The Kent Potato Company is facing closure after losing a key chunk of retail business.
Parent company Produce Investments (PI), which owns Greenvale and released its annual report to the City yesterday (8 October), said it was expecting a reduction in volume of market share to one of its key retail customers – understood to be Tesco – and that this will have a knock-on effect in Kent. A consultation process has begun with Kent staff and is expected to be concluded in late November.
“With this reduction in volume I can confirm that the company is currently reviewing its packing facilities, aligning capacity to forecast sales and therefore ensuring that the business remains efficient and cost competitive,” said chief executive Angus Armstrong.
“This review is also taking into consideration proximity of grower base and procurement requirements and may well lead to the closure of the company’s Kent-based packing facility, subject to the outcome of consultation.”
Greenvale will now supply “at least 25 per cent”, down from 40 per cent, of Tesco’s potato needs, however there was some good news as Armstrong revealed the company had secured a three-year fixed-margin agreement with the supermarket. It has also retained 100 per cent of Tesco’s organic business and will supply all of its Jersey Royals from 2016 onwards.
PI’s accounts showed turnover fell to £178.4 million for the year to 27 June 2015, down from £191.8m the year before, a drop the company primarily attributed to margin pressure from the supermarket price war. Pre-tax profit was £7.3m, down from £8.6m in 2014.
The company also warned that it would have to take a financial hit of up to £1.5m as a result of the metal contamination issue at Swancote Foods, which will be recorded as an exceptional in next year’s accounts.
Chairman Barrie Clapham described the result as “robust” given the tough market conditions, with 2014 seeing an oversupply in the potato market as well as price pressure at retail level. He added that results had been much better in the second half of the year as value and volume declines slowed.
On a positive front, the company said it had improved efficiency at its packing sites following the closure of Tern Hill last year; income and profitability is rising at its Restrain ethylene storage and ripening business; and net debt has been reduced.
Armstrong also noted that the company is committed to building up the GreenVale potato brand, which is “continuing to build momentum” despite the threat of being delisted by one customer.
No comments yet