After successfully planning and executing a couple of expansions, Mike Timani, founder, president and chief executive officer of Moncton, N.B.-based Fancy Pokket Corp., felt confident in setting out to enlarge his bakery products manufacturer once again.
So, with a $3.2-million budget, in 2001, he hired an engineering and general contracting company and placed orders for new state-of-the-art bakery equipment from a U.S. supplier. But things did not go quite as planned.
First, Mr. Timani faced an unexpected change in the Canadian dollar against U.S. currency, which hiked the cost of the equipment by about $400,000. Then, with construction in full swing, Mr. Timani received more bad news: Sizes of some of the massive steel support beams had been miscalculated, which meant they'd have to be reordered, adding time and money to an already over-budget plan.
With these surprises, the cost of the expansion grew by $1-million. While major lenders agreed to help with the escalation in project costs, another bank, which had provided a $250,000 line of credit for managing inventory and receivables, decided to pull the plug. News of this reached the other lenders, which decided to boost the interest rate on his loan. Faced with all of this, Mr. Timani had to decide how he could keep going with the expansion.
Mr. Timani landed in Toronto in 1976 eager to start an engineering degree. As civil war raged in his native Lebanon and financial support from home dwindled, he was forced to look for a job.
He started off as a busboy at a Toronto hotel, realized he enjoyed the interaction and the industry, and decided to make it a career. He enrolled in the hotel management program at what was then called Ryerson Polytechnical institute, now Ryerson University.
Mr. Timani landed a position as food and beverage director at a newly opened hotel and convention centre in Saint John, N.B., in 1983. Five years later, he decided to leave and use his food and beverage experience to set up a bakery and restaurant business in Moncton, under the name of Fancy Pokket.
In 1989, he opened the doors to a 1,000-square-foot bakery and a 75-seat restaurant. Within two months, he realized he needed to automate the bakery. With a plan in hand, he approached a bank and, within 10 months, expanded his bakery to a new 4,000-square-foot location with more efficient automated equipment.
Within a year of that move, he landed three private-label accounts from major retailers to supply pita products across Atlantic Canada and Quebec. This led to another $2.5-million expansion in 1995, with the bakery moving to a new 24,000-square-foot facility. To finance the expansion, he sold the restaurant business, and focused his attention on the bakery, expanding the product line to include pizza crust and bagels.
As business grew, Mr. Timani decided to expand his product offerings even more to include different sizes and flavours of pita bread, as well as hamburger buns. Although his diversification strategy was working, he faced high ingredient costs due to his location (on average, 20 per cent to 25 per cent more than they cost in Ontario or the United States.). To cope with the costs and make production more efficient, Mr. Timani opted to expand his product offerings again.
Mr. Timani decided to forge ahead with his expansion plan, aggressively pursuing options to replace the line of credit. The construction miscalculation delayed the project by about seven months. It also took a lot of time – 14 months – to find another banker, but Mr. Timani did succeed. The new bank offered to not only extend the line of credit but doubled the amount. Mr. Timani could then put his focus on getting additional business to feed the expansion by increasing sales and further expanding his line of products.
The 2001 expansion created a 32,000-square-foot facility, with additional capacity, freezer space and process automation. Mr. Timani also expanded his product offerings once again, adding new tortilla wrap and bagel lines. The increased capacity and more cost-efficient production process allowed Mr. Timani to launch his own branded line of products in addition to supplying major retailers with their private-label products. The effort paid off, with sales doubling between 2001 and 2005. Between 2005 and the end of 2012, sales increased another 30 per cent.
Healthy sales increases and confidence led him to plan and successfully execute two more expansions, spending $2.3-million in 2009 and $3.2-million in 2012, which replaced his existing sheeting line, added a mezzanine production floor to house a new traditional pita line, increased freezer capacity and added a new sanitation room.
The production facility is now a 45,000-square-foot, state-of-the-art bakery with 55 employees making a range of pita bread, bagels, tortilla wraps, pizza crusts, flatbreads and panini bread, with customers across Atlantic Canada and Quebec. The company has grown into one of Atlantic Canada's leading manufacturers of such products.
And Mr. Timani is in expansion mode again. He has launched another $8-million project to manufacture gluten-free bakery products at a new plant in South Carolina, with a planned opening by the end of the year. The location was strategically chosen, offering access to 80 million consumers within a 12-hour driving time. Mr. Timani plans to use excess Moncton plant capacity to feed the U.S. market and ship gluten-free products from the U.S. plant to meet Canadian demand.
Special to The Globe and Mail
Nauman Farooqi is a professor and head of the department of commerce in theRon Joyce Centre for Business Studiesof Mount Allison University .
This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Report on Small Business website.
Join The Globe's Small Business LinkedIn group to network with other entrepreneurs and to discuss topical issues: http://linkd.in/jWWdzT