Route to Market

Jump to section

• Overview & contents
• i. Important Notice
• 1. Executive Summary
• 2. A Note on the Name
• 3. The Market and Why Scale Is the Enemy
• 4. The Product Strategy
• 5. SWOT and Competitive Position
• 6. Route to Market
• 7. Unit Economics and Prime Cost
• 8. Returns: The Wholesale Bakery Tax
• 9. Energy
• 10. The Five-Year Build and Its Gates
• 11. Funding
• 12. People and Production
• 13. Food Safety and Compliance
• 14. Financial Projections
• 15. Break-Even
• 16. Sensitivity and Scenarios
• 17. Risk Management
• 18. Implementation Timeline
• 19. Returns
• 20. Key Performance Indicators
• 21. Key Assumptions
• 22. Conclusion
• A. Appendix A: Consolidated Financial Summary
• B. Appendix B: Capital Schedules
• C. Appendix C: Funding and Debt Schedules
• D. Appendix D: Risk Register
• E. Appendix E: Glossary

The shift from 78.0 per cent to 58.0 per cent wholesale is deliberate. Wholesale builds volume fast and fills the ovens, but it carries returns, credit risk and a distribution cost of about seven per cent of the wholesale line. Retail carries none of those. Adding a retail outlet in Year 4 lifts blended margin without needing more production capacity.

6.1 Route economics

Distribution falls from 5.6 per cent of revenue to 4.2 per cent, but the cost per rand of wholesale revenue barely moves. The improvement comes almost entirely from wholesale falling as a share of the total, which is another way of saying that the retail outlet is the distribution efficiency measure in this plan.

6.2 Credit

Wholesale customers pay on 32 days while flour is bought on 30. That two-day gap sounds trivial and is not: at Year 5 wholesale revenue of R9.95 million it represents roughly R872 000 of trade debtors funded permanently, which is why a working capital facility is drawn in Year 2 and why credit discipline is a route-level responsibility rather than an office one.

• Every new customer is opened on cash terms and moved to credit only after a defined trading period without incident.
• A credit limit per shop, set against observed offtake rather than against what the shopkeeper asks for.
• The route salesman collects on delivery where terms allow, because a debt collected at the door is not a debt.
• A shop over its limit takes no further delivery until it is inside it — enforced by the route salesman, not by an invoice.
• Debtor days reported weekly by route alongside units per drop and returns.

6.3 Schools and institutions

Schools, crèches, clinics and workplace canteens sit inside the wholesale line in the financial model but behave quite differently from a spaza round. Volumes are contracted rather than speculative, quantities are known a week ahead, payment is by invoice against an order number, and there are no returns because nothing is delivered on a sale-or-return basis.

The absence of returns is the point. A wholesale rand delivered to a school is worth roughly three to six per cent more than the same rand delivered to a spaza shop, because none of it comes back. Against that, institutional demand disappears during school holidays and the documentation burden is real — which is exactly the compliance file described in Section 13, kept current rather than assembled when asked for.

The practical approach is to treat institutional volume as base load rather than as the growth engine. It fills the ovens predictably, it improves the blended returns rate, and it pays reliably. It will not grow at the rate the spaza round grows, and a bakery that builds its capacity plan around it will find itself with idle ovens every school holiday.