By Bernie Cahiles-Magkilat Singapore-based Gardenia International Pte. Ltd., the parent firm of Gardenia Bakeries Philippines, Inc. (GBPI), has created a new wholly-owned company Nutribake Food Products, Inc. to rationalize its expanding investments in bread manufacturing in the country. The spin off, which was implemented last year, has resulted in the delineation of work functions between Nutribake and GBPI. On one hand, Nutribake is now doing toll manufacturing for GBPI bread products. It charges toll manufacturing fees to GBPI. On the other hand, GBPI, which used to be the overall corporate vehicle of Gardenia International in the country, is now concentrating in the distribution, marketing and development of all Gardenia products in the country. GBPI General Manager and President Simplicio Umali Jr. explained that this move is geared to facilitate the foreign direct investments of Gardenia International into the country. This will also make their operations in the Philippines more focused and cost efficient. Although this has been the business model since Gardenia International invested in the country’s first large-scale loaf bread manufacturing plant in Laguna, it was only able to create the new company last year and transferred the investments in the Cebu plant to its head office in June last year. “Our Cebu plant is now also foreign-owned by Gardenia International Ltd.,” Umali said noting that the plant is now run by its sister company Nutribake, which also absorbed some of Gardenia’s original trained employees and hired some more to operate the plant. “Our head office now owns the plant and they charge us toll fees for manufacturing our products,” he said. Gardenia International is also investing R1 billion in the ongoing construction of its manufacturing facility in Cagayan de Oro, which is expected to start commercial operations in the second quarter this year. According to Umali, this arrangement is in keeping with the company’s commitment to bring in foreign investments into the country. This also makes it easier for the company to process loan financing from foreign and local banks.  Inflow of equity is also faster if the company is foreign-owned, he said. Most of the financing for their expansion projects in the Philippines is funded through 50 percent foreign financing and the remaining 50 percent from local funds. Umali also said that this arrangement will strengthen Gardenia Philippines’ operations in the country and ensure growth in a business that is volume driven but at very low profit margin. “We take charge of our distribution and use our own funds for the improvement in our delivery, invest in our fleet of delivery trucks, and develop new products,” he said. Putting up a fully automated bread plant requires high cost of investment and yet the profit margin is only 1-2 percent, he said. Gardenia’s original bread plant in Laguna is fully automated and produces the loaf breads and other Gardenia bread products.  The cost of putting up new fully automated manufacturing plant has doubled to P1 billion from P500 million only a few years ago.