Greeencore CEO Patrick Coveney has faced tough challenges during his time at the helm but the horsemeat scandal threatens to deliver the biggest blow to the company’s reputation and requires deft handling, writes Kyran Fitzgerald
At the end of January, Ned Sullivan presided over his last AGM at chairman of Greencore. He was able to state confidently that: “A situation similar to that of the horse DNA crisis could not happen at Greencore. The reputation of the company is something hard won. We do extensive risk management.”
Today, he is, no doubt, regretting this unqualified expression of confidence. He may well have already eaten his hat.
At times, it can help if one has a legal training and instinctively knows when to hedge one’s bets, statement-wise.
Greencore CEO Patrick Coveney must also have a greater sense of the pressures now weighing on his brother, Simon, our Agriculture Minister, as the European food supply chain crisis moves into its second month.
Yesterday morning, his company’s share price tanked by as much as 10% as the markets absorbed the news that traces of horse DNA had been found in bolognese sauce supplied to it by ABP.
Greencore must wait to see if further products are caught in the net as a result of extensive testing across the supply chain by the UK food Safety Agency.
Clearly, the reputation of food processors and of the meat industry, in particular, is on the line.
That a relatively high-end convenience food supplier like Greencore has been sucked in, via its supply relationship with the Larry Goodman/ABP plant in Nenagh, serves to remind one of the seriousness of the situation.
In the past week the crisis has spread across the Continent, implicating Dutch traders, ex-French rugby internationals, the Spanghero Brothers, a brace of British suppliers, the Poles and the Romanians.
One of the stranger suggestions is that a ban on the use of horses and donkeys on Romanian highways may have triggered an upsurge in the supply of horsemeat into the food chain. Ireland has also been name checked as a leading source of nags for burgers.
Yesterday, alone, the British media was reporting that horsemeat had been found in cottage pies sent to almost 50 Lancashire schools. The Daily Telegraph hastened to point out that the offending meat may have come from France.
One thing is clear. There is now an epidemic of finger pointing as concerns about the food chain reach levels not seen since the height of the BSE-Cjd crisis in the 1990s, a crisis that led to important markets being shut off to Irish beef producers.
The cartoonists continue to have a field day, with British sketcher, Matt, depicting a horse being told by a fortune teller that he would travel to many countries.
The food crisis has, in fact, been weighing on the Greencore share price since it first developed in mid-January. As London analyst, Nicola Mallard, points out there are indirect as well as direct effects.
Peoples’ suspicions of meat-based convenience foods have grown, though Mallard, an employee of Investec, brokers to Greencore, believes that such scares are usually short-lived once the initial panic has abated.
The pity for Coveney is that Greencore seemed to be weathering well its transition to a full London Stock Exchange listing.
The share price reached £1.15 prior to the scandal and the stock was benefiting from its FTSE 100 status, through a broadening of its shareholder base.
In late November, Greencore announced a 45% rise in revenues to £1.1bn (€1.27bn) with operating profits up 37% to just under £71m.
While most of the rise was attributable to the acquisition of UK convenience producer, Uniq, underlying revenues were also up by almost 8%, an increase all the more creditable given the downward pressures on margins as a result of rising input costs and a consumer recession.
Coveney’s tenure at Greencore can be viewed in two phases. He joined the company as chief finance officer in 2005 before taking over as CEO at the end of 2007. It is unclear to what extent he can be blamed for the company’s decision to withdraw from sugar production, with big implications for beet suppliers and factory employees in Mallow.
It is a decision which he continues to vigorously defend.
Arguably, his major initiative as CEO was the unsuccessful takeover offer for Northern Foods in what would have amounted to a reverse takeover. At the time, the offer was seen as hugely positive by the market. When it was scuppered by the intervention of Ranit Boparan, Greencore took a big hit.
Some questioned Coveney’s tactics in the run up to the failed £380m bid which would have led to big synergies while establishing the merged entity as the dominant convenience foods supplier in Britain.
The subsequent Uniq acquisition can be viewed as a consolation prize, though Patrick Coveney insists that it is actually a better fit than Northern Foods would have been.
Greencore is pressing ahead with plans to build a US business. The US now accounts for 10% of turnover — the aim is to push this share up considerably.
Coveney will be aware that a focus on forward planning must not allow for distraction from producing food to the highest standard.
Europe as a whole, suppliers, retailers and agencies have received a sharp wake-up call. If the food chain is not broken, it is certainly badly frayed.
Agriculture Minister, Simon, must understand that Ireland’s hard won ‘green’ reputation as a quality foods supplier has been dented.
The Coveneys have done their late father, Hugh, proud in many respects but 6’7’ Patrick must know that he has just lost an important lineout and must now run back to prevent the situation running out of control.
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