A liquid-extract plant costing a full year of sales (1996)

Can you build the vessel before the demand arrives

The essence of this investment appears to lie less in the size of the sum than in the fact that the vessel was prepared before the demand existed. In 1996 the market for liquid extract was small; convenience-store prepared food and standardised restaurant kitchens were both still ahead. Build only once demand is confirmed and the two years to start-up hand the opening to someone else. Build early and, if the demand never comes, an asset worth a year of sales sits idle. The reading that construction is cheap in a downturn can be seen as an attempt to collect a discount equal to the size of that gamble.

The other thing visible here is that the plant’s specification — hygiene and automation — became the commercial terms themselves. What the head offices of convenience-store and restaurant chains wanted from an ingredient was not only taste but assurance that nothing would go wrong. The antibacterial walls and the air showers came from manufacturing necessity, yet they worked as material for convincing buyers who came to look around. Is capital spending an increase in capacity, or a visible form of the trust you show a customer — the course of this plant shows that there are industries in which the second reading does the heavier work.