The Sunday Mail
BREAD making, it seems, is no longer raking in the dough as demand continues tapering off. Despite being a key sub-sector in the manufacturing industry, the bread-making business has been under stress of late.
Indigenous businesses have been affected the most as two main players in the confectionery business — Baker’s Inn and Lobel’s Holdings — have shelled out huge amounts in increasing production since 2009.
However, despite the improvement, companies are failing to meet the current installed capacity of 1,8 million loaves per day.
The post-2009 period, which saw sweeping reforms in the market anchored mainly on the introduction of the multi-currency system, witnessed renewed consumer demand.
Initially, small bakeries that mostly required limited capital to recapitalise relative to the big confectionery businesses gained a significant foothold on the market, but as the full impact of investments in plant and equipment by the big firms sets in, the fledgling bakeries have begun losing ground.
Consequently, about 80 bakeries mostly indigenous have since closed shop in the last four years.
The National Bakers’ Association of Zimbabwe (NBAZ) president, Mr Givemore Mesoemvura, told The Sunday Mail Business last week that the sector is battling to operate at full capacity due to multiple challenges.
“We have an installed capacity of 1,8 million loaves per day, but at the moment we are only able to produce one million loaves.
“There are various factors that have put us in this situation, but the most important is (the) under-performance of the economy, antiquated equipment, high production costs and low disposable income.
“As you are aware, this industry has gone through the difficult periods of hyperinflation and dollarisation. As a result, every bakery is living from hand to mouth.
“Since the NBAZ is not a profit-making organisation, there is nothing we can do to help each other financially, so when an operator runs into trouble, they rush to banks to look for loans on their own and try to make things work,” said Mr Mesoemvura.
Legacy debts that were accrued during the hyper-inflationary era, where supplies were procured in foreign currency while products were sold in local currency, continue to affect most of the businesses.
Information gathered last week indicates that though the production capacity in the baking industry declined to an estimated 600 000 loaves per day between 2008 and 2009, it has recovered steadily since then.
Last year the industry was producing about 800 000 loaves per day. But as demand begins to taper off, it is believed that more than half of the 300 sector players are doing relatively well.
Even the big companies are beginning to feel the effects of softening demand.
Baker’s Inn, a unit of industrial behemoth Innscor Africa Limited, recently announced in the 2013 full-year financials that volumes declined 10 percent from a year earlier.
The company has since consolidated its production at the Graniteside facility that houses four most recent lines, while the other Harare site has been mothballed “until such time as demand improves”.
Baker’s Inn commands a 40 percent market share and produces about 400 000 loaves per day.
Its peer, Lobel’s Holdings, is presently operating at 70 percent capacity following the acquisition of a US$2,5 million bread-making equipment last year.
At its peak, the company sold about 400 000 loaves a day.
Management is trying to further ramp up production.
The fortunes of yeast manufacturer Anchor Yeast have also been tied to developments in the bread-manufacturing industry.
Last week, Anchor Yeast chief executive officer Mr Muvirimi Kupara said local bakeries, particularly small players, preferred buying their yeast from neighbouring Zambia rather than from the local market.
“At the moment I can say we are operating at about 65 percent. I can confirm that some bread makers, in particular the smaller ones, are importing yeast from Zambia instead of getting it locally.
“We have spoken to some bigger players and they are supporting the 117 jobs we have here by buying local yeast. We have therefore started some programmes with the NBAZ and we believe they will yield positive results for all of us,” said Mr Kupara.
It is not clear whether softening demand is being caused by the current liquidity crunch or is a factor of demand that has reached a ceiling.
Government is currently seized with various interventions that are meant to improve the performance of the manufacturing sector, which declined 1,5 percent last year.
Treasury officials expect the sector to rise 3,2 percent this year driven by the foodstuffs, tobacco, drinks and the beverages sub-sector.
