Massimo - The Italian Baker

Image 1: Massimo logo (Jommakan.blogspot, 2011)

As a human, we cannot live without food. Human are always searching for food to survive while bread is a common food for everyone and also the mainly energy resources. Sometime when we are hungry but busying doing our work, we will think to buy bread to fill up our stomach it is because bread has affordable price, it is tasty, easy to be found at any convenient store nearby and also convenient to carry. Nowadays, firms are producing few types of packaging and sizes of bread that give variety choices to consumers comparing to the traditional loaf bread. Therefore, bread is important elements in our life and would never be eliminated.

        In the bakery industry, there are many company producing bread such as Mighty White, Hi-5, Gardenia and so on. As on 21 March 2011, a brand new bread in Malaysia, Massimo, is a product of The Italian Baker Sdn. Bhd. (TIB) was established. It is wholly owned subsidiary by Federal Flour Mill (FFM) Berhad which is the largest miller in the Malaysian wheat flour industry and under the Robert Kwok’s PPB Group. The Italian Baker Sdn. Bhd. is located at Taman Perindustrian Pulau Indah in Port Klang. Moreover, this RM120 million new baking plant is strategically located near FFM Pulau Indah to facilitate easy access to the raw ingredients needed for the baking process (Mpc.gov.my, 2011).

       In the Italian word, Massimo literally means “maximum”. The Italian Baker Sdn. Bhd. currently has 2 production lines consisting of a 10,000 loaves-per-hour bread line and a 24,000 rolls-per-hour roll line. They are state-of-the-art fully automated lines using the latest American and European technology (Theitalianbaker, 2013).

Image 2 : Products of Massimo (Alice, 2011)

(PPBgroup, 2013) TIB products include:

•          Massimo Sandwich Loaf with Wheat Germ (first of its kind in Malaysia) – 400g & 600g
•          Massimo White Sandwich Loaf – 400g & 600g
•          Massimo 100% Whole Wheat Loaf – 420g
•          Massimo Duetto Cream Roll – Blueberry & Cream, Coffee & Cream
•          Massimo Favorito Cream Roll – Chocolate & Corn
•          Massimo 100% Whole Wheat Cream Rolls – Vanilla Favorito
•          Massimo 100% Whole Wheat Cream Rolls – Strawberry Duetto

The Italian Baker Sdn Bhd believes that “Wholesome Goodness, Maximum Satisfaction” is not just a tagline for advertising used. It could doubles up as the company’s motto, giving wholesome goodness products to maximize the satisfaction of consumers, also for the staff of the Italian Baker who have passionately contributed to the availability of the good and wholesome products. Thus, the Italian Baker started to develop “Malaysian-Italian” products to fulfill the 21^st century customers’ demand for quality bread that corresponds to their dynamic life-style (Mpc.gov.my, 2011).

Image 3 : The Demand Curve (Investopedia.com, 2009)

Since Massimo was established the amount of Massimo that consumers plan to buy during a given time period at a particular price is called quantity demanded. The consumer will be easily affected to consume the product by its price, when Massimo price is lower, the quantity demanded will definitely goes up. It is illustrated by a downward-sloping demand curve drawn with the quantity demanded on the horizontal axis and the price on the vertical axis. There are still many influences that will change the demand of Massimo, including the price of related goods. Let say if another brand like Gardenia drop down it price, the demand of Massimo will decreases because people are willing to pay lesser for the substitute. Beside this, if the price of complement for example margarine rises, the demand of Massimo will decreases too. Something interesting that if people expect that the price of Massimo will rises in the future, the current period demand for the goods will increase. Apart from this, when consumers’ income increased, Massimo which is a normal good, people will consume more of it. But the preferences of consumers acting the role of controller, by the time consumer are likely to support Massimo than other breads, the demand will increase or vice-versa (Pearson Education Canada, 2010).

Image 4 : The Supply Curve (Investopedia.com, 2009)

On the other hand, the quantity supplied of Massimo is the amount that the Italian Baker Sdn Bhd planning to sell and willing to produce. The firms are willing to produce more and more bread if the price is getting higher. It is illustrated by an upward-sloping supply curve drawn with the quantity supplied on the horizontal axis and the price on the vertical axis. The factor of production like wheat or flour rises in price will increase the cost of production and company will decrease the supply. Some more if the price of a substitute rises, firm would decrease their sales of the original good and the supply for the original goods will decrease, contra the price of a complement increases causes the supply of Massimo increase. Other influence is the expected future price of Massimo rises will cause to reduce the amount they sell. Furthermore, the advance in technology will increase the quantity of supply also (Pearson Education Canada, 2010).

For any fixed quantity of bread available, the height of the demand curve shows the maximum price that consumers are willing to pay for the quantity of the good. The price on the demand curve at this quantity indicates the marginal benefit to consumers of the last unit consumed at the quantity. For any quantity of Bread, the height of the supply curve shows the minimum price that the Italian Baker Sdn. Bhd. must receive to produce that quantity of breads. As a result, the price is the marginal cost of the last unit produced at this level of output.

Graph 5: Equilibrium Price (Mrski-apecon-2008.wikispaces.com, 2008)

When the quantity demanded by the consumers is equal to the quantity supplied by the Italian Baker Sdn. Bhd., there is the equilibrium price. The shortage arises when the market prices below the equilibrium price and it will cause the price rises, which decreases the quantity demanded and increases the quantity supplied. Besides, when the market prices above the equilibrium price, a surplus occurs and make the price falls, which decreases the quantity of supply and increase the quantity of demand.

 (Gardenia.com.ph, 2013) As we all know, the Massimo faces competitors which selling the homogeneous bread and the main competitor is the Gardenia, which is Malaysia’s most popular brand in producing bread. The price of elasticity of demand is inelastic demand, the price of demand increase or decrease, the quantity of demand changes less than the prices of demand. The situation is there do not have or very less of substitution goods exceed, and it is a daily product like the two product, Gardenia bread and Massimo bread. The prices differentiate are not that big, consumers not very sensitive to the price of the prices, but the quality, flavor and types of the bread. The Massimo bread with 100% wheat cost RM 3.50 while Gardenia bread sells RM 3.20. Although there is some different prices of the two goods, but the prices less affect the consumer willingness, so the elasticity of demand is inelastic.

In fact, Massimo is produced by Robert Kuok’s business group. Gardenia bread is selling at RM 3.20 a loaf compared with Massimo selling at RM2.50. The price of Massimo bread was supposed to be a promotional price and last for two years, the price never rise. The reason for the stayed price is The Italian Baker Sdn. Bhd. sourced their flour from their own mill, Federal Flour Mill (FFM), which owned by Robert Kuok. In addition, all flour millers get millions of ringgit in subsidy from the BN government including FFM. Massimo has the ability to maintain the selling price because they source from their own mill and pass the RM80 million subsidy from the government to consumers. However, Gardenia as a competitor of Massimo, it does not enjoy government subsidy because they don’t have its own flour mill (The Malaysian Insider, 2013).

Further, Massimo is a firm producing cream rolls and loaf of plain bread. But many company such as Lavendar, Seasons, RT Pastry House, Tous LesJours or Yeast Pastry, they are those company which opening branches and selling own baking products. Although the operation style and products are different from Massimo, but production are still considered as bread, so that Massimo might be facing a huge competitors that selling pastry bread. As the prices are higher than Massimo, and price is always the mostly concerned elements for consumers take consideration but the pastry bread are successful in fulfilling the demand and need or desire of consumers. Therefore, the fall or rise of demand can be result from the choices that consumers made.

          At last, from the process of producing Massimo bread to the sales of product to consumer include a lot of economic theories. Those theories are utilized by the Italian Baker Sdn. Bhd. nowadays to ensure the company made profit every year, so that the firm can survive in this industry. Nevertheless, it also support the firm by achieving their mission or goal such as producing affordable bread to public. Next, through Bernama Media (2011), it showed that Thomas Brandt said Malaysia has potential in the bakery industry because bread is moving up in Malaysia, it is getting more popular over the last five to seven years, so there is a positive uptrend in Malaysia also an advantage for Massimo.

References List:

Gardenia.com.ph (2013) About Us – The Company. Available from: http://www.gardenia.com.ph/index.php/about-us/52-about-us-the-company.html [Accessed 22 October 2013].

Investopedia.com (2009) Economics Basics: Supply and Demand [photograph]. In: Reem. H. [online]. Available from: http://www.investopedia.com/university/economics/economics3.asp [Accessed 23 October 2013].

Jommakan.blogspot (2011) Loaves Of Passion [photogragh]. In: Alice. Y. [online]. Available from: http://jommakan.blogspot.com/2011/09/loaves-of-passion.html [Accessed 22 October 2013].

Mpc.gov.my (2011) Analysis on the Business Transformation of Organizations through Innovation. Available from: http://www.mpc.gov.my/mpc/images/file/Publication%20&%20Case%20Study/ANALYSIS%20ON%20THE%20BUSINESS%20TRANSFORMATION%20OF%20ORGANIZATIONS%20THROUGH%20INNOVATION.pdf [Accessed 20 October 2013].

Mrski-apecon-2008.wikispaces.com (2008) Mrski-apecon-2008 - Chapter 4- The Market Forces of Supply and Demand [photograph]. In: Mr. Ski. [online]. Available from: http://mrski-apecon-2008.wikispaces.com/Chapter+4-+The+Market+Forces+of+Supply+and+Demand [Accessed 23 October 2013].

Pearson Education Canada (2010) Supply and Demand. Available from: http://people.uleth.ca/~michael.lanyi/Misc/Teaching/Courses/Temp/park_7e_sm_ch03.pdf [Accessed 21 October 2013].

Ppbgroup.com (2013) PPB Group Berhad. Available from: http://www.ppbgroup.com/our-businesses/bakery.php [Accessed 22 October 2013].

The Malaysian Insider (2013) The Gardenia vs Massimo bread war – Sakmongkol. Available from: http://www.themalaysianinsider.com/sideviews/article/others-bread-is-too-salt-the-gardenia-vs-massimo-bread-war-sakmongkol/ [Accessed 21 October 2013].

Theitalianbaker.com.my (2013) The Italian Baker – Massimo. Available from: http://www.theitalianbaker.com.my/funbuns.html [Accessed 22 October 2013].

Yahoo News Malaysia (2013) MALAYSIA HAS POTENTIAL IN BAKERY INDUSTRY, SAYS BODY. Available from: http://my.news.yahoo.com/malaysia-potential-bakery-industry-says-body-070118432.html [Accessed 23 October 2013].