"This will feel different from a union shop," says Joe Zajac, "not so much because of the ESOP as because the group that started this didn't have jobs, and they did this, they own this." Thirty to 40 people from the original ex-Braun group are expected to work at City Pride, and, says Zajac, "we're going to set the pace, which new people will pick up."
The company's main oven is one of the biggest producers in the country, with the capacity to make 9,800 loaves an hour, versus a standard 7,600. High production will allow City Pride to offer competitive prices. Curtis puts the best light on the fact that the equipment is used, calling it a plus that the people running it will have assembled it and know every screw in its belly.
City Pride managers will have to be good gamblers: Gold Medal's LaComte likens the commodity business of baking -- with fluctuating costs of flour, sugar, and soybean oil -- to a crapshoot at times. But City Pride has inherited considerable organizational and floor experience from Braun and has gone out and bought management as well. Planning for numerous baked-good line extensions for customers, City Pride expects profitable sales of $26.2 million for its first 12 months of production and $31.4 million for its second year. Capacity should top out, say managers, at $53 million in sales, probably by year three. By then they hope to be less dependent on Giant Eagle, which will make up the bulk of sales for the first year.
* * *
The Risks
Curtis sees three main vulnerabilities for the company as it prepares to open. First, again, the equipment is used; downtime if there's a problem threatens the daily-delivery strategy. Second, three unions are involved -- bakers, engineers, and, for delivery, teamsters. While Curtis praises them all for not being adversarial, he says candidly that negotiating is draining and if he'd known there'd be three unions involved, he might not have signed on. Further, having these unions in an ESOP environment may have unexpected effects. Third, City Pride's actual implementation has to work smoothly, on budget, and on time; "the danger is that we may stub our toe on service." Another risk: a large number of the workers will be new to the industry.
Giant Eagle will test the breads and require them to be of quality equivalent to that of Thomas' or Pepperidge Farm. Until they pass muster, a lot of people will be holding their breath. "I believe in it; I know it's going to go," says Mayor Masloff. "Of course, it'll be my neck if it doesn't." Moreover, the projections City Pride is ramping up for are only guesstimates; the mix of bread and other products the customer supermarkets actually purchase will be at their discretion.
Still, at this point the participants in the venture are lined up to take credit. "A lot of people claim ownership of City Pride," says Point Venture's Minno. "Politicians, government groups that gave funding, social investors [like churches and so-called social-justice funds], the labor component, private investors." A lot of people also have their necks on the line: Curtis, for one, who rises at 4 a.m., walks for several miles, goes to church at 6 and has breakfast at the Hyatt at 7 each day like clockwork. In addition to investing two years' time, working a year out of pocket, and putting $200,000 cash into City Pride, he brought along one of his three daughters and her family when he moved to Pittsburgh, and he has hired his son and son-in-law. To better his odds, Curtis carries a lucky rock given to him by a nun investor at City Pride's ground breaking. "It never leaves my pocket."
"This really isn't that big a project," says Pittsburgh National Bank's Ned Randall, referring to the funding in the scheme of the city's economy. "What makes it unique is the situation. And maybe what it tells us is that it doesn't have to be a big project to make an impact, and that we should seek out more small projects for our neighborhoods."
Impact? Look no farther than the factory floor and the people who believed from the beginning. "I've been working two jobs to make ends meet," says Pearl Alexandre, who was in the shipping department at Braun for 23 years. "I'm looking forward to our working for ourselves, being a part owner. I think we'll give people a hell of a loaf of bread."
EXECUTIVE SUMMARY
Company: City Pride Bakery, Pittsburgh
Concept: To produce private-label breads for regional supermarkets and to provide merchandising help as a way to boost sales and distinguish the company from competitors, all while saving jobs in a shrinking industry
Projections: Year-one (ending June 1993) sales of $26.2 million with a $1.3-million pretax profit; year-two sales of $31.4 million with a $3.1-million pretax profit
Hurdles: Generating profit quickly enough to make further financing optional; executing large-scale production with no time to ramp up; keeping primary customer satisfied while bringing on others; remaining competitively priced if other bakers cut their prices
The Founders
City Pride was conceived of three years ago by a group of unemployed bakers, who worked with economic-development and government agencies to pursue the idea. Ten percent of the bakery is employee-owned, and 30% will be by 1996. CEO Daniel Curtis was hired by the workers in October 1990 to pull together financing and help secure customers; he most recently was director of frozen products for Fornaca Family Bakery, in San Diego, and before that was with Gold Medal Bakery, Uddenberg's supermarkets, Country Home Bakeries, and ITT Continental Baking Co. Curtis was a POW in Korea and has a master's in marketing from Syracuse University
Financials
City Pride Bakery Projected Operating Statement ($ in thousands)
Year One Year Two
(7/92-6/93) (7/93-6/94)
Sales $26,200 $31,400 (Giant Eagle, Riverside/BiLo)
