NPD integral to bakery growth
There was a lot of work to do when the Grain D’Or site was bought from Northern Foods by Vision Capital in 2007. The site only had one major customer and it was being run as a factory instead of a business.
I turned up on day one as general manager and there was only a factory manager, technical manager and an engineering manager. They were the only managerial functions local to the site. I don’t particularly want to comment on the rights and wrongs of Northern’s structure, but this business was only supplying own-label to Tesco and one other business at the time, with a commercial team operating from Sheffield, which was a recipe for disaster.
The whole principle about our group – Fletchers Group of Bakeries, which is owned by Vision Capital – is that we’re a devolved business. We make decisions closer to the point of action, which means a promise to a customer isn’t made by a central commercial team that doesn’t understand a site’s capabilities.
Since we took over, we've recruited a finance team, an HR manager and a commercial team, so it’s a proper business in the sense that every decision we make is our own. Purchasing is still a central element to the business, as we have three businesses in total – Fletchers, Kara and Grain D’Or – that buy roughly the same ingredients.
Factory site (Return to top)
This site, which is in north west London, is 9,290m² spread over 14 separate units. We turn over £31M a year, which has grown from £20M when we took over. Production capacity sits at around 650,000 packs of croissants and pain au chocolat a week; 300,000 packs of American muffins, 175,000 bloomer bread packs; and 95,000 packs of speciality bread a week.
We recently secured two supermarket deals valued at £8M: one for sweet bakery products for Sainsbury ranges, including Taste the Difference, Be Good to Yourself and Basics and one with the Co-operative for a mini croissants and pain au chocolat range.
Our biggest customer is Marks & Spencer (M&S), followed by Tesco and Sainsbury. Waitrose, Aldi and Lidl are also in there, but aren't supplied with as much. We've also got contracts with Brakes and other smaller foodservice businesses.
Building the customer base was one of the most important steps after the takeover seven years ago. We’ve gone from a couple of customers in 2007, offering a couple of products, to having eight customers with products in four main areas. The complexities of the business, in terms of the number of stock-keeping units and the number of depots we work with, grow almost cubically with the number of customers we have. The business had to be more complex to give it scale and security.
Staff and equipment (Return to top)
On this site we have nearly 200 staff, some of whom are from agencies. We’re still developing our team and expect our permanent head count to go up to more than 200, plus some agency workers for peak production times, within the next year. Shift patterns run over seven days and revolve around three eight-hour shifts, but are skewed towards volume across the week, which is heaviest towards the weekend.
We don’t make use of any particularly innovative production equipment. We have different baking, forming and packing processes – just their uses change. However, the way we use it is quite special. We’re neither a massive automated and robotic-reliant business, nor a craft facility either.
Take our croissant line, for instance, we need to make high-quality croissants for the major multiples. Equally, we need to be able to make lower volumes of speciality products for the likes of M&S. Flexibility is the key.
The set-up of our site allows us to produce and launch new products alongside our four mature categories. We’re launching a couple of speciality products, including premium speciality pastries, for a client in August. We’re also increasing our range of bloomers and fruit loaves.
New products (Return to top)
Bringing new products into the bakery sector isn’t that hard, but sometimes it can be a little straight-jacketed. It can be hard to bring innovation to things like traditional Italian products, because you don’t want to deviate from the recipe. But we’re trying different fillings, toppings and flavours – we may even fuse together different regional flavours.
What is hard is coming up with a big breakthrough. The most recent and influential new product breakthrough in bakery I can think of is sandwich thins. It’s a great big new category that's come out of one idea. All of a sudden we’ve got a new sandwich carrier. It’s the sort of idea we will dream of, but it only comes along once in a while … fingers crossed though.
New product development will become a bigger part of the business, following the second half of a two-phase investment plan. We're going to be spending about £80,000 on a new development kitchen, with tasting facilities to work on ideas with customers. We're also going to be spending another £100,000 on finishing touches, following a £4M investment to move a closed site in Barnsley to this one in 2012/2013, which completed in September last year.
That’s boosted our production capacity by 40% and was done because Barnsley was losing about £2M a year. It was a hard decision to make, but it was the right one because company profits have increased as a result.
Trials and extra business (Return to top)
We ran trials and took on extra business in October and November. It’s been a successful transition and it got up to full speed as we approached Christmas. The £4M was part of a £15M group-wide investment over the past three years. This has allowed us to enhance our technical standards at Grain D’Or. But Vision has been investing since it took over in 2007 and managed to turnaround an estimated loss of almost £10M in 2007/2008 to an operating profit of £6M in 2012/2013.
At the moment things are on the up, but there is some volatility in the commodities market. Flour and butter are the two ingredients that have the biggest impact on this site. Butter is expensive and if it goes up in price, it’s impossible for us to absorb it into our margins.
We talk to our customers about price increases, but they have to protect their margins too. If we can get an increase in price from our customer, though, then we have to get it as quickly as possible. We accept that when the price of something comes down, we put our prices back down.
A good business should be able to survive margin stresses. You should always be a competitive and lean business, especially during times like these when supermarkets are at war with each other.
Ultimately, you should be honest with your customers if you are unable to absorb price increases. I don’t think any customers are against manufacturers having decent margins. But, at the same time, they have to be competitive too.
Listen to our exclusive podcast in which Sloan talks about the challenges of reformulation in the bakery sector.
Factory facts (Return to top)
Location: Unit 11/16 Townsend Industrial Estate, Waxlow Rd, London. NW10 7NU
Staff: 200
Products: Various morning goods, including croissants, pain au chocolat, American muffins, bloomers and speciality bread
Customers: Marks & Spencer, Tesco, Waitrose, Aldi and Lidl, as well as Brakes and some other smaller foodservice companies.
Turnover: £31M
Personal
Name: Simon Sloan Age: 50
Career Highlights: Building a strong management team here at Grain D’Or and maintaining that team since we took over
Domestic: Married with a daughter aged 24 and a son aged 22
Outside work: My biggest hobby is boats and anything to do with boats – I have a boat and that’s one of my greatest passions
