Bakery Business - Heading due north: The Compass Bakery story

July 2006


This vibrant bakery business has two personas; a public face as a favourite factory shop sought out by many Cape Town fans in the southern Peninsula, but whose major business is as a key supplier to Woolworths. On this, its 30th anniversary, Brenda Neall uncovers the story behind The Compass Bakery.

THE Compass Bakery, today one of the largest manufacturers of its kind in the Western Cape, started out as a small general bakery - the Kommetjie Continental Bakery - in what was then a rather remote seaside outpost on the Cape Peninsula. Back in 1976, it was a business opportunity spied out by Bob Horton, a British emigrant and professional baker who came out to South Africa in 1968 to work for a flour company. He was then, most fortuitously as it would later turn out, employed by Woolworths as its first ever bakery technologist. With bigger ambitions for his career, Horton saw the potential of the Kommetjie Bakery to service an area of the greater Mother City that was still commercially very undeveloped, and decided to go the entrepreneurial route. Partners and financial backers he found in the form of Rodney Cottrell and Dave Bruce, both successful in the construction industry, and thus The Compass Bakery was born.

Things did not go quite as well as they had hoped, however. 'We had a general-purpose bakery, little focus and were barely surviving. Our key assets were three clapped-out delivery vans,' comments the quietly-spoken and dignified Horton. Impending financial disaster promoted a different and better business model, and turning to his network of past colleagues, Horton persuaded Woolworths to allocate him some baked goods lines. 'This was a defining development that allowed us to streamline the business and greatly improve efficiencies and cut costs, especially those worn-out vans!' he says.

The business soon moved from the red to black and prospered in tandem with its key clients, eventually outgrowing its Kommetjie village premises. The move to its current site in 1991, much in the public eye on the Sun Valley/Kommetjie road, became a space and capacity imperative following the bakery's very successful move into biscuit manufacture in 1989.

It was at this juncture that, big on ideas, big on enthusiasm and with a really big customer, the trio found themselves at that classic second stage of an entrepreneurial business: the market is proven, survival is no longer a daily issue and comes the need to develop a long-term vision and make the transition from entrepreneurial to professional management.

Largely sleeping partners until the early 1990s, Cottrell and Bruce subsequently intensified their directorial input to the business and set the pace for what has been a remarkable growth curve: the first-year turnover of R100 000 blossomed to R18 million in 1994, to R50 mlllion in 2004, and should hit a projected R100-million plus this year.

While still directors and key shareholders, the trio of Cottrell, Bruce and Horton has eased out of hands-on management and given the helm to a new generation of skippers, including three sons - Richard Cottrell, Miguel Howell and Alistair Horton - who have cut their teeth in several aspects of the business. The day-to-day buck stops at the desk of no-nonsense financial manager, Neville Sullivan.

This team currently has its time cut out overseeing Compass' latest expansion: imminent renovations to create a new raw materials warehouse and the installation of a new 45m travelling oven from Laser in Italy and supplied by local agent, Macadams Baklng Systems. It also incorporates a wire-cut biscuit machine. This significant R4-million technology investment will quadruple its biscuit-baking capacity. Compass is also bolstering its chocolate capability with a new Lloveras tempering and enrobing line imported from Spain. Macadams, too, has installed an automatic, five-lane depositor for muffins as well as several rack ovens over the past year.

Right place, right time

Compass is fortunate to find itself at the crux of some major business and consumer trends, enjoying the spin-off of a buoyant economy, increased consumer spend on life's luxuries and Woolworths' rapid expansion of its food stores that has attracted many new customers through its doors. In a recent interview with BUSINESS TIMES, Woolworths' CEO, Simon Susman, describes this as 'going down the market' - targeting customers beyond the traditional top-level income, but not diminishing the aspirational allure of the brand.

'Woolworths' increased visibility and accessibility is obviously to our benefit, as is the consumer trend to indulgence,' comments Horton. 'I think the public regards our products' home-style, preservative-free image as being a touch of "healthier decadence", too.'

Compass' range is extensive - in a marvel of production planning, hundreds of baked SKUs leave its portal every week, but none containing yeast or cream which would require a whole set of different facilities. It makes baked puddings, brownie confectionery and dessert, round gateaux, muffins, cup-cakes, Swiss rolls, lamingtons, bar cakes, ring cakes and 77 ranges of biscuits. And then there are several seasonal and special occasion lines, such as mince pies around Christmas times, and for which it has often scooped top honours in newspaper 'Whose Are Best' evaluations.

Bar cakes are its biggest range in volume terms and it supplies these on a national basis. Muffin volumes are also huge but are only sold in regional stores. 'We produce 11 variants, including some novel savoury options which are almost soufflé-like in texture. I think muffins' popularity is due to a "healthier" perception over other sweet goods, but they also make a great anytime snack,' Horton remarks.

Compass is particularly famous for its biscuits and, in this instance, is not solely devoted to Woolworths, but also has its own biscuit brand, Compass Rounds and Squares, that is distributed in the Western Cape. This is an aspect of its operations that it would like to grow in future.

Path to innovation

In the flexible bakery world, innovation is a major driver in keeping consumer interest fresh and sales buoyant. Compass' seven-strong R&D team is headed up by Liesl Huysamen, an unusual professional combination of dieticlan/MBA and passionate about her work. All new concepts are trialled to mimic the factory floor in every way and, says Huysamen, 'ultimately so finely tuned that once in production, the R&D team can walk away'. Customers are never shown kitchen samples but pass judgement only on product from pre-factory trials.

She explains that new ideas are largely taken from a bank of concepts with fully-developed recipes that can be tweaked according to taste, cost and packaging parameters. On a more philosophical level, Huysamen believes that real innovation lies not so much in a 'wow' idea, but delivering it with available equipment, skills and use of mainstay ingredients: 'One always should work within core competencies: endeavour to rock the world with a quality product at a good price or put a fresh spin on an existing product,' she comments. In this regard, Huysamen is particularly proud of a recent innovation for Woolworths, Marshmallow Brownies, a brownie base topped with marshmallow and enrobed with chocolate. They have been a sales hit; a decadent swoon especially when microwaved for a few seconds to melt the marshmallow. Another such example is the old-but-fading stalwart, the Swiss roll that has been rejuvenated by Compass in successful mini format.

She also feels strongly that it is the supplier who should take category ownership and tell customers what they ought to be doing. Key bakery trends today, she adds, lie in nostalgia, on the go and health - with real winners being products that can encompass all three. Muffins, a contemporary bakery phenomenon, can be put into this category.

We also have to take account of new eating habits - people are very aware of fat and sugar - and we are catering in this country to a whole new market of mouths in the emerging black middle class; to people who could never before afford these sorts of products. It's an exciting time,' Huysamen remarks.

Responsible employer

Through its unusual and commercially-remote situation in Kommetjie, The Compass Bakery is very aware of its role in the community, not only via its well-patronised factory shop, but as major employer and substantial contributor to the economic well-being of this corner of the Peninsula: over 700 workers are employed over two shifts on a 24/7 basis. Most of these staff members hail from the nearby Ocean View and Masiphumele townships. An ethical sense of responsibility to thousands of dependents dissuades Compass from any real consideration of moving closer to the hub of the city. 'Being out there brings with it many logistical costs and headaches, but the only movement Compass plans is in our sales graphs,' says Horton.

The Compass factory is divided largely into cake and biscuit production, each section with its own ingredient compilation and various finishing and packaging teams. A number of rooms are cordoned off as special-care, temperature-control led areas ie for chocolate enrobing, cake icing and specialities.

While the Compass factory is home to an array of baking equipment, mixers, multihead depositers, flow wrappers and an army of rotary rack ovens, production remains relatively manually intensive with greater automation not on the cards for the foreseeable future: 'Lack of skills and absenteeism are inherent challenges in any labour-heavy operation in this country, but we see more value in managing these issues than further investment in automation,' observes Horton. 'Automation can be a double-edged sword, particularly when the competitive edge of our products is based on their premium, home-made appeal - we'd never want to compromise on this standard or quality.'

Compass' large workforce is guided by seven senior managers and eight production managers (all qualified bakers). Much attention is given to training, both work and life skills, and is the domain of the well-known Vernon Wheatcroft who used to run the Cape School of Baking, an acclaimed artisanal training college but which is now unfortunately defunct. They are also backed by a 17-strong engineering department and 19-person QC team.

Being a supplier to acme retailers entails rigid adherence to quality and safety protocols and Compass is subject to regular food safety, traceability and ethical practice audits that are undertaken by the Food Safety Consortium. HACCP certification, too, is in the pipeline. QC and microbiology testing is currently outsourced, but future capex plans include an in-house facility.

Another perhaps under-recognised challenge of the baking game is controlling wastage. Baking's precise physics and chemistry allow for very small margins of error (everything is made from scratch with no premixes used), and there are also inherent losses that go with the fragility of biscuits as well as the cutting and trimming of cakes and Swiss rolls into shelf-acceptable shape. Compass' popular and really customer-pleasing factory shop is a logical channel for product that's marginally out of spec, for offcuts and over runs and a viable way to reclaim some of these costs, although some baking is specifically done for the outlet.

At the time of our interviews, CEO Rodney Cottrell and director Dave Bruce were overseas and so Bob Horton was assigned to come up with some reflective commentary on thirty years' work and the creation of an immensely successful company: 'We're naturally delighted with our achievements - and it's an honour to be a key supplier to top retailers. Considering how many small businesses don't make it, we're extremely fortunate that we have survived some challenging times and that we continue to flourish.' he concludes.