whole series of different mechanisms to deal with inflation, whether that is price, managing the number of SKUs in the range or sourcing alternative ingredients and supply.”
Input cost inflation at Greencore ran in the high single digits in the six months to 25 March, but Hynes expected the latest wave to hit in the second half of the financial year, with house broker Shore Capital now putting the figure in the low double digits.
“We have to recover it and clearly labour is a big driver of inflation given the tightness of availability,” Hynes said. “It is never easy to pass it through, but we have had a constructive dynamic with our customers.”
The group, which makes almost 650 million sandwiches and other food-to-go products a year for supermarkets and coffee shops, reported a significant improvement in profitability this morning.
Revenues increased 33.6% to £770.8m in the 26 weeks ended 25 March as the food-to-go division, which accounts for 65% of total sales, saw trading back above pre-Covid levels.
The business also benefitted from incremental new business over the past two years, with wins contributing more than a third to the first-half growth.
Its convenience categories also performed well in the half, with growth from chilled ready meals, soups and other products coming in at 13%.
It helped Greencore move back into the black, with pre-tax profits of £1m, compared with a £1.8m loss in the same half a year ago.
Hynes called it “a good result” given the challenging trading environment, with good momentum going into the second half.
Shares in the group jumped 4.1% in trading today to 111.7p.
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