Though La Brea runs the risk of losing its product focus within the corporate structure of IAWS, Jon Garacochea, vice president of Pioneer French Baking Co. in Venice, viewed the transaction as a necessary.
"It's a good move if they want to build brand equity outside of Southern California," said Garacochea, whose company sold its frozen and partially-baked breads division to Maple Leaf Foods in 1996.
La Brea's East Coast presence could improve profit margins by sharply reducing transportation costs. Without an East Coast plant, Garacochea noted, "you open yourself to being knocked off by a local company."
But there are plenty of examples of regional food companies running into trouble after catching the eye of large national players as PepsiCo learned in its purchase, and subsequent sale, of California Pizza Kitchen.
In trying to make the leap national whether through acquisition or financing a company runs the risk of losing of focus, inconsistent product delivery or management turmoil.
Shaw believes La Brea's situation differs from California Pizza Kitchen because unlike CPK, La Brea's management team will continue to run its day-to-day operations without interference from its new parent company.
Of course, that will depend on bottom-line results.
"A public company's culture is to meet quarterly earnings, which creates enormous pressure (and) a vast cultural shift" for a private company like La Brea Bakery, said Eric Flamholtz, professor of human resources and organizational behavior at UCLA's Anderson School.
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