Bakery Services scraps new cafe chain
haul the firm out of the red and take the pressure off another key
business has been scrapped after less than three months.
The year just keeps getting worse for Bakery Services. In August the company announced an operating loss of £59.3 million, with annual revenue down seven per cent to £3.6 million, and now the first of a planned chain of upmarket cafes called Millers Eating Experience has been closed due to poor trading.
The new eateries were supposed to come from the units making up Bakery Services' ailing Don Miller business, acquired in 2000 and consisting of franchised and wholly-owned retail bakeries based mainly in the North of England and the Midlands.
Not surprisingly, the Bakery Services board described the closure as "clearly disappointing", especially as the company results statement in August put so much importance on the new chain. "The long-term future of the group lies with the success of Millers Eating Experience," it said.
"The board are now of the opinion that whilst trading can be improved over time, this cannot be achieved within the financial resources currently available to the group," said a company trading statement released this week.
The debacle may put Bakery Services in a mess if it cannot find a new way to adapt its business, even though the board has assured shareholders that the company's financial position is secure.
The problem stems from the company's dependence on UK retail chain the Co-operative group, the only customer for Bakery Services' in-store bakery business, Inbake. The business makes up more than 80 per cent of Bakery Services' revenue and supplies own-label bread, rolls and cakes to the Co-op for baking in-store.
The trouble is, the Co-op has shifted its growth strategy to smaller shops in towns and as a result has shut down a number of its larger out-of-town stores - the outlets more likely to have in-store bakeries. The Co-op's strategy also reflects a similar shift among other UK food retailers.
But Bakery Services said in its recent annual report that the situation was still manageable: "Although revenue is expected to decline, the Inbake business is profitable and is expected to remain so for some time unless the rate of host store closure increases."
Coupled with this, two of Bakery Services' franchised Don Miller outlets have been closed in the last year - ironically impacted by growing sales of baked goods through the supermarket sector, among other factors.
Company board members are currently undertaking a business review in the hope of devising another viable, alternative revenue stream to bail Bakery Services out of its predicament.
Meanwhile, the lease for the closed Millers Eating Experience store in Birmingham has been put up for sale.
