Patties managing director reveals the secrets to manufacturing success and a 6% earnings increase
At a time when many food manufacturers are struggling, Patties has managed to record increased earnings with 6% growth.
The baker based in the country Victorian town of Bairnsdale grew revenue by 8.8% over the last financial year with net profit after tax of $19.5 million for the full year to June 30, 2012.
The record trading result for Patties contrasts with fellow baker Goodman Fielder, which is closing five bakeries and getting rid of 600 jobs as a result of eroded earnings it says are a result of competition from the supermarkets.
Patties managing director Greg Bourke told SmartCompany the secret to Patties’ success when other manufacturers were faltering was investment in production.
“The board five years ago made a significant investment in world’s best practice pastry making equipment, so that maintains our efficiencies. So we are very competitive from a cost point of view,” he says.
“We continue to invest in manufacturing. We are investing $10 million in automation so that on one of our product lines the products will be packed through robots.”
There have been delays in commissioning the automation project, so the expected efficiency gains from it were not achieved in the past year and will be delayed until 2013. But when the project is complete, Bourke says he expects it will help margins even further.
He acknowledges conditions are tough but says Patties has tried to address this by focusing on cheaper products.
“The consumers are still in this flight-to-value space and they are being encouraged to look for value and that is something that we have to keep working on to have value offers. In the petrol and convenience space we get good growth when we have deals for each of the banners like a pie and a drink.”
Patties is driving sales by continuing to innovate with new products and has 17 new products planned for the next quarter.
The new products include a Four'N Twenty range of "Aussie Classics" featuring a chicken parma pie and a spag bol flavoured pie, which Bourke says have had “very encouraging” initial sales.
“We had delays in launching our new products, but we are expecting some good things out of those products now,” he says.
“One of them is a new concept for Four’N Twenty. It is a breakfast wrap, so rather than being in a breakfast space it is a tortilla wrap with savoury ingredients. We are getting good initial sales on that.”
Patties has now started exporting to the United Kingdom, which Bourke says is indicative of the efficiencies the baker has achieved in its manufacturing process.
“We’ve just started an export division this calendar year and we have some trial products going to the UK ready for the Christmas market. It is very early days but we are looking for good sales of our frozen party goods,” Bourke says.
“They are all made in the Bairnsdale factory and that shows something about the investment in production capacity over the last few years; that we can now make party pies and single serve pies very efficiently to be able to sell into the UK even paying tariffs and expensive sea freight.”
Bourke says at the moment Patties is just focusing on supermarkets in the UK but in the future there is potential for exporting into the petrol and convenience space and perhaps the Brits will even be introduced to the delight of a Four’N Twenty pie.
“There is no market in the UK for ready-to-go hot savoury food at the moment in petrol and convenience stores and we think longer term there is opportunity in there.”
Patties chairman Chris Riordan said it was a “pleasing result” in difficult trading conditions.