When Maple Leaf Foods celebrated the grand opening of its Canada Bread bakery in Hamilton, ON, last fall, the heavy lifting had just begun. Back in September, the 380,000-sq-ft facility that’s now called the largest bakery in Canada housed two high-speed production lines turning out pan breads, buns and rolls (see Baking & Snack, November 2011, Page 19).
By the end of 2012, the bakery will house nine lines cranking out bread, rolls, buns, tortillas, flatbreads, English muffins and rye bread — and it still has much more room to grow, according to Richard Lan, president and CEO of Canada Bread, based in Etobicoke, ON, and COO of Maple Leaf Foods, the Toronto, ON, company that owns 90% of Canada Bread.
If 2010 and 2011 were the years of bricks and mortar from a capital spending perspective, this year plans to be a time for getting the Hamilton bakery fully operational.
“2012 is going to be a big year because by the end of 2011, we had started up the roll line, the bread line, the specialty bread line and the English muffin line,” Mr. Lan noted. “In 2012, we will start up the pita line and tortilla lines. The key thing will be getting everything to run in sync, including maintenance, quality control, distribution and all of the lines. For us, 2012 is a make-good year. We’re excited about it, and so far, things are going well.”
For Mr. Lan, ramping up the CA$100 million Hamilton bakery will just take up a portion of a hectic schedule. This year, Maple Leaf also plans to break ground on a CA$395 million meat processing plant in Hamilton as part of an ambitious effort to reinvent itself and lower its cost structure to become more competitive in the global food market.
In 2010, Maple Leaf Foods, a public company, announced allocation of nearly CA$1.3 billion for various capital investment projects with CA$775 million going to new spending through 2013 and CA$515 for maintenance capital. In addition to its ownership in Canada Bread, Maple Leaf operates three bakeries throughout the US that produce a plethora of frozen par-baked breads, rolls and other baked goods that are sold primarily through the supermarket in-store bakery and food service channels.
In the UK, the bakery division operates facilities that produce bagels and other frozen par-baked specialty and niche products sold throughout Europe, which Mr. Lan described as a “growth market.”
During the past three decades, Maple Leaf and Canada Bread have made dozens of acquisitions as the baking industry consolidated. More recently, however, the changing global economy, a strong Canadian dollar and increased competitiveness in the food industry prompted the company to shift strategies.
“We have gone from, ‘Let’s consolidate’ to ‘Let’s dramatically improve our cost position,’ because it used to be we were growing,” Mr. Lan explained. “But when you are not growing anymore, the only way to improve the bottom line is to either innovate, which we’re working really hard at, or get our costs down, which we’re also working hard at.”
During the next two years, Maple Leaf will close three of its smaller Canada Bread operations in Ontario and consolidate their operations into the Hamilton bakery. Much of the equipment in these aging bakeries is several decades old — some of it in place for more than a half-century — and it was simply more cost-effective in the long run to invest in the Hamilton operation than maintain the old ones, according to Mr. Lan.
In addition to consolidating its operations, the company allocated 50,000 sq ft of space in the Hamilton facility for yet-to-be-determined production lines based on consumer trends, customer demand and new product development. Building the future infrastructure may have cost more initially, but the extra space will allow the company to respond quickly to future shifts in the market.
“This was a hard decision, one of the hardest decisions in building the Hamilton plant,” Mr. Lan noted. “We asked if we should build the addition at a later date or do we put aside 50,000 sq ft now and say, ‘We’re going to put something new in here. We’re just not sure what it is yet.’ I’ll tell you why I favored the latter. When the space is there and it’s empty, it’s a reminder every day when we walk through the bakery that it’s important to innovate.“If there were just a wall with another acre of property behind it, you probably only see it twice a year when walking behind the back of the plant,” he added. “You do reduce your construction costs long-term by doing it all at once. If I didn’t think we could fill the space, I wouldn’t have done it. I believe if we put our thinking hats on, we will come up with some innovation.”