The Milton Keynes-based firm built a successful business supplying major retailers with quiche, then jacked it all in to go off and make artisan-style breads, pastries and tarts. Giles ditched its quiche business in 2006, dismayed by the way quiches had become devalued and commoditised in the market.
The quiche business was turning over £18.5m when it was sold in January 2006. "It got to the state that, no matter how much turnover you've got, you're not making any money. So we washed our hands of it. We're not commodity players," says sales and marketing director David Marx.
Quiche had been a wonderful growth product through the 1990s, he recalls, before the market changed. "It was growing at 9... 10... 15% a year, and it was good solid retail business. But think about it: you're putting in cream, egg, butter, flour, bacon - expensive stuff. The proper margins got completely killed, and you could buy two for £2.50 in retail." Consumers, he noted, would buy them on offer, eat one and freeze one. "And a quiche coming out of the freezer is pretty tacky - horrible," he points out.
So, having been driven down in price, people wouldn't buy them again and, as prices eroded, volumes declined, setting off a vicious spiral of lowering prices to get the volume back. Ironically, Marx now says the quality in the market is coming back up to the level of the late 1990s - though whether anyone is making any money, given the commodities climate, is another matter.
But selling the quiche business was not the only upheaval the business has seen in the last decade. In 1997, fire completely destroyed its operations. Says Marx: "I've been with the business 11 years and, when I joined, we were producing quiche, garlic bread and party foods, very successfully. However, seven months after I joined, the whole place burned down!"
Undeterred, MD David Rixon and Marx started over, ploughing the insurance payout back into creating a 12,000sq ft facility in Telford, with the support of existing customers such as Safeway.
Once it got the quiche business up and running, Somerfield came on board as a garlic breads customer and, very quickly, bigger premises were needed. So Giles bought a unit in Milton Keynes specifically for producing quiches. When it exited the quiche market, Giles shifted focus on to breads, building on the Pan Artisan breads business it founded in 2000, and which accounted for a third of turnover (the rest being quiche).
== Taking a calculated risk ==
The bread business was shifted from Telford to Milton Keynes, where it has two pods - one to bake breads and the other to add value, such as with garlic breads. Now the transition from quiche to bread has completed, they're treating this year as 'year 3' of a new business start-up.
Everything was going swimmingly before the commodity cost hikes hit home last year, for which Giles had to go twice to market for price rises. "The last year has been tough," he admits. "Garlic bread? Butter? Flour prices doubled! We had to take massive views on risks, we really did. The easy way out is to drop your quality and offset the prices, but one thing we were not prepared to do was compromise on quality. We've done our very best to shave overheads, though, so we've had some fun in the past year!"
What has cushioned the crunch has been a healthy balance between foodservice, retail and wholesale business. Giles doesn't want to be swamped by high volumes; instead, Marx wants to build progressive, steady growth.
"Each year, we take on more and more volume, but you always have to think, how could we automate?" he muses. "So, from day one, we've kept putting the money back into this business."
== Flexibility holds the key ==
At its Milton Keynes site, the company bakes its own range of artisan and speciality breads - both chilled and frozen - and has separate facilities where it adds value to products, from garlic baguettes to sundried tomato flatbreads. It's also a major producer of dough balls.
The bakery has been designed to be very flexible, in order to produce a wide range of speciality breads efficiently and cost-effectively. It has the latest injection, flow-wrapping and freezing facilities, as well as new mixing equipment, and a second stress-free dough line has been installed.
The König stress-free plant was needed to protect artisanal recipe doughs from shearing strain - doughs such as ciabatta that must be put under minimal mechanical stress - to produce soft, fluid doughs that may not have a structure suited to a traditional plant line, he believes. "The dough is literally still moving as we're cutting it - it's not tightening and it gives a nice, open structure," says Marx.
"We've always wanted kit that's flexible - we want the ability to intercede, to hand-cut and hand-finish. A line may have 18 changes in a day and there are hardly any factories in the country that would even think about doing that!"
The other site, in Warminster, makes fully finished and pre-proved Danish pastries, as well as classics such as Belgium buns. The facility has been significantly upgraded over the past three years, nearly doubling in size, with a new tart line installed allowing Continental-style products to be produced.
== Meeting the challenge of the market ==
While that side is showing steady growth, it's the French breads - the majority of which are supplied fully-baked and frozen for thaw-and-serve - that are really taking off, he says.
"French baguettes started coming over in the mid-70s. They're still in every shop corner, and every sandwich maker uses them. They haven't changed very much, but the flavour has been cut back with the price. When it comes to our artisan baguettes, it's very much about traditional recipes, different structures, different flavours - sales are going through the roof."
Customers are now much more demanding for bespoke NPD, and this is never more true than with ciabatta. "You can't stand still," says Marx. "A true ciabatta is ultra-dry, with big holes and a waxy finish. But that is too dry for some, and we have certain customers who take four different recipes. It is slightly more expensive, but the comments we're getting are that it delivers quality of flavour and texture."
What he doesn't want is to develop 90 products a year, only two of which make it to shelf before falling off after 12 weeks. He wants to grow turnover steadily by involving customers in NPD from the word go, identifying where new products fit in the market and avoiding the "scattergun approach".
"Selling the quiche business was the best move we ever made," states Marx. "Firstly, we enjoy what we're doing, because we no longer have to sit there fighting a ridiculous price point that we're never ever going to beat. Secondly, we can make a quality product that people will pay a quality price for. So there is money to be made, and that's what we're in business for."
=== Giles Foods at a glance ===
Business: Giles Foods manufacturers chilled and frozen bakery products. The company operates from two sites in Milton Keynes and Warminster, both accredited to BRC grade A standard
Turnover for 2007: £13 million
Projected turnover in 2008: £16 million
Number of staff: 150
Key personnel: David Rixon, managing director; David Marx, sales and marketing director
Customers and key markets: retail sector 40%, foodservice 40%, wholesale 20%