Bakers Inn to invest in pie making line, to reintroduce half bread

Published: 10 June 2013

Innscor's Bakers Inn will in September commission a new pie making plant which will raise capacity to 200 000 pies from the current 12 000 daily.

Bakers Inn General manager Ketan Patel said during a tour of the new Shepparton Rd plant that the new pie machine will carry improvements on size and recipe as an expert had been flown from the UK to come and oversee the process.

Patel however said there will be an adjustment on the price to "maybe around $2."

He said the whole idea around the expansion was to mould the unit into a Bread and Confectionary company and not just a Bread company.

Patel said the new premises purchased from Interfresh for $5.8 million last year had the capacity to handle the expansion plans.

Already two bread lines had been set up and the factory had capacity to hold six more lines. The two bread lines can each produce 80 000 loaves a day bringing the total group production to 525 000 loaves per day.

Patel said the group uses 18 employees to run the two lines.

The two lines will be officially commissioned tomorrow while two additional lines were already on their way. "Line three is already in Durban and should be set up in December while line four would be commissioned in December.

Patel said the group had spent about $10 million to get the plant from where it is while the cost of the lines were around $4-6 million. He said the group expects a 14-24 month return on the initial $10 million investment.

Patel said the new line was efficient enough to supply customers and therefore the other two plants would have to be closed as they were producing only 20 000 loaves each.

He said the cost of producing bread varies depending on the power used and the source of the raw materials but they were getting a 12% net on sales. Patel also said there was no way the unit could cheat on the 700g weight as the dough enters the oven at 780g.

The group has back up power and enough capacity to hold 8hr-shifts.

The group also said there were plans to re-introduce the half bread to cater for different market segments.

National market share was at 40% while it was at 57% for Mashonaland. In terms of distribution, Patel said the group had 200 tucks which spend 25 kms a month delivering bread to around 5 000 customers. He said the group had a good tracking system with all the trucks using routes which were predetermined.

Meanwhile at the Imara Investment Conference yesterday, Innscor said it was confident the Competitions and Tariffs Commission will clear the group of restrictive practices with FD Julian Schonken explaining that the only reason the other small bakeries had folded was because the current cost structure of the industry was not sustainable. Innscor only thrives because it pushes volume.

Schonken said it was interesting to note Innscor had acquired a shareholding in NatFoods in 1997 but alarm had only be raised in 2003 when the economic situation had turned for the worst.

Innscor faces a penalty from the Competition and Tariff Commission for not giving notice of its intent to acquire a majority stake in National Foods and for restrictive practices. The move, according to submissions made at the hearing by competing companies had lessened competition as the new Innscor group had strong market power. The new group which also included a stake in Colcom saw Innscor be involved in milling, pork processing, bakery, fast foods and stock feeds.

Representatives from Victoria Foods said the acquisition of NatFoods had created dominance and had given the group power to determine the pricing structure as there was internal price transfer. This, Vic Foods argued was not reflective of the correct production costs thereby dictating the prices for the whole market.
- Financial Express