Goodman Fielder Continues Restructuring in Australian Baking Business to Drive Further Efficiencies

Goodman Fielder announced that it has commenced the first phase of consolidating its bakery facilities in Australia to improve its manufacturing efficiency.

25 Jun 2012 --- As previously advised, Goodman Fielder has initiated Project Renaissance to reduce the company’s overall cost base and optimise its manufacturing and supply chain. “Our immediate priority over the past six months has been to stabilise the business against the challenges of very difficult market conditions,” said Goodman Fielder CEO, Chris Delaney.

“The first phase of Project Renaissance was to identify overhead savings which we have successfully achieved through a new, more efficient operating model in Australia and the integration of our three retail-facing divisions in New Zealand.

“We are now targeting additional manufacturing efficiencies across our portfolio. In our Australian baking business specifically, we are implementing further changes to our business model to create a more efficient and sustainable business.

“This is in response to both the current difficult trading environment and also recognising that the fundamentals of the industry in Australia have changed significantly.

“As a result, we have undertaken an extensive strategic review encompassing every aspect of the business and with a key focus on our manufacturing footprint, product range and distribution strategy,” he said.

Manufacturing footprint efficiencies

Goodman Fielder announced that it has commenced the first phase of consolidating its bakery facilities in Australia to improve its manufacturing efficiency.

The company’s Townsville bakery facility will be upgraded to become the manufacturing hub to service customers in the north Queensland region. As a consequence, the bakery facility at Rockhampton will be closed on 20 July 2012, with the Cairns facility expected to close in the third quarter of the financial year ending 30 June 2013.

The bakery facility at Whiteside in Melbourne is also expected to close in the second quarter of the financial year ending 30 June 2013.

“This is a difficult but necessary decision to ensure we can create a more efficient manufacturing footprint in our Baking business,” said Pankaj Talwar, Managing Director – Bakery Category.

“Optimising our manufacturing network forms part of our overall strategy to extract scale benefits from consolidating our supply chain to create a more sustainable bakery business. “While three bakery facilities will close, we are also investing in our other facilities to ensure we continue to reliably supply our customers with fresh, quality product in these regions,” he said.

Goodman Fielder is consulting directly with its employees impacted by this decision and all employees will be provided the opportunity for redeployment to fill planned vacancies in other Goodman Fielder sites.

Employees who are not able to be redeployed will receive their full redundancy provisions as well as an employee assistance program, outplacement program and careers workshop.

It is expected that 115 roles will be removed from the Baking division as a result of the consolidation of the three bakery facilities.

This brings the total number of roles removed across the company to 541 this financial year.

“We understand the impact these decisions can have on our people and our immediate priority is to ensure that our employees are supported through this process,” said Mr Talwar. Range rationalisation Goodman Fielder is also simplifying its bakery range to improve efficiency across its bakeries, improve on-shelf availability and increase consumer satisfaction. Plans have already been implemented to reduce the company’s current range of 450 unique products down to approximately 350.

Additional plans are in place to further reduce the range by another 50 unique products, taking store size and demographic segmentation into consideration. This will result in an overall 33 per cent reduction in unique products by the conclusion of the project.

Distribution efficiency With distribution costs accounting for around 43 per cent of the total delivered cost of a loaf of bread, the company is initiating strategies to reduce the costs of distribution. As an example, Goodman Fielder has transitioned from a vendor to a contractor model in Tasmania to provide greater capability, efficiency, and flexibility to its customers in that state.

In other states, Goodman Fielder has also commenced collaborative discussions with its customers regarding the implications of national service under the baking business model. Options are being explored to either streamline service or find new methods of delivery to remote areas. Goodman Fielder will release its financial results for the full year ended 30 June 2012 on 14 August 2012. The company will also host an investor day to update the market on its strategic plan in early September 2012.