Honey Bun adding fourth production line at expanded factory
Published:Wednesday | February 28, 2018 | 12:00 AM
Bakery company Honey Bun will take control of new operating space in days and is about to add a new production line to grow output, now that it also has more room for inventory.
The contractor hired for the $130 million expansion project will hand over the keys on Monday, March 5, according to Honey Bun CEO Michelle Chong.
"The investment in a new facility gives us a platform and leverage to be more strategic in earning more revenues and profits," Chong told shareholders at the company's annual general meeting on Wednesday.
As the new space was being developed, Honey Bun was innovating new products, including new flavours of the Goldie cream-filled cake that now comes in strawberry and black forest, alongside the long-standing chocolate and vanilla.
On Wednesday, Chong and her team also gave a preview of at least two other pastries soon to hit the market - a cassava muffin and a Shorty hamburger bun - but otherwise held back on the details of other products they said were coming down the pike, for competitive reasons.
Chong also said the company aims to unveil its new offerings at Expo 2018 in April. The trade show is an annual collaboration of the Jamaica Exporters' Association of which Chong is the current president, and the Jamaica Manufacturers' Association, among others.
Honey Bun wants to grow revenue, and to do so it needs to grow production, but Chong told the Financial Gleaner that the company has maxed out its capacity, running three shifts for six and a half hours each weekday on three production lines.
"What we'll do is add a fourth by splitting one line into two, by employing equipment that will increase the capacity of those two lines," said the CEO.
"We've looked at it and we can easily increase the capacity of one line by about 100 per cent. Each line varies in terms of increased capacity, but none of them will be below 60 per cent," she said.
The new equipment will be delivered based on a predetermined schedule.
"The first piece will arrive next week and we have a schedule for the other items. We're doing it that way because we are not heavily into debt financing, and so we want to do it from available resources," Chong said.
She adds, however, that the company expects that by the end of 2018, it's likely that Honey Bun would once again have maxed out the new capacity, and was likely to begin another round of expansion at that point, also on a phased basis.
In fiscal 2017, annual turnover at Honey Bun grew modestly by five per cent to $1.25 billion. Profit fell 32 per cent to $93 million. Chong said both revenue growth and production were hampered by a serious lack of space.
"We couldn't buy any more equipment because there was no more space. It's just a matter of making those acquisitions that would increase our capacity, but there was no more space," she said.
The expansion allows for better management of distribution, and has also given the company space for production, Chong added.
Honey Bun 1982 Limited produces cakes, buns, bread, and various other pastries, under brand names Goldie, Buccaneer, Island Bites, Honey Bun, Goodie, and Shorty.
Goldie has been a runaway success for the company, which was forced to defend its market when the pastry was threatened by imports of a cream-filled cake with the same appearance and similar name, originating from Turkey. Chong said that after the publicity and investigations in early 2017, the imported product disappeared from the market but may have reappeared under a different name recently.
"We have seen other products that look similar, but no name breach," Chong said. She said that given two considerations - the production constraints that Honey Bun was facing and the high demand for its product - the company felt it was better served concentrating on supplying the market rather than facing down import threats.