Besides, as if to underscore the opportunity available in particularly Capra-esque fashion, a major snowstorm had blanketed the area a few months earlier and closed the highways. Out-of-state bread producers had had a difficult time supplying the city, and for much of the Christmas season bread shelves had been bare.
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The Industry
"This is the dumbest industry," says Curtis. "Bakers produce a perishable product, and if it's not sold, they take it back." Moreover, despite an explosion of in-store bakery sales over the last decade, merchandising of house brands, he says, is done haphazardly at best.
The Gold Medal model, Curtis attests, is to teach stores how to better manage, market, and make money from their bakery departments. Bakery employees help stores merchandise the product -- setting up point-of-purchase displays, rotating day-old bread to the front of the racks, ordering different amounts for different days of the week. That kind of service may seem basic, but Gold Medal president John LaComte says he doesn't know of other bakeries providing merchandisers. The approach proved effective in New England. "With Dan's aggressive approach and knowledge, I would say, our bakery sales doubled during his involvement," says C. Lee Gibson Sr., former president at Valueland Foods, in Canton, Mass., and now executive vice-president of its parent company. "When he left the area, a lot of people were disappointed, including myself."
Curtis believes merchandising can be just as effective in Pittsburgh. "Consumption of store-brand bread by customers who already buy it can increase by 50%," he says, if a store pays attention to its house brands, pricing them well and displaying them prominently. "People will eat three pieces instead of two." Lofty claims, but ones that can be tempting to supermarket execs, who tend not to get wowed very often by bakers. "My enthusiasm is rare in this industry," admits Curtis, 58, who moved to Pittsburgh and formally took the CEO position in October 1990.
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The Marketing
Given a private-labeling strategy, the key to the project became clear early on: the primary customers for City Pride Bakery, as workers had named it, would be supermarkets, not individual consumers, and those supermarkets had to be signed on before anything else could proceed. A plant as big as the one the organizers were imagining had to hit the ground running just to pay overhead. More to the point, banks and private investors told Curtis flat out they wouldn't play without customer commitments.
City Pride's first target was the Giant Eagle Markets Co. supermarket chain. "Giant Eagle has a 46% market share in Pittsburgh," says Curtis, "and its private-label bread is a $13.5-million business." At the time that Curtis approached the supermarket chain, it was working with three out-of-state bakers. "When I asked Giant Eagle, 'Are you happy?' they said, 'Not necessarily.' "
Giant Eagle executives visited the Gold Medal operation in the summer of 1990 and came back impressed. And the package City Pride was offering was attractive. It promised not just a product that shoppers would choose but prices and services to woo the supermarket from established bakers. Starting that summer, this is the pitch potential customers, including Giant Eagle, got:
* Fresher product: City Pride won't use emulsifiers to preserve shelf life, thereby, says Curtis, eliminating a gummy taste; the bakery's "sponge and dough" method is designed to enhance flavor and improve color and appearance. More bakers are going back to that method, he says, but none of the bakers supplying Pittsburgh offers it. The breads will be delivered the day they're baked (versus a two-day to three-day wait from competitors), and, Curtis maintains, "customers will taste the difference." City Pride also will pick up the expense of redesigning packaging and using bags that cost a penny more to bolster appearance.
* In-store merchandising: City Pride will have a drop-ship merchandising program. Other bakers either drop off their product and leave store staff to stock and market it (at a price that gives stores 35% to 40% margins) or deliver direct to the shelves (allowing a 20% to 25% margin). City Pride will employ the former method -- but claims that stores will have 35% to 55% margins -- plus provide in-store merchandisers to visit stores daily and help with displays, product rotation, and ordering. Employing one merchandiser for every six stores and training customers' personnel will increase City Pride's costs, but the company expects to make it up by needing fewer truckers, since it's located closer to the stores than competing bakeries are.
* Higher customer profits: While its prices are comparable with the competition's, City Pride maintains that with better marketing, more store-brand bakery items, and a reduction of markdowns through better ordering (like most private labelers, City Pride won't take returns, because the bread will be owned by the supermarkets), stores will see a minimum 10% increase in gross profit. City Pride also will produce higher-end store brands to be sold next to regular store brands for better margins.
* Points for civic duty: A large part of City Pride's pitch has been for players to do the right thing for their Pittsburgh community. Participants would reap a public-relations dividend by supporting the worker-led manufacturing venture -- of some value in a union industry where anticorporate sentiment can run deep. For added leverage, Pittsburgh mayor Sophie Masloff used her considerable influence on behalf of the project, leaning on, among others, her personal friends in Giant Eagle management.
In September 1990 Giant Eagle signed a letter of intent to buy from City Pride, and in a July 1991 letter said it would enter a contract once City Pride is open and shows it can produce quality products. Is the supermarket skittish about working with a start-up? Perhaps; Joseph Faccenda, Giant Eagle's senior vice-president for buying and merchandising, declined to talk to Inc. about the relationship.
