A biscuit manufacturer in Scotland

Turning a disaster into a catalyst for positive change

Biscut FactoryA company, previously part of the Nestlé group, produced a high volume of wafer based biscuits. It sold these predominantly to supermarket chains as own label products as well as white label branded. The business suffered a serious fire and as a result lost the use of 12 of its wafer ovens. The factory building was damaged and the parts that were structurally unaffected were smoke damaged.

The total cost to replace each oven with a modern day equivalent was approx £6.0m. The delivery time, however, was in excess of 12 months.

Our client was properly insured on a new for old basis and could have replaced all 12 ovens at insurers’ expense. However the long term impact to customers of waiting more than a year for supplies to resume was unacceptable, despite the protection offered by the insurance policy.

On behalf of the insured, we suggested that instead of replacing 12 ovens in 12 months time it would be strategically more sensible to purchase two much larger ovens which would meet the capacity needs of the company. Further, as the cost of these ovens was cheaper, money was now available to make major modifications to the production line.

We also discussed other innovative and collaborative approaches with insurers such as purchasing a small sub-contractor in order to speed recovery and yet at the same time reduce the total overall cost to insurers.

As a result of our involvement, our client emerged from what had appeared to be a disaster:

  • with the two most modern production lines in Europe
  • being back in business nine months earlier than would otherwise have been the case
  • employing fewer people on the production line, thereby reducing unit costs and increasing its competitive edge
  • improving throughput which also reduced costs
  • retaining customer goodwill by being back in production quickly and at reduced prices

By interpreting the policy correctly and negotiating strategically (as opposed to simply reinstating assets), the apparent disaster of the fire was turned into a catalyst for positive change.

Pragmaticum Limited is Authorised and Regulated by the Financial Conduct Authority. Ref: 501527

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