After 118 years of farming, the Co-operative Group has bid farewell to its agriculture business. Farmcare, the UK’s biggest lowland farmer, became a subsidiary of the Wellcome Trust on 4 August.
Its profits will be fed back into the trust’s £18bn endowment fund, which ploughs around £700m a year into ‘biomedical research and public engagement’. For its part, the trust will bring a new level of investment to the business.
Richard Quinn, chief executive of Farmcare, will continue to lead the business, and he is excited. “This is a huge opportunity,” he says. “It’s not often we get a piece of blank paper to think about what we can do to help us function and develop as a business. It’s an incredible time for the team and myself.”
Farmcare produces top fruit, soft fruit, vegetables and cereals on more than 50,000 acres, on sites throughout England and Scotland. It owns seven farm estates and three packhouses, and manages a further eight farms. Its estates include over 300 farm buildings and dwellings, some in a poor state of repair, along with community facilities such as village halls and playing fields.
“We’re not just a farmer, we’re a rural business,” adds Mr Quinn. “We have a role to play in the communities where we farm. The estates need further investment.”
When the Co-operative Group put Farmcare on the market in February, it was clear the Group was struggling to maintain its many diverse businesses with limited capital resources. Its strategy was to dispose of ‘non-core’ assets such as Farmcare, which raised £249m, its pharmacy division, which brought in £620m, and its security arm, which raised £41.5m.
“The Co-operative Group needed capital this year, as has been well-reported,” says Mr Quinn.
“Farmcare was part of a bigger group of businesses. Compare the food business turnover [£7.2bn in 2013] with Farmcare turning over £60m. We were investing huge amounts in the business, but this wasn’t enough.”
Mr Quinn believes the decision to sell was the right one, and will enable Farmcare to develop. “We did a huge amount of research with customers on what they thought was appropriate for a retail business,” he says.
“It’s important for retailers to employ appropriate sourcing methods, like caring for the environment and ensuring that suppliers adopt good soil management and husbandry. If you look at retail during the last two years, all the supermarkets, from Aldi to Waitrose, are advertising that. But apart from Waitrose, none of them own farms. They just work closely with their supply chain.”
Waitrose’s Leckford Farm in Stocksbridge, Hampshire, produces arable crops including wheat for Leckford label flour, milk, apples, pears, apple juice, cider, mushrooms and free range chickens and eggs. It has succeeded in shortening the supply chain in a way that works for Waitrose.
But for Farmcare, a large and complex business, this proved too big a challenge. Just 2% of Farmcare produce is sold to the Co-operative Group. The rest goes to commodity markets or other customers, the main crops being wheat for flour, barley for beer and potatoes.
As Mr Quinn explains, supply chains in these sectors are dominated by large manufacturers, and were falling beyond the Group’s sphere of influence. “The question was how do we achieve scale? Asking manufacturers to segregate supply chains is a real challenge, particularly when you are seeking to do it without increasing costs.
“Twenty years ago there were much larger numbers of manufacturers, and manufacturers were smaller. There was a broader range of products. If you look at some product types today, you have two large manufacturers dominating the market.”
Farmcare is keeping its name and its staff, including its management team, which will stay in Manchester, and will remain a single business. It will continue to supply potatoes, soft fruit and top fruit to the Co-operative Group’s food stores.
There is also an intention to maintain cultural links with the Group. “As a leading supplier, why wouldn’t we want Co-operative Group members and customers to come and look at what we’re doing?” Mr Quinn says.
“We will continue to work with the Group’s supply policies, but Farmcare is a standalone business. It will have its own identity and its own values and principles.
“They’re not dissimilar to some of the co-operative values and principles, but there will be different objectives, different deliverables and different expectations.”
Since 2005, Farmcare has hosted more than 100,000 Farm to Fork educational visits, for example, and has supported the Habitat Heroes wildlife and conservation scheme.
“Farmcare will continue to care for its land, provide good husbandry, support wildlife and support rural education,” says Mr Quinn. “These activities will still exist, but they might be communicated differently or exist in a different way.”
Farmcare now has its own board, and will make its own decisions. Comprising Mr Quinn, three representatives of the Wellcome Trust and land management agent Ian Monks, it is creating a new strategy for Farmcare. “We’re attempting to grow the business not through size, but through customer base,” Mr Quinn adds.
“It’s a farming business and it will carry on farming. It will hopefully be more recognised as a leading supplier and a leading producer.”
New recruits, in selected areas including account management and change management, are helping the board take the strategy forward, and will increase the number of Farmcare employees from 220 to around 240.
Mr Quinn says there was “a huge amount of interest” in the sale of Farmcare. “Farmcare is proud of its co-operative heritage but it now has an opportunity to invest and grow,” he says. “Members and employees should be proud that it has been sold as one to a business with strong values.
“There’s a huge amount of work to do. Farmcare has that focus and attention now. Wellcome Trust will invest appropriately to further the Farmcare business.”