Room for manoeuvre
09 June, 2006
Having moved to new, much larger premises on the east side of Glasgow, wholesale baker McGhee's is targeting ambitious turnover and a strong move into the frozen bakery sector. Ian Martin reports
For many baking companies over the years, the decision to move to new premises has been motivated primarily by a need for more space. Their old bakery was not designed to cope with growing levels of production and had become cramped, so the familiar argument runs.
But not so in the case of McGhee’s Family Bakers on the east side of Glasgow. The company’s new home, on the M8 Food Park in Port Dundas, affords 38,000sq ft of space – exactly the same amount of floor area available at its former bakery in Murano Street, Maryhill. According to Gordon McGhee, grandson of the company’s founder and the current managing director, the focus has been on making better use of available space in a way that was not possible at the firm’s previous bakery. This has involved streamlining both product range and production processes so as to maximise returns from those bakery goods in which it specialises.The result is an uncluttered bakery floor with a clear production flow, which has already yielded tangible benefits in the months since the move last July. The longer process times available through the new layout have led to a major increase in revenues from McGhee’s top seller – morning rolls. Feedback from customers suggests the quality of the rolls is “consistently good all the time”, according to McGhee.Furthermore, the 70-year-old company’s new headquarters, combined with its recent achievement of the BRC Global Food Safety Standard at the highest grade, has attracted interest from a wider range of prospective customers. McGhee observes: “The other bakery was built 38 years ago. When we changed our focus from confectionery to morning goods, none of it was right; the bakery was the wrong shape. This new bakery is the same size as Murano Street, but we can do four times as much here. When customers come to see this bakery, it takes their breath away.”Two brothers and a cousin – Gordon himself, production director Ian and sales director Stuart – plus three other non-family members make up the company’s senior management team. All are delighted to be in the new premises. At the same time, however, Gordon McGhee describes the move as “one of the most challenging periods of my life”; following a delay, the entire transfer was completed in little more than a single, hectic week. The experience has left him with “great admiration” for Alan Marr and the rest of the staff at fellow west-of-Scotland baker Aulds, which managed to return to production at a new site within eight weeks of a fire destroying its facility at Inchinnan last year.Initially, McGhee’s management team had not been planning to build a new bakery; the company had looked to grow through acquisition, but a couple of promising deals failed to come to fruition. “They were not going to give us what we really wanted,” says McGhee. The company’s requirement was for a bakery of sufficient size to fit a limited range of products while avoiding “too much wasted floor space”, he adds.Confronted by a lack of appealing alternatives, the company ultimately committed itself to constructing its own new bakery. The experienced management team had clear ideas about the layout, but equipment purchasing decisions were to occupy Gordon and Ian McGhee for some 15 months. “We trawled through Europe to source the best of everything,” says the former.Helped by a Regional Selective Assistance grant of Ł750,000, McGhee’s has ploughed a total of Ł6.8m into the development of the new bakery. More than Ł3m of this sum has been invested in new equipment, including a Koenig roll machine, four Tagliavini ovens from Italy, and a pair of spiral coolers from Finnish manufacturer Vulganus. A mezzanine floor features two automatic San Cassiano mixers, which are fully enclosed to limit dust emissions. Out on the bakery’s main floor, meanwhile, is a 270-rack German-made Miwe prover “built to my specific design and split into several different compartments”, explains McGhee.The management team confesses to some disappointment that most of the new kit is of overseas origin, with the largest item of British-made equipment being a refurbished potato scone production line from Sugden. McGhee comments: “We feel that what we got is the best for the roles demanded.”The company is now consolidating and concentrating on its most successful product lines. “Growth is coming mainly from more of the same type of things,” explains McGhee. The firm’s renowned morning rolls now account for more than 50% of turnover compared to around 25% in the past – equivalent to more than one million rolls every week. “This is the big change,” confirms McGhee. The company’s remaining production is now restricted to other morning goods, such as croissants, Danish pastries, potato scones, doughnuts and a small range of Scottish cakes. Several fringe products – such as labour-intensive celebration cakes – have been dropped to leave the company lean and mean in terms of its offering, says its managing director. However, the move to new premises has not all been about streamlining. The company has diversified into a number of related, high-margin product areas, including rustic baguettes for the sandwich trade and ciabatta. Furthermore, having conducted no frozen product business at the previous bakery, the management team made the speculative decision to incorporate a massive freezer into the design of the new facility. Perhaps unsurprisingly, frozen sales to date have revolved around that established trinity of company top-sellers – morning rolls, doughnuts and potato scones. “Frozen is a big angle for us. We have got some frozen business now, but we want a lot more,” says McGhee.Intriguingly, this massive increase in freezer capacity has not impacted on the company’s energy bill. “Believe it or not, we have the same power consumption as at the old bakery,” he says. “We are delighted by that result – it’s very important given the cost of energy now.”The company is also considering ways to boost brand awareness. “We have built our new bakery, and sales projections are looking good,” says McGhee. “We now want to build the McGhee brand.” To this end, the firm plans to refresh the presentation of its logo and to upgrade its 30-plus fleet of delivery vans.This delivery capacity reflects the significant shift in McGhee’s customer base over recent years. A few years ago, one-third of the firm’s turnover revolved around a supply contract with a major supermarket, however, this arrangement ended when the supermarket chain asked McGhee’s for a price reduction that would have meant paring back already tight margins. Now, the baker supplies independent shops and convenience stores across central Scotland. The wide spread of its customer base means the largest single contract wraps up only 7% of company turnover – a change which, according to McGhee, makes the whole business very strong.Having employed more than 200 people at the height of the supermarket contract, McGhee’s workforce now totals just over 120, although a further 10 appointments are anticipated for this year. “Productivity per person is now way up, but it had to be,” states McGhee. Meanwhile, sales have been climbing steadily over recent years, partly as a result of the acquisition, five years ago, of a majority stake in Fergusons of Kilmarnock. Specialising in the manufacture of rolls, this Ł2m turnover business, run by managing director Jim Ferguson, also distributes McGhee’s confectio-nery and potato scones to its local market.Positive feedback from clients and members of the public has given McGhee’s the confidence to aim high in its business projections. It is looking to boost sales to Ł7.25m this year and to Ł11m within the next three years. “We can comfortably do that at this bakery,” says McGhee, adding that the current layout offers the capacity to turn over something nearer Ł14m per annum.
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