Profile and analysis of an employee-founded bakery: the struggles to gain financing and customers.
Pittsburgh's City Pride Bakery relied heavily on the appeal of civic allegiance to lure its investors as well as its customers. But the long-term future of the employee-founded company will depend on executing the basics better than the competition.
On a saturday morning in late may 1989, scores of angry bakers and depressed machine operators gathered at their local union hall to figure out what to do next. They were out of work: two weeks earlier Continental Baking Co. had shut down its Braun Bakery plant, after 100 years in Pittsburgh, leaving 110 people unemployed.
Many of them had spent 10 or 20 years at Braun, and even if there had been other jobs beckoning in the city -- which there weren't -- they weren't about to change careers. The union and the city had offered Continental an array of concessions to entice it to stay; three years earlier a similar package of wage cuts, tax credits, and help building a new facility had kept the Clark Candy Co. from exiting Pittsburgh, which lost a dizzying 100,000 jobs in the 1980s. But Continental chose to consolidate operations at a more efficient plant in Philadelphia. In the process, Pittsburgh lost its last major bakery.
We'll start our own, people grumbled. Hell if we're going to move to Philadelphia. (Continental had offered positions to anyone who'd go with it.) If a major company won't locate here, we'll just start our own.
That morning, 67 people kicked in $50 each, talked about a boycott on Continental's products, and began calculating who would approach the mayor's office for help and how to start gathering market research.
Three years later, with the active efforts of more than 100 people and investment from 23 sources -- including five venture-capital groups, four banks, nine government agencies, and a battery of religious organizations -- City Pride Bakery has become a reality. If it succeeds, it will be a shining example of public-private partnership at its best. Housed along the Allegheny River in a spanking new building that, at 650 feet, is almost two football fields long, City Pride is scheduled to churn out its first loaves of bread for customers this summer. Year-one sales projection: a profitable $26.2 million.
Just about everyone involved with the enterprise voices a bit of amazement that it has really come together. "Who would have thought a group of workers could take a dream and transfer it to all of these people and make it materialize?" muses Evan Bergwall, City Pride's director of human resources. "What are the chances of that happening?"
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The Story
Part of the appeal of starting a large bakery was simply intuitive. Pittsburgh is the only metropolitan area in the country without a major wholesale bakery; its major brands of bread are produced in places such as Philadelphia, Buffalo, and the Akron, Ohio, area, and trucked in. Surely, figured the group, they could create a wedge in the local market for a product as dependent upon freshness as bread is. Part of the appeal, too, was revenge: "People had a burning anger to get back at Continental, to some degree, for screwing up their lives," says Tom Croft, executive director of the Steel Valley Authority (SVA), a regional economic-development group.
Pittsburgh is a city of mills, of unions, and of neighborhoods; many people have traditionally stayed in the area and worked where their parents worked, and the determination among locals to kick-start job creation is fierce. As the unemployed bakers began drawing on their savings, across town a collection of steelworkers, community groups, and elected officials was working to pull together a new steel minimill. While that effort ultimately didn't work out, a coalition involving many of the same partners began forming around the bakery project.
"A lot of people who worked at Braun were telling us we were crazy for trying this," says Joe Zajac, who had been assistant production superintendent at Braun and was elected chairman of the newly created workers' committee. But others thought the idea had merit enough, and the SVA located $100,000 from the Pennsylvania Department of Commerce to do a prefeasibility study and work on a business plan.
The workers hired a consultant, contracted out market research to the University of Pittsburgh, and by the fall of 1989 were conducting focus groups on the viability of introducing a new brand of bread to the Pittsburgh market. In November the consultant brought in another adviser, Daniel Curtis. And Curtis had completely different ideas about what the group should be doing.
Curtis had grown up in the bread business and was developing the frozen-products division of a bakery in San Diego when the Pittsburgh project called. He'd made his name at the Gold Medal Bakery, in Fall River, Mass., where revenues rose from $4 million to $20 million in his first two years there; it's now a $75-million company. Gold Medal distinguished itself in its handling of private-label production -- making bread that carries stores' own labels -- for many of the supermarkets in New England.
Forget about trying to create a new brand, Curtis advised the Pittsburgh workers -- going head-to-head with the Pepperidge Farms of the world takes millions of dollars in advertising alone and is an extraordinarily risky venture. Instead, he encouraged, look to private labeling: supermarket chains generally have in-house breads produced by outside bakers who also make their own brand-name products. Those bakers consider the private-label breads less of a priority because they don't make as much money on them, said Curtis; you can compete on that ground. His arguments and savvy made sense to the fledgling group. "I saw how Dan talked to the store managers, the questions he asked," remembers Zajac. "I went back to our group and said, 'This is the SOB we need.' "
In February 1990 there was a huge blowup. The consultant who'd been leading the expedition quit when people began leaning toward Curtis's strategy. With the seed money already spent, the workers were devastated, says Curtis. "They asked me, 'Will you do this?' And I said no." But he agreed to talk to supermarkets and to continue his formidable commute between California and Pennsylvania to help the group develop a business plan.
