In the life of many a celebrity chef there finally comes a time to hand over the business to those who presumably can grow it bigger, faster and more profitably.
It happened last year to Patina’s Joachim Splichal. Now it’s time for La Brea Bakery’s Nancy Silverton. The question is how it will affect a brand that in Los Angeles has become synonymous with good food for the past decade.
The locally based artisan bread company she started in 1989 out of La Brea’s original 2,000-square-foot store is about to vastly expand its reach after being sold to Irish conglomerate IAWS Group.
IAWS, with 2000 revenues of $860 million and international holdings that range from Power Seeds and Hardware to United Fish Products, purchased 80 percent of the bakery for $55 million in cash, as well as assuming its $13.5 million in debt. The company has an option to purchase the remaining 20 percent.
Actually, Silverton brought in outside investors to La Brea Bakery three years ago. At the time of the sale to IAWS, she, along with co-owners Mark Peel (her husband) and Manfred Frankl, had a 50 percent stake in the bread company.
“IAWS respects the fact that this group has grown the business from a boutique business to a substantial player in the bread market,” said La Brea Chief Operating Officer Philip Shaw. “It is critical to note that management is staying in place.”
Even so, the challenge is formidable: taking a delicate product made fresh daily and turning it into an international brand.
Key to La Brea’s chances is using par-baked, or “store baked” products. Store baked refers to the process in which bread is baked 80 percent through and then frozen and transported to retailers or restaurants, where the baking is completed.
Since 1998, La Brea has developed this product, built its Van Nuys plant specifically for store baked production and is now at capacity. Shaw estimates that 75 percent of La Brea’s 2001 revenues will come from its store baked line.
The reliance on store baked bread, which increases its scalability, may prepare La Brea to meet IAWS’ expectations.
“IAWS brings financial wherewithal and experience of an international company without strangling us with corporate baggage,” said Shaw. “The entrepreneurial attitude will continue to drive the business.”
With the infusion of capital, the company is in the final stages of negotiating a lease deal for a 189,000-square-foot plant just outside Philadelphia. The plant will serve all La Brea Bakery customers east of the Mississippi.
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.
