With ever-increasing demand for Australian made goods, come growing pains for many food and beverage manufacturers. RMR Process founder and managing director, Peter Taitoko, explains there are better ways to grow manufacturing other than the traditional expansion routes.
When we launched RMR Process in 2010, we made it our mission to keep food manufacturing alive in Australia. At that time, much of Australia’s food manufacturing industry was disappearing overseas where products could be made more cheaply without the need for capital expansion.
We developed a scaling model, backed by over 25 years of industry experience, that enables growth while adapting to an ever-changing market, allowing manufacturers to make the right decisions about how to cost effectively grow their capability while managing risk.
A number of projects carried out under this model have already contributed to reversing the trend of food manufacturing going offshore by repatriating production capability.
Fast forward to today, and Australian food and beverage industry has never been busier. In fact, the sector is experiencing intensifying pressure to expand its manufacturing capabilities to cope with the increasing demand for Australian made products. This is driving more and more food and beverage manufacturers to seek out alternatives to the traditional expansion model, fuelled by escalating building costs and extended timelines in today’s post Covid landscape.
We find that many manufacturers typically face the same issues, having a lack of resources and capability to expand their process capacity. However, we ensure that the products remain the focus of the expansion plans rather than the building, potentially saving on the cost of unnecessary capital outlay.
Don’t roll the dice on a new facility
Accurate costs and clarity of the project deliverables and investment returns can significantly reduce the project risk. Thirty per cent of the projects that we undertake stem from customers that have stalled their project due to the high cost of construction.
We question what opportunities exist to reduce the budget by minimising construction and shifting the focus to greater processing capability, automation, energy reduction, and more efficient use of expensive real estate.
Our model helps reduce the complexity and cost of food manufacturing expansion, through the creation of short- and medium-term strategies for scaling growth. This may or may not include a new factory expansion in the first few years.
The key to every food manufacturing business is making high-quality product as efficiently as possible. The heartbeat of the business is often a key capital piece of equipment or process line that must not stop.
With a better understanding of the company’s strategic direction, we can explore options for where best to allocate funds. For example, if production volumes need to increase quickly, we may focus more on front-end batching, cooking and filling equipment. But if optimising existing production and lower operational costs is the goal, we may focus more on automating process and packaging lines. This process not only helps to minimise the factory footprint but also develop a plan for future growth.
A clean take on operations can identify ways to de-bottleneck, increase output or improve product consistency that doesn’t necessarily end in the need to build more infrastructure.
Our team does this with a lens focused keenly on understanding consumer requirements, as well as retail and export standards, ensuring that any growth opportunity realises food safety, product quality, and output goals.
Preliminary review
Initial engagement with a client usually starts with a Preliminary Design review. Before looking at any expansion costs, there is a thorough review of the complete manufacturing process.
Typically, a simple mass balance or material flow analysis of the existing production facility is conducted to gain a greater understanding of how best to optimise the facility footprint and improve processing capabilities.
This exercise is also beneficial in identifying and minimising waste, leading to cost saving opportunities and gaining a better insight of the actual capital expansion requirements.
The findings of this Preliminary Design review drive out the staged expansion options for an optimal growth strategy.
Where necessary, appropriate building, fit out, and utilities companies are recommended for any expansion works, because we believe in staying in our lane; we are experts in process.
We partner with other relevant industry specialists to ensure the best level of service and protect the valuable relationships we have with our clients and suppliers.
Client Case Studies
PDP Fine Foods is the manufacturing company behind the Wicked Sister dessert brand. They are also one of our most valued and long-standing clients and a great example of continuing scaled growth.
RMR Process started collaborating with PDP on a brownfield site in 2016, when an existing warehouse was converted into a dairy desserts factory at Ingleburn in Sydney’s outer west.
The upgrade saw the existing production of 4.5 tonnes of premium desserts per day with 35 employees across two shifts, grow to 16 tonnes in one shift with less than 20 employees.
As sales have increased, RMRProcess has continued to incrementally scale PDP’s production capability by increasing the level of automation, as well as installing higher throughput process and packaging equipment.
This has enabled PDP to develop additional product formats and take advantage of new market opportunities.
Most recently, Victorian bakery snack manufacturer, Springhill Farm has successfully adopted our model. As an agile manufacturer, Springhill’s expansion needs revolved around maintaining market continuity while being able to increase its SKU range with the addition of a new processing line.
RMR Process was engaged to design their current infrastructure upgrades and give the company a future capital works staging plan.
Ensuring the uninterrupted operation of existing lines was crucial for Springhill. RMR Process mapped out and remodelled their existing plant layout to enable a staged fit out and utility upgrade that could be carried out in isolation from the existing process lines, avoiding operational disruption.
The growth being experienced by manufacturers like Springhill Farm and PDP Fine Foods reflects the increasing trend we are seeing for Australian made goods across the sector to support brands’ provenance stories.
New players
The food and beverage industry is also witnessing an increasing presence of private equity investment in the sector.
We find ourselves working more and more on both sides of the equation, helping manufacturers ‘scale for sale’ and helping investment firms leverage into the industry.
These investors see significant growth potential in the value of Australian food and beverage products, for example, companies like Australian private equity investment firm Queens Lane Capital (QLC), who engaged RMR Process to conduct a peer review of an upcoming brownfield project.
Our team optimised the proposed layout to fit the initial equipment requirements and protect enough real estate to ensure the site could grow into the future and significantly expand production capacity when required.
Time for change
Never have we seen such an opportunity for Australian made products to succeed both at home and abroad, with the increasing domestic and global opportunities that currently exist for Australian food manufacturers. This makes our mission to keep food manufacturing alive in Australia even more relevant today than ever before.
We’ve built a great network of food industry experts just as passionate as we are about providing manufacturers with a high level of industry expertise.
This network includes builders, town planners, architects, food safety and quality specialists, as well as connections with state and federal government departments for industry funding opportunities.
Ultimately the more you spend on your factory, the more pressure you put on your manufacturing costs and therefore on the cost of your products.
Our scaling model gives manufacturers the ability to break their project into bite sized chunks, enabling clients to minimise debt and equity funding by strategically scaling growth, in a way that can be funded by cash flow, as capability and sales increase.
This article first appeared in the October edition of Food & Drink Business magazine.
