Modern Baking's 2006 Profitability Leadership Awards

Expanded operations grow Deising’s sales

The Deising family credits progressive thinking for their success.

In 1965, Uwe and Ingrid Deising took over ownership of a storefront bakery in Kingston, N.Y.; one of 12 such operations in the small Hudson Valley town 40 miles south of Albany. Within five years, Deising’s Bakery was one of the only ones remaining.

More than just survive, the company has boomed, constantly increasing production to satisfy its growing customer base. The need for more space for storage, production, display and parking led to the purchase of a second location in 1980, a 7,500-sq.-ft. former tire factory in uptown Kingston. Three years later, the bakery expanded that space by an additional 2,000 sq. ft.

Uwe and Ingrid’s children, Eric, Peter and Norman Deising and Kirsten Wright, believe that their parents’ progressive thinking about production automation, energy savings and maintaining skilled, satisfied employees through training, competitive compensation and benefits packages were just as important as product quality in giving their bakery a competitive edge. And for the seven years since Uwe and Ingrid’s retirement, the siblings have been following their example.

The original mid-town bakery, for example, has become a cold site. Production for both locations is done in the larger uptown store, which is outfitted with a roll line that can produce 8,000 pieces an hour and a bread line that turns out between 2,000 to 3,000 loaves in the same amount of time.

Substantial initial investments in two rack ovens and a four-deck oven to replace the original 15-pan oven has paid off in not only speeding and streamlining baking, but providing additional savings by being more energy efficient to operate, says Eric Deising. Effective use of freezer space also is key to the volume production that allows Deising’s to maintain a menu of more than 400 items and an average of only five percent stales.

In the 1980s, when customers began looking for coffee and seating as well as donuts from their neighborhood bakeries, Deising’s added a counter for seating. Soup came next, in response to increased customer requests and, eventually, a full menu of sandwiches, quiches and other lunch items served in a 120-seat restaurant the company added in the building next door to the uptown bakery.

The mid-town store is still only open for breakfast; the uptown location is open for both breakfast and lunch.

Finally, the Deisings transformed an adjacent laundromat into two catering halls, where customers could hold functions of various sizes. (They kept a couple of the commercial washing machines to save money on laundering the operation’s linens.)

“During times of the year when the bakery is slower, the restaurant and catering are busy, so we don’t have down periods anymore,” Eric says.

Originally primarily a retail operation, the company now attributes about 35 percent of its almost $4 million total sales to retail and 30 percent to in-house catering. The remaining 35 percent is from wholesale, a category that Deising’s, renowned for its hard (Kaiser) rolls, Danish pastries and specialty cakes, is continuing to aggressively pursue, Eric says.

“We have the machinery to do it,” he notes.

Although the operation is mostly scratch, the family is not opposed to using mixes for some products, “if the quality is up to our standards and they can help us achieve greater consistency,” Eric adds. As far as product standouts, he identifies dessert cakes, particularly over the past two years.

“Specialty cake sales have really jumped as people’s taste buds have become more sophisticated,” he explains. “They may pick up some of their bakery items at the supermarket, but they’re coming back to neighborhood bakeries for more upscale items, such as beautiful cakes and pastries.”

Tweaking tradition helps Rao’s Bakery evolve

The Tortorices (from left): Josh, Jake Jr. and Jake III

Rao’s Bakery had been a Beaumont, Texas, landmark for more than half a century by the time Jake Tortorice took over operations in 1998. Tortorice had grown up in the neighborhood, immersed in the reputation and products established by the founder Johnny Rao in 1941, but he knew that the time had come to do some serious tradition tweaking.

Prior to purchasing Rao’s, Tortorice was involved in several major retail enterprises, including owning several Great American Cookies franchise units in Texas and Louisiana. After selling those units back to the franchisor, he decided to put his skills and experience to work remodeling and rejuvenating Rao’s.

But before rushing into any physical remodeling, Tortorice took a year to learn the ins and outs of the scratch bakery business to determine exactly what should go and what should stay. He determined that the original Rao formulas were definitely keepers and that all ingredients should be top-of-the-line. Tortorice also made it a priority to keep full displays of fresh products all day.

“I noticed that a number of bakeries will try to predict how much product will get them through the day and they end up running out by around 2 p.m.,” he explains. “We’re open until 6 p.m., and that means customers should be able to find what they want and find it fresh up until then.”

Tortorice also added coffee and some cafe seating. By the end of that first year, sales at Rao’s Bakery had doubled.

When it came time to refurbish, Tortorice wanted to freshen and update the bakery’s appearance without sacrificing its signature European, art deco ambience. What he did want to change, however, was how the 2,000-sq.-ft. space was divided between production and retail.

Originally, about 1,500 sq. ft. was dedicated to production. One of Tortorice’s highest priorities in remodeling was to switch that around to give the retail store the majority of the square footage, adding upscale display cases for the cakes and pastries, more hot and cold coffee and tea drinks, gelato and sandwiches, including Sicilian-style panini.

Sales almost doubled again by the end of the second year. Two years later, he opened a second Rao’s in Beaumont. The 3,500-sq.-ft. location (one-third of which is dedicated to production) features a drive-through window and inside and patio seating for about 80.

“We created this second location to be a dessert destination, whether people want to come for a break during the day, dessert after dinner or to buy a whole cake along with muffins to take to the office the next morning or cookies to take to school,” Tortorice notes. “It’s a place where people come for a brief, inexpensive getaway.”

Since then, the company has opened two additional locations. Rao’s third Beaumont unit is a 175-sq.-ft. kiosk, which operates five days a week in one of the area’s largest hospitals. The kiosk sells beverages, panini, cookies, muffins, cinnamon rolls and other individual pastries that are delivered two times a day from the original store.

The fourth store, a 3,200-sq.-ft. facility, one-third of which is dedicated to production, is the company’s first foray into the Houston market. To whet these new customers’ appetites for its gourmet-style cakes and pastries, Rao’s displays and sells a lot of slices and single serving desserts.

“Many people are hesitant to commit to buying a whole cake when they don’t know you,” Tortorice says. “A slice or two allows them to stick one toe in the water. Then, when they realize how much they like it, they’re ready to jump in.”

At Rao’s, new products are built and tweaked to Tortorice’s satisfaction before cost is considered. Once the cost is determined, price is set at a level that “reflects the quality of the product, but isn’t so high that it will scare people off,” he says.

Annual revenues for the four stores reach between $4 and $5 million, all of it from retail, Tortorice says. His sons, Jake III and Josh, oversee the stores.

“We weed out three-quarters of our competition simply by our level of quality,” he adds. “Customers won’t find products that look or taste in any way similar to items they can find in the grocery store.”