Becoming a Global Force

Being in the business of baking, as any other business, is about improving that bottom line and making a profit. This, in turn, depends on the market itself, writes Andre Erasmus, and growing that market can mean moving outside of your comfort zone.

Similarly, there is the principle that says you need to spend money to make money and returns on investment need to be taken into account before stepping out into a brave new world.
Expansion opportunities are where the bigger populations are, obviously, and that makes the Far East and Asia important regions.

Look at McDonald’s, the fast food giant, reliant on many baked goods, is planning a further 30,000 drive through outlets in China and Hong Kong – as well as establishing 100 new restaurants annually!
The drive-throughs will be done through franchise agreements but the company will expand its 762 restaurants notably over the coming years.

Let’s look at some global players in the bakery and ingredients market as they will be needed to support outlets like McDonald’s and the growing demand for ‘western’ foods.

Take Givaudan, for example. Just last year, this Swiss company specializing in flavors and fragrances expanded its Flavour Innovation Centre in Singapore – investing some USD5m making the company ideally placed to address regional trends such as the needs of a middle class concerned with health and wellness but without wanting to compromise on taste.

The company says expanding capacity in Singapore will enable greater collaboration and innovation with customers to meet their needs, and those of a growing mass market with a desire for quality products with natural ingredients.

At the time, Givaudan Chief Executive Officer Gilles Andrier was quoted as saying: “The expansion of the Singapore Flavour Innovation Centre supports our 2020 strategy of investment in high growth markets, and builds on our recent developments in Nantong, China; Karachi, Pakistan, and Pune in India.” A glance at the group’s mid-year financial report last year shows that sales were ‘positively impacted’ by new wins and existing business expansion in the high growth markets of Argentina and Brazil in Latin America as well as India, Indonesia, Thailand and Vietnam in Asia Pacific. The report adds that the ‘mature markets’ of Japan, Korea and Australia delivered good results while Europe and Africa rebounded despite challenging economic conditions in Western Europe and Sub-Saharan Africa. And widening a company’s horizons does not mean that what is made at home will work in another country – different, traditional and localized tastes need to be catered for and accommodated. Again, Givaudan are leaders here and the company does not rest on its laurels.

Chris Thoen, Givaudan’s Head of Global Science and Technology, says: “The best way to be prepared for the future is to actually create it. We believe in fostering innovation and putting the consumer at the center of everything we do.”

Another bakery ingredient company which is now worldwide is AB Mauri with 55 plants and, in Asia for example, it supplies yeast and bakery ingredients to countries as diverse as Laos, Cambodia, Malaysia, Vietnam, the Maldives and Nepal.

AB Mauri’s China and North East Asia sector has noted dramatic increases in demand, in particular in China. The challenge in this region is that the markets are at differing stages in maturity and evolution.

Consumer awareness, expectations and awareness vary, says the company, but by adapting to the different market requirements AB Mauri can deliver products offering the best fit for each country.
In these and other instances, there are other drivers to help motivate the expansion. These range from tax incentives offered by many countries to cheaper labor, lower energy costs and more land available.

Weighing up all the pros and cons takes time, as do the preliminary investigations but retail outlets like McDonald’s, Starbucks and Kentucky Fried Chicken, along with suppliers such as Givaudan, AB Mauri, Novozymes and many others are now reaping the benefits of their foresight.
In some instances, local products can and will be added to existing ‘western’ offerings, increasing popularity.
And there will be more who will seek new markets where the return on investment will be good with potential growth opportunities.