Pu­rity ad­just­ing to ag­gres­sive ri­valry

Jamaica Gleaner - - FINANCIAL GLEANER - neville.gra­ham@glean­erjm.com Busi­ness Re­porter NEVILLE GRA­HAM

BREAD MAKER Con­sol­i­dated Bak­eries, which trades as Pu­rity Bak­ery, racked up $12.49 mil­lion in losses last year, de­spite a six per cent gain in rev­enues. It rep­re­sented a near 200 per cent de­cline in earn­ings for the com­pany that made a profit of $12.96 mil­lion in 2018. The re­sults were bad but not un­ex­pected, said Pu­rity Bak­ery CEO An­thony Chang, who told the Fi­nan­cial Gleaner that the com­pany had been go­ing through a trans­for­ma­tion, one that saw a re­align­ment of its prod­uct port­fo­lio to make the pro­ducer of Pu­rity and Miss Birdie baked goods less re­liant on bread as its sta­ple. One bright spot for the com­pany, which pro­duces breads, bis­cuits and pas­tries, is that its an­nual sales hit $1 bil­lion for the first time, up from $960 mil­lion the pre­vi­ous year. “We re­alised three years ago that a con­tin­ued over-re­liance on the tra­di­tional prod­ucts to bring in rev­enue would bring down the com­pany. We had to change tack,” Chang told the Fi­nan­cial Gleaner.

Found the sweet spot

The fact that the com­pany made gains in rev­enue, he noted, was an in­di­ca­tion that the strat­egy is work­ing; but it also means the com­pany has had to be beat­ing back ri­vals to safe­guard the gains in mar­ket share. “These prod­ucts that are do­ing well brought a re­sponse from our com­peti­tors, but we’ve with­stood that and so far, so good. We are find­ing a space that we can hold on to and de­fend. We can’t hold on and de­fend in the tra­di­tional space, but now we think we’ve found the sweet spot,” Chang said. The com­pany has in­tro­duced prod­ucts such as rock cakes, cin­na­mon twists, raisin bread, as well as a gluten-free line of prod­ucts un­der the Miss Birdie brand. Four years ago, Pu­rity recorded an un­usu­ally high capex of $82 mil­lion, and in the years since then has in­vested an­other $142 mil­lion in the busi­ness. How­ever, Chang would not say the over­all cost of the trans­for­ma­tion pro­gramme, nor was he forth­com­ing on what more he plans to do – a re­luc­tance that was due in part to cau­tion about not re­veal­ing too much to the com­pany’s ri­vals. “The sit­u­a­tion is very dy­namic in that we make a move and the com­pe­ti­tion coun­ters, then we have to ad­just. Pu­rity was never that sort of com­pany that op­er­ated com­pet­i­tively, but this has be­come the new re­al­ity,” he said. The changes im­ple­mented so far have seen new hires in mar­ket­ing and pro­duc­tion, re­vamped pro­duc­tion pro­cesses, and some re­dun­dan­cies. Pu­rity also in­creased its dis­tri­bu­tion fleet, buy­ing new trucks and re­plac­ing old ones, and has taken on new de­liv­ery con­trac­tors. Op­er­a­tional ex­penses, which climbed by $45 mil­lion last year, was the rea­son for the $12-mil­lion loss, but Chang says Pu­rity is con­vinced it is on the right track de­spite its re­duced bot­tom line. “That change process in it­self will cause bumps in the road, re­flected in our P&L and how you man­age the bal­ance sheet. It is a very del­i­cate bal­ance and we have to be care­ful,” he said. The bak­ery, formed by the Chang fam­ily in 1957 and listed on the stock mar­ket at the end of 2012, has adopted a more ag­gres­sive stance on mar­ket­ing and prod­uct pro­mo­tion. Its sales tac­tics in­clude pop-up mar­kets, so­cial me­dia ad­ver­tis­ing us­ing in­flu­encers such as Olympian Shelly-Ann Fraser-Pryce, and go­ing af­ter a greater share of shelf space at out­lets where the com­pany ap­pears. “We want to be in a space where we can com­pete, and that is the back end, where we have the fac­tory, and the front end in the mar­ket­place,” Chang said. Pu­rity’s main ri­vals in­clude Na­tional Bak­ery, Yummy and Honey Bun. Na­tional is seen as the mar­ket leader, but the re­spec­tive mar­ket share held by the var­i­ous bak­eries is un­known. Chang says what Pu­rity has opted for is deeper rather than wider mar­ket pen­e­tra­tion. “We don’t have the lux­ury of a big is­land­wide foot­print, but what we do is to be right up there with the com­pe­ti­tion in the lo­ca­tions that we are present with our prod­ucts,” he said. The com­pany also ex­ports buns to the United States, Canada and the United King­dom, but those mar­kets were dis­rupted dur­ing the pan­demic. Its main ex­port used to be bread, Chang said, but that line has now been over­taken by bis­cuits and snacks among for­eign cus­tomers. As for the broader im­pact on the busi­ness from COVID-19, those will show up in the com­pany’s March and June quar­ter earn­ings re­ports, when they are re­leased. So far, Pu­rity has said the mea­sures taken by the Government has im­pacted its pro­duc­tion sched­ules, but has given no in­di­ca­tion of the ef­fect on sales.

FILE

An­thony Chang, man­ag­ing di­rec­tor of Con­sol­i­dated Bak­eries Ja­maica/Pu­rity Bak­ery, speaks at the launch of the Miss Birdie line of gluten-free prod­ucts in June 2019.

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