Fast on its feet1600 SKUs (Stock Keeping Units). That’s how many items Kinnerton, the Fakenham, UK-based subsidiary of the Zetar Group PLC, has in its entire inventory.
“We’re regenerating our portfolio constantly,” explains Gordon Chetwood, Kinnerton’s manufacturing site director. “We produce between 300 and 400 SKUs each year.”
As he points out, it’s Kinnerton’s ability to handle so many different items that has helped grow the company during the past several years. Sales last year topped £60 million ($90 million).
“We have the flexibility to turn things around quickly,” he points out. “It gives us a significant competitive advantage as well as the ability to refresh our product range.”
Given that the company’s customer base revolves around supplying retailers with private-label products (50%), contract manufacturing (16%) and licensed and branded items (34%), it’s not surprising that changeovers are a way of life on the production floor at Kinnerton.
To accommodate the flux between shorter and longer production runs, the company has segregated its operations at the 125,000-sq.-ft. plant into three business units: moulding, novelty and nut.
“We, in essence, have two operating factories, with separate engineers, canteens, locker rooms, kitchens,” Chetwood says. “The two zones are separated by a warehouse that has only one crossover point, which features an air-locked series of doors.”
And although auditors, managers and quality assurance personnel move between the two manufacturing zones, donning appropriate attire when they do so, floor workers remain in their respective departments. Not only are uniforms color-coded, but so are moulding trays. Moreover, there’s signage everywhere warning about the hazards of cross-contamination.
In addition, there’s a strict policy of forbidding visitors to the facility from bringing nuts.
Implemented in 1999, the move to ensure a nut-free zone within the facility cost more than £1 million ($1.5 million) and involved putting up walls to segregate five production lines from any nut contamination. Although costly, that decision has benefitted the company’s capabilities as a contract manufacturer and as a supplier of private label products to retailers.
“It’s helped our business,” affirms Chetwood.
Complementing the investment in separate production facilities, the company has also maintained pace with evolving scientific testing methods, enabling it to test for nuts down to one part per million.
“Even though that’s such a miniscule amount, we decided not to call our products ‘nut-free,’ since it’s unclear whether even such a tiny amount could cause a reaction in a consumer,” explains Chetwood. “The scientists can’t guarantee that; so we don’t either.”
Thus, in 2007, Kinnerton removed its nut-free claim and replaced it with a Nut Safety Promise, which informs the consumer that no traces of nuts were found down to one part per million.
“It was a difficult business decision, and some of our consumers were disappointed that our labeling no longer said ‘nut-free,’” Chetwood admits. “But we’re in fact safer now than we’ve ever been.”
In the nine years since Kinnerton first segregated its production facilities, during which it produced well in excess of 250 million packs of chocolate, the company has never had a verified nut incident. As Chetwood notes, “Mothers look for our logo [Nut Safety Promise] and our name.”
“We manufacture more than 16 million Easter eggs a year, ranging in all different sizes and shapes,” he adds. “We’re also the largest producer of advent calendars in the UK, turning out about 8.5 million of them last year.”
When it comes to licensing children’s novelties, Kinnerton continues to be the market leader in that segment, handling highly popular brands such as theSimpsons,High School Musical,Thomas and Friends,Barbie and theDisney line.
Five miles north of Fakenham in South Creake, the company has a packaging facility that handles foiling, netting and finished packaging activities.
“Because of the complexity and sheer size and scale of what we do, as well as the lack of space, we ship products there to finish the packaging operation,” he explains.
At another facility about 40 miles from Fakenham, the company has a warehouse that’s used to store packaging and work-in-progress items. A picking process then selects component parts to ship either to the packaging facility or to the factory.
“Say we produce a chocolate lolly today,” Chetwood says. “We wind up shipping it to our South Creake facility often not knowing what the end product will be until the customer decides.”
There’s no doubt that such complexity poses scheduling headaches for Chetwood and his crew. Nevertheless, as the manufacturing site director explains, “We are used to flexibility. That’s something we do very well.”
For example, the company acts as a contract manufacturer for major multinationals. Just recently, it co-developed an Easter product for a key confectioner that was launched in late February.
Kinnerton also worked with a large UK retailer with hundreds of shops and cafes across the UK, in launching a new line of chocolate bars, 19 in total, last September.
The line features classic offerings such as Belgian Milk, Mint and Fudge varieties as well as single-origin chocolates from Mexico, Papua New Guinea, Ecuador, Tanzania and even exotic fusions such as Balsamic (vinegar) in Dark Chocolate and Orange & Cardamom Chocolate.
“We developed seven of the varieties on site,” explains Chetwood. “They had sourced the different chocolate origins earlier and we worked together on the packaging and recipes. The launch proved very successful for them and they’re looking at extending the range to their retail customers. And they just recently added one more variety to the range, Limited Edition Chilli Dark Chocolate.”
“The volumes weren’t really large enough for a highly automated line, especially when you’re doing so many different flavors requiring changeovers and packaging switchouts,” he adds.
Such flexibility is also allowing Kinnerton to expand its own branded items, such as its premium chocolateCocoa Deli line. Having developed a unique Lolly Truffle in 2005, the company has distributed the brand across the UK, and has also sold some seasonal and limited edition lines in Walgreens in the United States for the last two years.
Available in Caramel Toffee Crunch, Mixed Berry Crunch and Cookies & Cream, the Lolly Truffle combines the convenience of a lollipop on a stick with the indulgence of various flavors and textures in an easy-to-eat chocolate shell.
TheCocoa DeliClusters products, Belgian chocolate bars available in a Rocky Road and Fruit and Almond varieties, have a greater distribution and are available at several retail chains.
One of the company’s latest Easter egg creations – the triple sandwich egg - tempts consumers with three layers of chocolate - milk, white and dark – in the shell.
“There’s definitely a trend toward highly decorated, more premium chocolates, everything from marbling, sprinkles and drizzles to eggs with various inclusions,” says Menna Mainwaring, international sales manager.
Of course, what works well in the UK often can be parlayed abroad. And although only 5% of Kinnerton’s sales stem from exports, Mainwaring believes there’s significant potential for future growth, particularly as private-label products gain ground amongst retailers and consumers as an excellent value in tough economic times.Mainwaring also sees Kinnerton’s Nut Safety Promise as a critical component in assuring customers and consumers alike of the company’s quality manufacturing standards. Currently, the company exports to 20 countries, but counts the United States, France, Spain, Japan, South Africa and Canada as its top six markets. Kinnerton also has a subsidiary in Australia.
Parlaying the company’s ability to accommodate a broad range of chocolate products also offers it a competitive advantage others don’t have, she adds, since “every marketplace abroad is different.”
Of course, what’s a few more SKUs. Seems Kinnerton has learned how to handle them well, even on the fly.
AT A GLANCEKinnerton
Parent company: Zetar Group PLC, which also owns Humdinger, Ltd; Readifoods; Lir and Horsley Hick and Flower.
Plant: 125,000 sq. ft., Fakenham, UK.
Sales: £60 million ($90 million)
Output: 7,500 tons annually
Products: Advent calendars, Easter eggs (spun confectionery), bars, chocolate moulded novelties, enrobed / extruded products, lollies, panned chocolates, truffles.
Management team: Richard Reilly, managing director – confectionery group; Gordon Chetwood, manufacturing site director; Rachel Wyatt; marketing director; Menna Mainwaring, international sales manager.
RR:All areas of the business have potential to grow but we are focusing on export, all-year-round sales and adult premium products as we expect these areas to grow faster for us.
CI:What percentage would you like to see exports as part of Kinnerton’s total revenues?
RR:More than 20%, but it will take some time to get there.
CI:Do you see “premiumization” having a greater impact in product development for Kinnerton down the road?
RR: Yes and we have invested in this. We have over recent years invested heavily in the Norfolk plant, which means we have the capacity to grow.We have also invested in people who have the confectionery development skills.
The Confectionery Division has also purchased Horsley Hick and Flower in York and Lir in Ireland, which are primarily premium chocolate businesses. Both businesses have received significant investment since acquisition and now have the capacity to grow quickly. The forward order book for both of these businesses looks very promising.
CI: Given the financial stress that some confectionery companies are experiencing during this recession, do you foresee any additional acquisitions for Zetar?
RR:Our plan is to drive the acquisitions that have been made to date in the current climate, but if the right opportunity comes along we will look at it.