When QAF acquired Gardenia in 1986, not many consumers in Singapore and Malaysia were bread eaters. How has the average buyer of Gardenia bread changed in the last decade? What are your insights on this shift in consumption traditions?

Over the past two decades, bread is increasingly seen as a staple food alongside traditional Asian favorites such as rice and noodles. In terms of consumption patterns, it has evolved from being perceived as a breakfast food to food for many occasions, such as sandwiches for lunch or canapés for high tea. Because of a hectic city lifestyle, bread is a favorite item for convenience, [and is seen as] tasty and healthy product for consumers.

Singaporeans are increasingly becoming savvier and more cosmopolitan as they travel widely and are more highly educated, and this in turn has resulted in a more discerning palate as well as a greater awareness of health and nutrition.

They are also increasingly more adventurous and willing to try new variants due to their greater exposure. Many people are switching from basic white bread to other fortified variants due to its additional health benefit, such as from Gardenia Enriched White Bread to Gardenia High Calcium Milk Bread to help prevent osteoporosis, or to Gardenia High Fibre White Bread, which is fortified with the soluble fiber, inulin, as well as Omega 3 and Omega 6.

Our wholemeal range of breads are also increasingly popular as people recognize the health benefits of wholemeal and grains in their diet, and this is an encouraging trend as it shows that people are making attempts to take care of their health and dietary needs. Many people are even upgrading from wholemeal to multigrain.

What are the differences in the distribution channels, delivery operations, and marketing strategies in these markets?

In Singapore, we have a wide distribution network of some 3000 distribution points which helps us to reach out to more consumers on a daily basis. Our distribution team's dedication and hard work through the wee hours of the night and early morning help to ensure only the finest quality breads reach our consumers by delivering Gardenia's home-baked bread fresh daily to all our outlets 364 days a year, and for selected supermarkets where demand is high but space is a constraint, we even arrange for a second delivery in the day to replenish our bread stocks.

In terms of marketing strategies, product innovation and development is a key area that helps us keep up with changing consumer demand. Our products undergo several rounds of stringent product testing before finally reaching the market place.

Gardenia is now one of the most widely distributed brands of packaged bread in the Philippines. The company's distribution network, which initially focused on covering the Greater Manila Area and the nearby regions, now reaches the northern-most cities of Luzon. Distribution extends as far as Laoag City in the north, Cagayan Valley and Nueva Vizcaya in the northeast, and the Luzon provinces of Albay and Sorsogon in the south. In the Visayas region, Gardenia's reach has extended to Iloilo and Bacolod cities in the Negros Province as Gardenia delivery trucks travel on the nation's Nautical Highway using the Roll-On-Roll-Off (RO-RO) shipping network.

In Malaysia, the marketing strategy emphasizes on mainly on market and new products development. Distribution of products is similar with our other Gardenia operations using our own trucks and inter-state deliveries to some 18,000+ outlets selling our products.

How about the profile of the bread consumer in these different markets?

Singapore consumers are generally health conscious and prefer bread with nutrients and less sweet.

Filipino consumers like their breads to have lighter/whiter color and sweeter taste, thus Gardenia Philippines made adjustments in its formula and process to meet these expectations in addition to freshness, good taste, oven-baked aroma, softness, nutrition and convenience.

Are there any plans in the next 3 to 5 years for capital expansion in these markets? Are there other markets in the pipeline?

In Philippines we are investing in another new production line adding another 200,000 loaves per day capacity.

Likewise in Malaysia, because of continued high demand for Gardenia products, capital expansion would be inevitable to capture the growing market; so the planning stage for expansion is in the pipeline.

We are also in the process of assessing the markets in China and Viet Nam to determine the viability of a wholesale industry bread factory like what we are used to doing.

What are the capacities of your plants in Singapore, the Philippines and Malaysia? Do these plants operate at full capacity? Are there peak seasons for bread purchases?

Gardenia Singapore has the capability of producing 180,000 loaves and 100,000 different buns/rolls per day. [Both these plants] are running at maximum capacity. The demand graph [in Singapore] is relatively flat as bread is a basic necessity that is consumed daily.

Gardenia Bakeries Philippines Inc. has the capability of producing 200,000 loaves and 200,000 buns per day from its five production lines, all of which are operating on full capacity. The peak seasons for bread purchases are during holidays (Christmas, New Year, All Saints day, etc.), occasions, and weekends where the demand is higher as these are the times where families gather together.

Because of specific market demands, the product mix in Gardenia Bakeries (Kuala Lumpur) Sdn Bhd is different from Singapore and Philippines. Our plants in Malaysia has various production lines capable of producing 800,000 loaves per day, 230,000 cakes per day and 1,000,000 assorted filled buns and rolls per day. To date, [these lines are] operating at full capacity.

Increases in the cost of raw materials and energy have been remarkable this year. What strategy did Gardenia International utilize to reduce the impacts of these costs on profitability? How successful have you been in implementing such measures? Have you had to increase the prices of your products this year?

Over the past two years, there have been continual upward price pressures especially for flour and fuel, which we have tried to absorb initially. This has led to a great increase in our costs of operations and therefore a review of the pricing of our products

As the market leader in the bread category however, Gardenia is mindful of the fact that many Singaporeans depend on us for their daily bread and as such, we have tried to contain the price increase to so as to minimize the impact of the rising inflationary costs amongst our fellow Singaporeans.

In the Philippines, prices are adjusted based on increases in flour prices as supplied by flour millers, although increases are kept to the minimum due to the low consumer purchasing power.

Food quality and safety are on the minds of purchasers as a result of the melamine scandal, which has tainted even global brands. Do you think this will have an impact on the market in general in the long term?

Gardenia Singapore does not use milk or milk-related products from China. The milk products used in selected Gardenia bread products are imported from Australia and are free from melamine.

Gardenia Singapore believes strongly in ensuring that our consumers enjoy the finest quality and freshest bread daily. We take our Gardenia Assurance very seriously and consumers of Gardenia products are aware of our commitment to the highest quality, food safety and freshness.

In the case of Gardenia in the Philippines, the melamine issue has not directly affected the bread market as the major bakery association, the Philippine Baking Industry Group Inc. (PhilBaking), immediately announced through the media that its member-companies do not use milk products from China. The company also assured right away the Filipino consumers that it only uses high quality and superior ingredients so that only quality and safe bread products reach the consumers, and that its milk sources are the USA, Australia and New Zealand, immediately restoring consumer confidence.

Similarly in Gardenia Malaysia, all milk and milk component used in our products are imported from Australia and New Zealand. So the melamine scandal does not affect our operations in Malaysia too.

Your company was one of the first in the Asian food industry to introduce healthy options such as low GI and trans fat-free breads, when health issues such as obesity and trans fat intake were not at all in the minds of consumers. What's behind these decisions?

To cater to Singaporeans' changing demands and lifestyle needs, Gardenia's marketing and R&D teams are constantly researching and exploring new product innovations. For example, we were the first in Singapore to identify an unmet demand in the market for low glycemic index bread to meet the special dietary needs of diabetics as well as for weight management. Even though awareness of glycemic index and its correlation to our blood sugar level (low glycemic index foods result in slow release of sugar in the blood and is hence diabetic-friendly) is still in the infancy and as such, low glycemic products are still considered a niche market, figures show that diabetes in Singapore is unfortunately on the upward trend and this is a group of people whose needs are not sufficiently addressed.

Because of that, Gardenia created our "Low GI" Nutri Multigrain bread and sales have been encouraging as more people begin to appreciate the dietary benefits of its low glycemic index, but also of its 12 wholesome grains like rolled oats, flax-seeds and quinoa which are an excellent source of complex carbohydrates and help to lower LDL or bad cholesterol.

Gardenia Bakeries (Kuala Lumpur) Sdn Bhd launched the "Gardenia Breakthru", the low GI bread in 2004. In 2005 the health benefits of Breakthru bread was further enhanced by adding beta-glucan that helps to lower cholesterol.

Are your frozen gourmet breads only sold in Singapore? Do you expect to expand your par-baked frozen bakery production in Southeast Asia?

Our Gardenia frozen gourmet breads are currently available only in the Singapore domestic retail market, but we are looking to provide this range to the food-service sector as well as to export to countries in the region.

The group has another wholly owned subsidiary Bakers Maison (Australia) Pty Ltd based in Sydney, Australia specializing in frozen French bread and pastries for the wholesale food service sectors distributing the frozen products nation-wide in Australia. We are investigating the feasibility of introducing such products and concepts in this part of the world, commencing with Singapore market.

Given the global financial instability, how do you think the Southeast Asian bakery market, in general, will fare in 2009? How about Gardenia International's prospects in 2009?

Bread is an essential food item especially in the markets where we operate so we do not expect any significant drop in demand. In some countries, consumers tend to eat more bakery items than rice because of the exorbitant price of rice as compared with bread. Gardenia International won the top place in the list of the Fastest 50 Companies in Singapore in 2008. Going forward in 2008/9 we expect continued robust positive results.