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Ask any retail bakery owner to identify the greatest challenge in operating a successful business, and you likely will hear, “getting your arms around everything to maintain control.” That need to control the business, rather than to allow it to control you, is no more evident than in managing a multi-unit retail bakery and a specialty wholesale bakery operation. The challenge to run both successfully is daunting.
Nancy Carey, co-founder, partner and director of research and development at Red Hen Bread in Chicago, indeed has the requisite “long arms” and has extended her reach with a team of business professionals and skilled bakery personnel. Together, they have built the company to include two retail stores and a central bakery, which supplies the stores and more than 300 wholesale accounts with a full line of authentic artisan bread products, pastries and sweetgoods.
Since Red Hen's founding in 1997, annual sales have climbed to top $3 million and have continued to increase despite the economic slowdown. Growth plans call for operating as many as eight retail outlets, while penetrating the Chicago area's foodservice market for more wholesale business.
A Chicago native, Carey was drawn to a baking and pastry career while attending the Culinary Institute of America in Hyde Park, N.Y. After graduating, she developed her skills in artisan bread making while working at Chabasso's Bakery, a South Haven, Conn., retail and specialty wholesale bakery. In 1996, she returned to Chicago, intent on opening a retail bakery, specializing in French bakery foods.
With financial support from a brother and other family members, Carey opened her store in 1997 in Chicago's Wicker Park, a neighborhood undergoing gentrification. She found, however, that she needed to pursue wholesaling “to help pay the bills” and discovered a market for her products.
No one was wholesaling authentic, hand-made artisan breads on a large scale,” Carey recalls. “I originally intended to wholesale only artisan breads. But, I included muffins, croissants and other breakfast items because my retail customers had asked for them.” Red Hen's first wholesale accounts included a gourmet food store and a couple of upscale restaurants.
Draws from retail products
As she adapted the store's product mix to meet customers' needs, Carey, in turn, made the items available to wholesale clients. “The idea was, and continues to be, to make more of what we already make for our retail stores,” she says.
By mid 1999, wholesale volume had grown to include 100 customers, and demand had outstripped production capacity in the 800-sq.-ft. store and bakery. Carey and her small crew were pumping out 1,800 baguettes and other bread products per shift with a four-deck oven, primarily for restaurants' dinner needs. “Our delivery system was a make-shift operation. We needed help to pull everything together,” she explains.
Carey's investor brother contacted Robert Picchietti, a close friend from their high school days. Picchietti, who had earned a bachelor's degree in electrical engineering and master's degree in international finance, was working for companies in financial distress. Seeing an opportunity to assist a successful, yet struggling, business grow, Picchietti joined Red Hen in October 1999 as president and chief executive office and a partner. “Our primary goal was to get the business under control and put together a team to build the business,” he says.
In May 2000, the company relocated production to an 8,000-sq.-ft. central facility in a commercial/ industrial section of Chicago's West Side. The bakery, which had been a Korean cake and cookie bakery, came with two vertical mixers and a revolving tray oven, which bakers use for pastries and sweetgoods. Red Hen relocated other equipment, notably a spiral mixer, from the original location. The four-deck oven remained to bake off product. To enhance bread production, Red Hen installed a second spiral mixer and an eightdeck with a semi-automatic loader.
The central bakery, which operates 24 hours a day, seven days a week, produces all products, including fruit fillings, from scratch ingredients. For example, bakers use several production methods to prepare 15 to 20 different doughs daily to make nearly 300 different SKUs of bread and roll products. Among the methods are biga for Italian doughs, such as ciabatta, a top selling item; and poolish for French sourdough bread and rolls.
To produce Red Hen's 64-oz. organic rustic loaves, bakers use a two-to three-day elaboration method, similar to levain, to create the final dough. “This extended process really develops the flavor without increasing acidity to a level that can occur with a levain,” Carey explains.
Each of Red Hen's five trucks deliver-product to the retail stores and wholesale accounts twice a day, morning and afternoon. Some 90 percent of the accounts are within an 8-mile radius of the bakery. “This is about the toughest part of the business,” Picchietti notes. “We considered using distributors, but they want 30 to 40 percent of the revenue, and we can distribute for a lot less expense.” A nearby truck leasing facility maintains the fleet for Red Hen.
Suburbs offer potential
Red Hen recently extended its deliveries into Chicago's far west and near northwest suburbs. “Those areas have some good restaurants, and we're getting recognition for our quality products,” he says. “The area around O'Hare (International Airport) has good potential because of a growing exposition center there and a casino that's expected to open.”
Picchietti adds that the types of wholesale accountsñupscale restaurants and food storesñhave not changed. “In fact, we continue to serve most of the original customers. We have added larger accounts, such as hotels, which have enabled the bakery to produce the existing product line in larger quantities. What they all have in common is that they look for the highest quality product possible.”
He explains that maintaining control of operations also includes having in place the personnel and procedures to select new wholesale accounts and to ensure that customers make their payments.
The company has two sales people, one to handle existing accounts and another to develop new business. New customers are required to sign personal guarantees if they want to have credit extended. “Most accounts are willing to do this. If not, they receive shipments C.O.D.,” Picchietti explains.
Red Hen recently hired a controller, who is responsible for tracking wholesale receivables. To help maintain control and hasten payments, the company began issuing invoices twice a month, rather than monthly. “Our customers, like those in other industries, pay when they receive a piece of paper. After only one month, the increased frequency of invoices has improved payments by 150 percent,” he observes.
Most wholesale accounts sell Red Hen's products unbranded. Carey and Picchietti say that though they would prefer product be sold branded, Red Hen loses control over its quality after delivery. “As we add our own stores, we will have that control and will increase branding, knowing that the stores will offer the needed quality,” he says.
The company opened its second retail store last fall in Chicago's trendy Lincoln Park neighborhood a few blocks from Lake Michigan. The 1,000-sq.-ft. store and the original location offer 40 to 60 different bakery foods, as well as sandwiches and beverages. The stores recently introduced fresh, chopped salads. “Our stores are bakeries with foodservice,” Picchietti says, “with bakery comprising 60 to 70 percent of store sales. Our focus is on bakery: pastries and, of course, coffee in the morning, and bread in the afternoon and early evening.”
Sandwiches helped to increase sales because they extended the stores' day-part sales. “We are considering adding more gourmet specialty food items for take-home dinners,” he says. “These will be packaged products, such as olive oils and other foods that complement meals, like bread does.”
Capacity to grow sales
Both retail and wholesale revenues continue to grow. However, the wholesale portion, as a percentage of company sales, has decreased slowly from 80 percent about three years ago to about 60 percent currently. The retail segment jumped several percentage points after Red Hen opened its second location.
“We're planning to add stores, which will raise retail's percentage,” Picchietti says. “Our bakery is not fully loaded. So, adding stores will not take away from our wholesale side. We can add to both without affecting either one. We have a long way to go before we run out of capacity.”
The company is examining several store locations in Chicago and its near suburbs. “A couple of suburban locations are particularly attractive,” he adds. “Residents there are accustomed to the same products offered at each Panera Bread or Corner Bakery. Our price points are a little higher, but our quality point is much higher.” If getting one's arms around a small business is requisite to maintaining control, Carey, Picchietti and their management team are gripped tightly. Better yet, that firm hold is enabling Red Hen's leadership to grow both its multiunit retail and specialty wholesale bakery operations.
A little dab will do youMaking naturally fermented artisan bread in Chicago's climate is no mean feat. Extreme ranges of temperature and humidity would challenge the best master bread bakers to produce consistent quality from mixed doughs allowed to ferment and shaped pieces allowed to proof in ambient conditions. At Red Hen Bread, bakers each day prepare as many as 20 different doughs, which may ferment or proof from 30 minutes to 36 hours, increasing the chances for inconsistency. The answer: Help comes from a small amount of dry yeast added to the final dough. “Consistency varied when we worked solely with allnatural leavening,” says Nancy Carey, co-founder, partner and director of research and development. “This was compounded because of different skill levels of our bakers.” French sourdough baguette production offers an example. Bakers place in the bowl of a two-speed spiral mixer bread flour, water, salt, old dough from the previous day's production, sour starter, and 0.05 ozs. dry yeast for each 13-oz. baguette piece. The ingredients are incorporated at first speed, and then mixed for 15 minutes at second speed. The mixed dough is allowed to rest for 30 minutes, then shaped by hand and placed between folds of couche material. The baguette pieces proof in ambient conditions for 30 to 45 minutes. Bakers inject steam into a deck oven just before loading the pieces, which then bake for 30 minutes at 500°F. “Using small amounts of commercial yeast helps maintain product consistency in the fluctuating humidity and temperature levels in our bakery,” Carey says. “We can achieve the fermentation we want without sacrificing quality.” |
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| Plain bagel | $ .35 |
| Butter croissant | $1.50 |
| Cherry Danish | $2.00 |
| Blueberry scone, 5 ozs | $1.75 |
| Banana date muffin, 5 ozs. | $1.75 |
| Oatmeal raisin cookie, 4 ozs | $1.75 |
| Apple tart, single serving | $2.50 |
| Multigrain dinner roll | $ .35 |
| Brioche bun | $ .75 |
| Tomato herb focaccia | $1.50 |
| Olio ciabatta, 28 ozs | $3.50 |
| Baguette, 13 ozs | $1.75 |
| Challah pan loaf | $4.50 |
| Milwaukee sour rye boule, 16 ozs | $2.00 |
| Sesame semolina boule, 16 ozs | $4.50 |
Red Hen Bread...at a glanceLocation: Chicago Web site: www.redhenbread.com Management: Robert Picchietti, president/chief executive, partner; Nancy Carey, co-founder, partner, director of research and development; Greg Magrum, vice president, operations; Herb Fingerhut, director of bakery operations; Chad Sellman, director of sales; Stephanie Jacobs, sales; Amy Karel, director of retail development; David Levine, director of retail operations; Eve Hepp, controller; Miguel Gomez, manager of distribution Annual sales: more than $3 million Product line: full line of artisan breads/rolls, bagels, scones, muffins, cookies, croissants, Danish, tarts, brownies, sticky buns Bakery business: 60 percent wholesale, 40 percent retail sales Number of wholesale accounts: about 300 Market territory: Chicago and several west and northwest suburbs Number of retail stores: two Size of central bakery: 8,000 sq. ft. Production methods: all scratch Major equipment: spiral and vertical mixers, manual and semiautomatic roll divider/rounders, bread divider, reversible sheeter, bagel machine, roll-in proofer, revolving tray oven, rack oven, 8-deck oven, bread slicer, walk-in refrigerator/freezer, five delivery trucks Number of employees: retail, 15; bakery/distribution, 30 Plans: operate as many as eight retail stores in a few years, increase wholesale business, introduce dessert line Bakery supply distributors: Dawn Food Products, Badger Murphy, Bear Stewart, Neiman Bros., European Imports, John B. Sanfilippo & Son |