KANSAS CITY — A razor sharp focus on customer service and a restrained approach to price increases in the face of cost inflation are among strategies that have helped bakers retain business customers amid unsettled market conditions for baked foods, executives at two independent baking companies said.
While there has been no escaping ingredient price swings of the past two years, transparency and a disciplined approach that avoids imposing on customers sudden, large price increases has proven effective, the executives said.
For the 2023 bread industry perspective, Milling & Baking News profiles a century-old independent baker from the Northeast as well as a startup baking business based in Houston.
Strength for private label
A company long focused principally on the private label market, Gold Medal Bakery, Fall River, Mass., has enjoyed a lift in demand over the past 12 months.
“It’s been an improved year obviously,” said Justin J. LeComte, vice president of sales and marketing at Gold Medal. “People are very price conscious. Private label has seen growth, especially through value channels. Core grocery has seen significant growth, too.”
The fourth-generation baking business was established in 1912 by Mr. LeComte’s great grandfather Auguste LeComte.
“He was a bartender,” Mr. LeComte explained. “During that time, he wanted to make some extra money and bought a bakery oven. He installed it in his basement and began baking small bread loaves. It was delivered the same way as eggs and milk.”
The company expanded into a larger facility in Fall River, and today operates three baking plants. Two of the three are connected by a large bridge in Fall River. Gold Medal also operates depots sprinkled throughout New England.
Within its product line, which today includes sliced bread, rolls, English muffins and specialty products, Mr. LeComte said organic and non-GMO bread have become a growing part of the business.
While Gold Medal bakes a mix of branded and private label products, Mr. LeComte described private label as “the main driver of the business.”
Before the recent pickup in private label bread sales, the subcategory had been losing market share steadily over the last several years. Mr. LeComte said Gold Medal for many years has diversified its mix of customers to avoid overreliance on any one aspect of its business.
“We’ve always had our hand in other avenues,” he said. “We’ve done co-packing. We’ve expanded into parts of foodservice, also in-store bakery programs and deli programs.”
Mr. LeComte said the company has worked to “saturate” its existing customer base, maximizing its presence in stores beyond the commercial bread aisle.
While variety bread has become more popular in private label, Mr. LeComte said the basics still rule.
“Core products are still the core products — traditional white bread and wheat,” he said. “There has been more of a push for non-GMO type products.”
Even as demand for private label has grown with consumers becoming more price sensitive amid an inflationary environment, Mr. LeComte said navigating the current marketplace with extreme ingredient price volatility over the past two years has been a challenge. With its wide range of private label and co-packing customers, Gold Medal has taken steps to ensure the company is viewed as a dependable supplier.
“What we’ve done, especially after the last two years, is we’ve needed to make sure we are reliable,” he said. “We can’t be shut down because of commodity outages.”
The company has increased its warehousing space for many of its commodities.
“We have days, weeks worth of production in ingredients in storage,” Mr. LeComte said. “For smaller commodities as well. We work closely with our (commodity) advisers to stay on top of things.”
At the same time, Gold Medal has stepped up communications with customers to “make sure they understand the length we are buying out in some instances,” he said.
Communication is key when it comes to passing along higher costs to customers, Mr. LeComte said. Gold Medal has been careful not to impose sudden, large price increases on customers and in some instances has not fully reflected cost increases in its pricing, he said.
“The transparency was the biggest part about pricing,” he said. “The private label bread market is highly price sensitive. We worked to keep pricing inside the ‘saving’ range for consumers. Sometimes you have to bear the brunt of the higher costs as well.”
The challenge for Gold Medal is not simply that prices are up but that they have been very volatile, Mr. LeComte said.
“I wouldn’t want to be on the spot market right now,” he said. “Since 2019, flour prices are still up about 30% even though compared to 2022 prices are down 60%. The insane highs and lows are hard to combat at times.”
Looking forward, finding ways to innovate and building “paths to customers” will be priorities for Gold Medal in 2024 and beyond, Mr. LeComte said.
“One priority is finding ways to be more efficient with our routes,” he said. “That’s another reason we want to increase our saturation in channels where we sell. The objective is to stop less and drop off more at the same time for greater efficiency.”
Efficiency also has been and will continue to be pursued by the company in its production lines.
“Robotics is where we need to play — bringing robotics into packaging and post production,” he said. “We’ve started to make serious efforts in this area.”
He said the company has completed an initial rollout of robotics and is in the middle of additional projects. Challenges include figuring out how to package, box and sticker products.
Starting from scratch
If Gold Medal is one of the older bread baking companies in the United States, Houston-based Bread Man Baking Co. certainly is among the newest, established in 2017.
While Bread Man was established more than a century after Gold Medal, the two companies share striking similarities in their origin stories. Just as Gold Medal was established by a bar tender who ultimately abandoned his original craft in favor of a baking career, Bread Man Baking was established by an entrepreneur whose family had owned a bar and who decided to make a major change mid-career.
The company’s founder and chief executive officer, Tasos Katsaounis, had learned to bake bread as a child. The eldest child of a Greek immigrant family, Mr. Katsaounis’ mother was unaccustomed to white bread when she came to the United States and found rustic bread to be too expensive. She baked bread at home and Mr. Katsaounis learned the craft as a 10-year-old.
A graduate of Penn State University, University Park, Pa., with a degree in business management, Mr. Katsaounis’ baking skills sat dormant for a lengthy period while he advanced in a career in management consulting.
“My last position was at Accenture,” he said. “My background mostly was in tech, learning and developing and change strategy. I wasn’t satisfied with my career and was considering a change. I began baking bread again, after having not baked for so many years. I did it as an escape from my career — the stress and dissatisfaction.”
What began as an outlet turned fairly quickly into a change of profession.
Mr. Katsaounis was baking artisan loaves and began posting images on social media.
“Bread Man started as a cottage bakery in 2017,” Mr. Katsaounis said. “I realized I’d stumbled onto something, and I made a career pivot. I started baking in February and quit my job in June.
“The posts gained attention, and local chefs took note.”
His first customer in July 2017 was a local hotel, and soon afterward other independent restaurants and hospitality groups with a few locations also began asking for samples.
The company’s name was the brainchild of his daughter Alexandra who was told one day when she was six the wonderful smelling bread in their kitchen was not for the family but was for customers. She replied, “Oh, so you’re a bread man baking company.”
In late 2017, the new company moved into a shared/kitchen commissary and a year later leased a larger, 5,000-square-foot space to expand production.
“The first space was tiny,” Mr. Katsaounis said. “I should have gone into something larger.”
Whole Foods Market became a customer in 2018.
“They had been shopping us at farmers markets,” Mr. Katsaounis said. “There is a lot of focus by Whole Foods on supporting local vendors in this market. They really helped us build the brand.”
Initially, Bread Man offered a range of natural fermented artisan products — sourdough batard.
It became clear that for the business to grow, Mr. Katsaounis needed to offer a broader range of products.
“I wanted the business to succeed and realized that I also needed to bake a bun, a hoagie, a pullman loaf,” he said. “I discovered we needed to be a one-stop shop. So we needed brioche and challah buns. You can’t be a bread baker in Texas without a burger bun, without Texas toast. These are products that pay the bills.”
Bread Man’s growth continued at a dizzying pace through COVID, despite the fact that most of its business was either foodservice or hospitality.
“The city of Houston shut down, and 78% of our business was foodservice,” he said. “The other 22% was sold in 12 Whole Foods stores.”
During the height of the pandemic, Bread Man was able to sustain its business by picking up 25 H-E-B supermarket locations to supplement the baked foods on their shelves during a period of peak demand. Additionally, Mr. Katsaounis set up pop up locations in front of closed customer locations, restaurants mostly, selling bread.
“I learned important lessons quickly during COVID,” Mr. Katsaounis said. “It’s valuable to be able to diversify yourself. Luckily, we managed that disruption. We still grew that year. We had triple-digit growth during COVID.”
Managing a startup business during the pandemic was no small feat, Mr. Katsaounis said, adding that he took pride in his ability to retain most of his staff.
“We treated our employees well,” he said. “We continued to pay people. A couple got fearful and left, but most remained. I stopped paying myself a salary, and we had to reduce wages. It was a proud moment. We kept up production.”
By the time the pandemic struck, Bread Man already had made a name for itself in Houston for its artisan baked foods, but a program implemented at the start of the pandemic further burnished the company’s reputations.
Mr. Katsaounis said he saw a story on television about furloughed hospitality workers, and the difficulty one mother was facing feeding her family. He said it struck a chord, thinking back to his own family history and the difficulties his mother experienced keeping food on the table.
Bread Man offered free loaves of bread to furloughed hospitality employees.
“It helped grow our business,” Mr. Katsaounis said. “The PR helped us stay relevant in the market. Afterward, chefs who weren’t working with us reached out.”
Indicative of the company’s continued growth, Bread Man in December 2021 moved into a larger production facility, giving the company 40,000 square feet of space to meet customer needs and accommodate future growth.
The company currently operates three production lines — one is devoted to artisan products, one to buns and rolls and one to pullman loaves. The lines feed into 10 double Revent rack ovens. The facility has blast freezing capability and a freezer large enough to hold 10 truckloads of products.
“We still have room for growth in this facility,” Mr. Katsaounis said. “We’re working five days a week with a single shift right now. We expect a second shift to begin on a limited basis before long.”
Mr. Katsaounis said the most recent quarter represented another all-time high for Bread Man and that the company is hotly pursuing significant new business opportunities.
“We are producing at our peak, and we are being considered for higher volume business,” he said. “It was a record quarter and it’s very exciting.”
He said Bread Man is in the running for co-packing opportunities for a consumer product.
“It’s a french toast, and we’re being considered to bake the brioche,” Mr. Katsaounis said. “We are finding opportunities from various areas coming to us. We have a very agile group and production. We’re at a stage when we will look at everything so long as it makes sense. It enables us to feed our creative side as bakers.”
To help accelerate growth, Bread Man partnered with Vantage Partners TX LLC in 2019, which Mr. Katsaounis said has assisted “all aspects” of the business, including becoming its primary investor.
Today, the company serves foodservice customers across Houston and ships frozen product as far away as Utah and Arizona to the west and Florida to the east.
“The three pillars of our business is to focus on consistency and quality, which is tough at scale for artisan; customer service, building relationships and putting out clients’ needs at the forefront; and a culture in which food safety is crucial,” Mr. Katsaounis said.
The company’s baking plant is Safe Quality Food Program (SQF) certified, which he said is an important selling point when Bread Man pursues new accounts.
Even as raw material costs have escalated, Mr. Katsaounis said Bread Man customers have worked to minimize price increases.
“Foodservice is our predominant business, and restaurant owners and hospitality groups seem to be the last ones who want to raise prices,” he said. “There is a genuine fear of losing business. Their costs are rising just as much as anyone’s. We don’t see the demand change. They still want 2021 prices or 2022 prices. We’ve done what we can to try to be competitive with some of the other large players in the market. We try when possible not to pass along the cost increases, but we’ve had to raise prices. But we have done it in minor increments over time, and we have tried to do it skillfully but respectfully.
“Pricing always will be a conversation. Everyone is looking for reasonable price. We have seen a slight decrease in margin. When you’re in a commodity driven business, it becomes a balancing act. You have to find that sweet spot. I don’t want to go in immediately and be reactionary. We have a relationship. We take it seriously. You don’t want to hit your customers with a 15% to 20% increase overnight.”
While conventional products like buns and rolls have been an important part of the Bread Man’s business, the overall mix remains a 50/50 split between artisan and conventional products. Mr. Katsaounis expects that ratio to be maintained for the foreseeable future, even as the company tries to keep growing rapidly.
“With what we have in our pipeline, there are four ‘big fish’ we’re going after, if we close the four deals, we’ll still be half artisan,” he said.
Asked whether he is glad he made the career switch, Mr. Katsaounis said choosing to start a baking company is not for those looking for extra leisure time, adding that he has zero regrets about the change.
“I’ve never been happier,” he said. “My parents are still alive — they live in Dallas. When I brought them here, and they saw the wide open warehouse, my mother started crying. I was confused. She looked at me and said, ‘This is exactly why we came to this country.’ They knew I had a good job before, but this means so much more. It has been very exciting, non-stop. We have not seen a slowdown period since we started the biz. I’ve never worked harder in my life, but this is my passion.”