Supermarkets can’t squeeze life out of this new food giant

Everything from freshly made sandwiches, a veritable jungle of salads, to every course you might need for a three-course ready meal in front of the telly for a tenner.

The equivalent experience in France's Carrefour would see dull sandwiches with an incredible sell-by date of a week hence, and in America's Walmart a ready-made hot dog that tastes as cheap as it costs.

Patrick Coveney, who will become chief executive of Essenta, the merged Greencore and Northern Foods, paid tribute to the latter company this week, saying: "Northern Foods was the company which created the chilled-foods market in the 1990s and early 2000s. Since then other people have caught up with them, including us."

Sadly, for most of the past decade Northern has been dominated by a series of profit warnings, factory closures and the disposal of a string of brands acquired in the 1980s and 1990s. Its share price has slumped from a peak of 164p four years ago to meander between 40p and 50p for the past six months.

Created in 1937, Northern is one of our oldest listed companies, coming to the stock market in 1956 as Northern Dairies. It demerged the original dairies business, Express Dairies, in 1998 and concentrated most of its efforts
on the chilled-food business with a handful of brands like Goodfella's pizzas and Fox's biscuits thrown in for good luck.

Right up until 2002 Northern rem-ained a family business, always led by a member of the Horsley family up until Chris (now Lord) Haskins, who was only allowed to marry the boss's daughter on condition he joined the firm. The family had socialist leanings and ran the business on distinctly paternalistic lines.

Sadly, that was not enough for greedy institutional investors who called for change and new management. In 1998, Haskins was booted upstairs as chairman and Joe Stewart, head of prepared foods, became chief executive. He presided over three profit warnings in
18 months, and was ousted in 2003 to be replaced by Pat O'Driscoll.

She lasted three years, during which the company halved in size. Her successor, Stefan Barden, who used to run Heinz in the UK, steadied the ship and brought it into port with Greencore, but will be walking the gangplank when the merger completes. Those institutional investors actually brought their own tumbling investment upon themselves with their lack of patience and demand for instant gratification.

Now the page has turned and Coveney, as boss of Essenta — which employs 16,000 people, mainly in this country — has a different stakeholder to battle. This world-leading industry is at the beck and call of its main customers, the mighty supermarket chains.

Northern's history is littered with disappointments, many of which can be laid at the doors of those chains demanding ever-tighter cost controls and better margins for themselves, not the manufacturer.

Coveney is a hard operator, and by doubling the business in size he holds some strong cards. But he will have to convince the supermarkets that if they want to continue to enjoy the benefits of rapidly rising convenience-food sales, they must be prepared to invest alongside him in the research and production facilities which will keep Essenta at the top of the game.

Grass is still greener in Emerald Isle

A sense of schadenfreude swept the City office when it looked as though Ireland would be forced to raise its corporation tax if it received a
multi-billion-euro bailout from the European Union.

Sir Martin Sorrell wouldn't be looking quite so clever, having shifted advertising giant WPP's domicile to Dublin less than two years ago, only to be hit by a big tax hike. Similarly silly-looking could have been publisher UBM, pharma group shire and engineer Charter.

But, as Greencore boss Patrick Coveney explained, it is not so much the low rate of Irish corporation tax that matters but the allowances the Dublin tax regime grants through its generous treaties on overseas earnings.

The merged Essenta will keep its HQ next to Dublin airport as Coveney made clear: "Greencore pays an overall 17% in tax while Northern Foods pays 27%." No contest.