THE HOUSE THAT CAKE BUILT
Cakes and croissants have become big business
The stakes have suddenly been raised in SA’s baking industry. It’s big business
Those with a sweet tooth will have noticed that, all of a sudden, the world of cakes and croissants has become big business. Last month, the French brand, Paul Bakery, opened in Melrose Arch, throwing down the gauntlet to local incumbents.
But the largest patisserie operation in SA, the 20-year old Château Gâteaux, says it is "delighted" by the new competition. "It raises the bar," says director Malcolm Lyle.
Château Gâteaux’s climb, from supplying restaurants and coffee shops since 1997, is a rousing tale of a small business making good in an industry with razor-thin margins and one particularly susceptible to consumers tightening their belts.
People on Banting or other diets are always going to cheat, and when you’re going to cheat you want to do it properly
The bakery began business in a 180m² kitchen that had been converted from a panelbeating shop, in Durban’s grimy industrial Sydney Road.
It opened its first store in 2011 in Durban, producing between 800 and 1,000 cakes a day, alongside 10,000 portions of desserts and pastries.
Lyle joined Château Gâteaux nearly nine years ago. Soon, it was supplying customised desserts to restaurants including Spur, Wimpy, Ocean Basket and Dros. "Around the same time, we saw how successful our factory shop was, so we took a (loan) from the department of trade & industry for a building at an old factory (to) open our first Patisserie outlet," he says.
Today, they have nine stores (five in Gauteng and four in KwaZulu Natal,and two will open this year in Cape Town), all owned by the company. High-profile investors include reclusive property magnate Jonathan Beare. "We’d like to get to 30 or 35 patisseries by the end of the decade," says Lyle.
Over the past 15 years, it has had compound growth of more than 25% in revenue and "substantially more" in profitability, says Lyle.
They also supply sweet and savoury food throughout the region — exporting to countries such as Zimbabwe, Zambia and Mozambique, but also, more surprisingly, to countries like the Democratic Republic of Congo (DRC) and Angola.
Lyle says they can do this thanks to their competitive edge — a blast-freezing technology, which can take their cake and desserts from fresh to frozen in a matter of hours. This "frozen freshness" allows a cake to be stored for up to 12 months in a freezer.
"The general impression our consumers had was that freezing isn’t so great but we have proven over the years that with cakes it’s very different, frozen is better," he says.
It used to export to Europe and the US, but that was torpedoed when the European Union slapped a ban on SA dairy. "There’s not enough residual monitoring of antibiotics in cattle by the state vets in SA," says founder Ilan Lipschitz, who is still the master patissier..
"That’s what motivated us to grow our business elsewhere and open up patisseries.
"We plan to have a Château Gâteaux Patisserie in every town in SA," he says.
From the seedy inner city, it now has a 12,000m² place near Riverhorse Valley that used to be an Astrapak facility. It has 260 staff members — and no shortage of big plans.
Lipschitz’ life story shows that the best industry to invest in is one for which you have a passion.
"I’m a cake-aholic, I enjoy creating desserts," he says. "I’ve always loved my mother’s baked cheesecake and use her recipe to make our ‘Andrea’s baked cheesecake’, which I named after her."
He worked in Europe and the Middle East, and spent a large part of this time working with the Hilton hotel group.
The growing middle class has helped Château Gâteaux’s rise, but there’s another surprising influence: television.
"The large majority of consumers are not too happy trying things that they either cannot pronounce or have never tasted before. But in the past five to 10 years since Master Chef and other TV cooking crazes brought the trends overseas closer and quicker, people are learning more about food trends," he says. As a result, it has become easier to launch unusual products.
"For example, we’re working on a key lime pie at the moment but up to a few years ago, no-one would have even known what it was. The red velvet craze came to SA only five years ago but it’s been popular in the US forever. We tend to take longer in SA."
You might think the rabid anticarbohydrate crowd, in some corners as vociferous as the anti-Zuma brigade, would have harmed sales. Lyle says this isn’t the case — thanks to people’s weaknesses.
"People on Banting or other diets are always going to cheat, and when you’re going to cheat you want to do it properly," says Lyle. The rise in Banting diets does, however, mean there is now a shortage of cream — which makes it tougher for bakers.
Those who’ve made the pilgrimage to Château
Gâteaux’s premises will attest to just how rewarding this weakness can be.