Greencore manages food inflation through collaboration

The Irish food group said in an interim management statement this week that managing significant food inflation is a key challenge for all players in the global food industry this year. It estimates that this factor totals between eight and 10 per cent of the cost of its goods. Food commodity and raw material prices have had a major impact on the balance sheets of manufacturers this year, and various strategies have been employed to reduce the impact of higher costs. Such strategies have included reformulation to reduce reliance on commodity derived ingredients such as dairy and vegetable oil, using other ingredients to produce the same effect instead. Others have attempted to pass on the higher costs down the food supply chain, but some retailers have been notably resistant to this. In some cases, they have removed products from shelves if the price was seen to have increased too much. For its part, Greencore has not given an indication of exactly how it is working with its customers to reduce the impact. But it did say in the management statement that it expects "the successful delivery of of our strategic, operational and commercial initiatives to drive strong growth (on a constant currency basis) in FY08, albeit with the contribution of the second half of the year more pronounced that in previous years."​ There was some evidence of a limited slowdown in consumer demand for convenience foods in January, the company said - although it did not quantify this, and said that underlying consumer demand for its products "held up well" in the first quarter. In full year 2007 turnover for convenience foods division was up 4 per cent to €933.1m, but operating profit fell some 7 per cent to €64.6m. In ingredients, the firm saw a massive increase in operating profit of 372 per cent over the previous year to €26.6m, market especially by recovery of Greencore malt. Since this recovery has continued in the first quarter of 2008, the company is confident that it will see strong growth for the full year in this area. In January 2008 the company received confirmation that it would receive 87.3 per cent of sugar restructuring aid totalling €127m, following a legal challenge to the Irish government's earlier decision to allocate it less. 2007 was Greencore's first full year since pulling out of the sugar sector. The final instalment of €83.4m is payable at the end of this month.