Greencore gains from £15m Cranswick sandwich deal

Greencore’s £15m acquisition of The Sandwich Business from pork processor Cranswick extends its reach into the convenience store and travel channels of the food-to-go market, according to the company.

In an announcement this morning (25 July), Greencore stated: “The acquired business will extend Greencore’s presence in the high growth food to go category outside of its current core business with large grocery customers.

“The facility also offers an opportunity to modestly increase overall capacity across Greencore’s food-to-go network and will bring new capabilities in short-run, specialist product formats.”

Cranswick CEO Adam Couch said: “I am pleased to announce the sale of our sandwich business to Greencore which is very much in line with our strategy of focusing on our core protein businesses.”

'Global leader'

Couch said he was “particularly delighted” that the sandwich division was being acquired “by a proven global leader in Greencore who will bring new opportunities and strengths to this business, its customers and the staff”. He thanked employees “for their long standing loyalty and commitment to Cranswick”.

Commenting on the deal, Darren Shirley, consumer equity research analyst at Shore Capital said: “… We have long considered sandwiches as non-core to Cranswick so the disposal comes as no surprise to us.”

The Sandwich Factory operates from a single facility in Atherstone, Warwickshire, where it produces food-to-go products for convenience store and foodservice customers. Net revenue from manufactured products in the financial year ended 31 March 2016 was £42m.

Greencore CEO Patrick Coveney said: “This acquisition makes strong strategic sense for Greencore, given our ongoing focus on the food to go market.

New product types

“The Sandwich Factory will extend our reach into customer channels in which we are currently under represented, notably convenience stores and the travel sector, and will also bring new product types into the Greencore portfolio.”

In a trading update for the three months to 30 June (the first quarter of the current financial year), Cranswick revealed that underlying sales growth had increased by 5% on the same period in 2016. That compares favourably with 2% underlying growth for the final quarter of 2016.

It confirmed the integration of the Crown Chicken business, which it acquired in April, was “progressing to plan, with the business making a positive contribution in line with the board’s expectations”.

On an underlying basis, volumes increased 12%, representing further material out-performance of the UK grocery market and an acceleration on the already strong c9% underlying volume growth delivered through Q4 2016, said Shirley.

Exports accelerate

And he added that although they still only represented about 5% of group sales, export volume sales continued to accelerate, with volumes to Far Eastern markets up 60% year-on-year.

Aside from pasties, all of Cranswick’s categories, including fresh pork, cooked meats, sausages, continental foods, sandwiches and premium chicken and poultry firm Benson Park, enjoyed volume growth across the latest quarter.

The future also looked bright for the company, as EU pig prices had strengthened and more upward pressure on them was expected.

Shirley concluded: “In our view Cranswick is a class act in the consumer space, with an excellent track record of sales and profit growth, cash generation and also dividend growth (26 years unbroken track record).

“With a strong balance sheet we see further opportunities for pork, benefiting from a decade of consistent investment in infrastructure, and whilst still early days we see the potential for growth in the poultry market as genuinely exciting.”

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