Finsbury Food Group chief executive Dave Brooks has taken his cake business upmarket and is diversifying the business as consumer tastes change. Kristian Dando takes a walk to Memory Lane.
While the name Memory Lane Cakes suggests sepia-tinted visions of a bygone age (think penny farthings and gentlemen tipping their hats to ladies), the company’s head office is a little more contemporary.
Tucked away in northern suburbs of Cardiff, the Finsbury Food Group’s main division, one of the Welsh capitals biggest employers, sits adjacent to another facility belonging to Allied Bakeries.
A Lidl supermarket sits to the other side.
There is not a penny farthing in sight.
The walls of the company’s reception are adorned with awards, and tantalisingly, the factory’s output. A large cross section of a Smarties cake peers enticingly from the wall. Dave Brooks, chief executive, bounds down the stairs. He has recently decamped from Cardiff to live near Maidenhead, but concedes to missing the Welsh capital. “I miss the feel of a small city. It’s nice to just be able to pop out of your house and nip onto HMV to get a CD when you want. I have to go all the way to Windsor now,” he laughs.
Brooks is enthusiastic and engaging – and if he’s tired from a pre-dawn dash up the M4 to arrive in Cardiff for 7.30 am, he’s doing a very good job to hide it. His southern tones exude a matey charm. The 40-year-old looks young for a chief executive of a £200m turnover group, he rebuffs the suggestion. “There are tons of younger guys than me on the FTSE. I just look young, that’s all!”
An accountant by training who enjoyed the wider aspects of business life away from balancing books, Brooks held the position of managing director of the company for three years, and prior to that, was commercial director. He played a major role in the turnaround of the firm from a £2m per annum loss-making burden on the Grand Metropolitan food and drink empire to become the profitable flagship of AIM-listed Finsbury.
“The expectation was that the former owners would have to close the factory down,” he says. “But we found that when we got here, there was a fantastically talented pool of people who were all of a sudden, cut free from being a tiny part of a business, to being all that really mattered. Just by being here all the time and caring about nothing else but Memory Lane Cakes, we were able to ride this wave of enthusiasm from our team here and build a pretty successful business.”
A clear, measured objective to place Memory Lane at the high-end of the cake market was made, and it paid dividends. The company manufactures the majority of Tesco’s Finest range of cakes, and supplies to the supermarket giant’s competitors, too. “With customers like this, you always know you’re going to get paid, and on-time – invoicing just isn’t a problem with these guys,” he says.
“We’ve positioned ourselves in areas which are the least price sensitive. If you buy a premium cake, the most important thing is that it tastes bloody nice. How much it costs doesn’t factor that much. Celebration cakes are different. The factor there is that ‘little Johnny wants a Disney cake, so that’s what he’ll have’. Whether its £9 rather than £6 doesn’t really come into it. The important thing is, it’s a Disney cake.”
“With low-fat markets, the important fact is that it’s a health-conscious product. Customers don’t want to pay the earth for them, but again, [price] is not the determining factor. It’s an important part of the mix, but it isn’t the most important thing. We have been able to move our prices forward, and our customers have been able to pass those costs onto consumers,” he says.
“We haven’t seen our volumes drop at all in recent years. We’ve put ourselves in the right market place. We’ve been able to convince our customers that we can charge high prices and without an impact on demand.”
In 2004, Brooks undertook a major review of the company to ascertain its place in the market, a move out of step with the usual practice of the business. “We usually avoid consultants like the plague,” he says. “But we really wanted to know – what are we for?
“Sure, we make nice cake, but there are ten nice cake companies out there. So we looked at it ourselves to see in which areas we performed best. But we also spoke to the consultancy to see what the big opportunities were likely to be over the next ten years. And that would dictate our investment and acquisition strategies.”
The review identified premium, celebration, health-conscious and kid’s cakes as the markets in which the company performed best, and suggested eschewing what Brooks describes as “motorway service station snacks”. That led to the acquisition of firms like California Cakes, and the license to produce Weight Watchers branded products, which brought about a 70 per cent share of that particular market.
The move into health-conscious markets indicate an acknowledgement that sugary, fatty foods sit at the top of innumerable think tank blacklists. While measures like the removal of hydrogenated fats from Memory Lane’s product range have been taken, Brooks is a vocal advocate of consumer choice.
“We don’t live in a nanny state,” he says. “And thankfully, we’re not in that part of the market – our products aren’t meant to be eaten every day, and you’d have problems if you did. But there are areas where it could impinge on us. We could get to the stage where cakes are sold on the top shelf, but if that’s what comes to pass, so be it. If we’re making the right sort of cake in the right sort of market, it is not going to affect us. Let’s be honest – everybody likes a little treat now and again.
“People are always going to pound the gym for two hours and then scoff a Big Mac on the way home. That’s never going to change,” he argues. “It’s a perfectly natural human reaction.”
In addition to its traditional specialisation in cakes, Finsbury sees a future in artisan breads, and products free from ingredients like gluten, wheat and dairy: a sector believed to be worth around £180m. Last month the group snapped up Hull-based Yorkshire Farm Bakery and A&P foods, purveyors of primarily gluten-free products. The deal was worth about £9m, and was the company’s sixth major acquisition in three years, taking its aggregate spending up to £80m.
Floating the company on AIM was the key to its expansion, and it led to deeper changes inside the business. “The biggest change to listing on AIM is that it creates an added tension. If you say you’re going to make £3m per year, you’ve got to do it. Everything is more target-led. But by listing on AIM, we raised the money to buy other businesses. And by being on it, I think it gave us the credibility that we might not have had otherwise to do it.”
And while most of the board of the company are English, Brooks says that a sense of Welshness has been prevalent in the business, and to an extent, been part of its success. “It very much feels likes there’s a feel of Welshness ingrained into the fabric here. Our lawyers, accountants and bank are all based in Wales, and there was a conscious move to bring the business’ head office back to Wales from London. This is where it all started, after all, and it does give the company a lot more identity.”
“And being part of Cardiff’s business community is much more rewarding than anywhere else,” he continues.
But while the success seems to sit comfortably with Brooks, a hint of stoicism, and indeed, disbelief lingers. “I do sometimes just think – £200m – that’s a lot of money. How on earth did I end up here?”