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UK''s Greencore raises forecast as chilled food demand soars in summer

UK's Greencore Boosts Profit Outlook Amid Surging Demand for Chilled Foods This Summer

LONDON – In a positive turn for the UK's convenience food sector, Greencore Group, one of the nation's leading producers of ready-to-eat meals and sandwiches, has upgraded its full-year profit forecast, citing an unexpected surge in demand for its chilled food products during the summer months. The announcement, made on Tuesday, reflects a broader trend of consumers turning to quick, fresh options amid warmer weather and changing lifestyles, providing a much-needed boost to the company amid ongoing economic pressures.

Greencore, headquartered in Dublin but with significant operations across the UK, specializes in manufacturing a wide range of chilled convenience foods, including sandwiches, salads, sushi, and prepared meals. These products are primarily supplied to major supermarkets like Tesco, Sainsbury's, and Marks & Spencer, as well as convenience stores and foodservice outlets. The company has long been a staple in the UK's fast-paced food market, where time-strapped consumers rely on grab-and-go options for lunches, picnics, and light dinners. However, the summer of 2024 has proven particularly fruitful, with sales exceeding expectations due to a combination of favorable weather, increased outdoor activities, and a rebound in consumer spending on premium chilled items.

According to the company's latest trading update, Greencore now anticipates adjusted operating profit for the fiscal year ending September 2024 to be in the range of £88 million to £90 million ($113 million to $116 million), up from its previous guidance of £86 million to £88 million. This revision comes on the heels of a strong third-quarter performance, where revenue grew by 1.4% on a like-for-like basis, reaching £493.8 million. The uplift is largely attributed to robust demand in its core food-to-go category, which includes sandwiches and other portable chilled foods that have seen a spike in popularity during heatwaves and summer events.

Executives at Greencore attribute this demand surge to several key factors. Firstly, the UK has experienced an unusually warm summer, with temperatures frequently topping 25°C (77°F) in many regions. This has encouraged more outdoor dining, barbecues, and picnics, where chilled foods like pre-made salads, wraps, and yogurt-based desserts offer convenience without the need for cooking. "Consumers are seeking out fresh, easy-to-prepare options that fit into their active summer lifestyles," said Dalton Philips, CEO of Greencore, in a statement accompanying the update. "Our focus on innovation and quality has positioned us well to capitalize on this trend."

Beyond weather, broader economic and social shifts are playing a role. Inflation in the UK has eased somewhat, but food prices remain elevated, prompting shoppers to opt for value-for-money chilled products over more expensive dine-out experiences. Additionally, the rise of hybrid working models post-pandemic has sustained demand for quick lunch solutions, even during the summer when many might traditionally take longer breaks. Greencore has also benefited from its strategic partnerships with retailers, who have ramped up promotions on chilled ranges to attract footfall during peak seasons like festivals, sports events, and holidays.

The company's performance stands in contrast to challenges faced by some peers in the food industry. While global supply chain disruptions and rising input costs – such as energy, packaging, and raw materials – have squeezed margins for many, Greencore has managed to navigate these headwinds effectively. For instance, the firm reported that its gross margins improved in the third quarter, thanks to efficient cost management and volume growth. This resilience is partly due to Greencore's vertically integrated supply chain, which allows for better control over production and distribution, minimizing delays and waste in the perishable chilled food segment.

Looking deeper into the numbers, Greencore's food-to-go division, which accounts for the majority of its revenue, saw a 3.2% increase in like-for-like sales. This was driven by higher volumes in sandwiches and sushi, categories that have evolved with consumer preferences toward healthier, plant-based, and globally inspired options. For example, Greencore has introduced new lines featuring Mediterranean salads, Asian-inspired noodle bowls, and low-calorie wraps, appealing to health-conscious buyers. The company's investment in sustainability, such as reducing plastic packaging and sourcing ethical ingredients, has also resonated with environmentally aware consumers, further bolstering demand.

Analysts have responded positively to the update. Shares in Greencore, listed on the London Stock Exchange, rose by as much as 5% in early trading following the announcement, reflecting investor confidence in the company's trajectory. "This upgrade underscores Greencore's strong market position and ability to adapt to seasonal demands," noted a report from Shore Capital. "With the summer trading period still ongoing, there's potential for further upside if the warm weather persists."

However, the outlook isn't without caveats. Greencore acknowledged ongoing uncertainties, including potential volatility in consumer spending amid economic slowdown fears and the lingering effects of geopolitical tensions on global food supply chains. The company is also monitoring labor costs, which have risen due to wage inflation in the UK. To mitigate these risks, Greencore has outlined plans to continue investing in automation and efficiency improvements at its manufacturing sites, aiming to enhance productivity and maintain competitive pricing.

This positive revision comes at a pivotal time for Greencore, which has undergone significant restructuring in recent years. Following a challenging period during the COVID-19 pandemic, when demand for food-to-go plummeted due to lockdowns and reduced commuting, the company streamlined operations, divested non-core assets, and focused on high-growth areas. The rebound has been steady, with fiscal 2023 profits recovering to £76.3 million, and the current trajectory suggests a return to pre-pandemic levels.

In the wider context of the UK food industry, Greencore's success highlights a shift toward convenience and freshness. According to industry data from Kantar, sales of chilled ready meals and snacks have grown by 4% year-on-year, outpacing ambient and frozen categories. This trend is expected to continue, driven by demographic changes such as an aging population seeking easy meal solutions and younger consumers prioritizing speed and variety.

Philips emphasized the company's forward-looking strategy: "We're not just riding the summer wave; we're building for sustained growth. Our innovation pipeline includes exciting new products tailored to emerging trends like vegan and gluten-free options, ensuring we stay ahead in a competitive market."

As the summer progresses, all eyes will be on whether Greencore can maintain this momentum. With major events like the Olympics potentially influencing consumer behavior – even if indirectly through increased tourism and social gatherings – the company is well-poised to capitalize. Investors and industry watchers alike will be watching closely for the full-year results in November, which could provide further insights into the sustainability of this demand surge.

Greencore's story is emblematic of the resilience in the UK's food sector, where adaptability to seasonal and economic fluctuations can turn challenges into opportunities. As consumers continue to embrace chilled convenience, companies like Greencore are not only meeting demand but also shaping the future of everyday eating in Britain.

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