Sweet Deals

Tweet

There is no Mrs. Beasley; like Betty Crocker, she's a fictional figurehead. But if there were a Mrs. Beasley, she'd be amazed at where her company seems headed, considering its humble -- by Hollywood standards -- beginnings.

The business started as a hobby. For years Nancy Fox and her sister, Lisa Blons, both of Encino, Calif., baked cakes, cookies, and muffins from recipes they had learned from both of their grandmothers. In 1980 the sisters went into business, hoping to make a living from their lifelong passion for baking. They called it Mrs. Beasley's because they felt the name embodied the perfect, homey, old-fashioned image. And they insisted on using only the highest-quality ingredients, such as Ghirardelli chocolate and Skippy peanut butter. And while banking on those traditional flavors, they also created some slightly exotic products: raspberry bars, pistachio muffins, zucchini bread.

At first they worked from Fox's home, but eventually they opened a tiny shop on Ventura Boulevard in Tarzana. Demand, fueled entirely by word of mouth, was high from the start. "Our very first Christmas was phenomenal," recalls Fox, a high-energy blonde, now a cookbook author and a consultant to Mrs. Beasley's. "We had to stop taking orders because every muffin that came out of the oven was already promised. We not only took the phone off the hook -- we had to lock the doors of the retail store."

But as Mrs. Beasley's approached its 10th anniversary, its founders realized it had grown too big to be run as a home-style business. And they found it harder and harder to balance the December demand with the negative cash flow of the other 11 months. Ultimately, they sold the business to Kayne Anderson Investment Management Inc., of Los Angeles. The firm, which has $6 billion under management, hired Harris to run Mrs. Beasley's.

At the time, taking over the tiny company seemed like an abrupt change of course for Harris. A veteran food executive, he had previously run the W.R. Grace restaurant group, which includes the Charlie Brown, El Torito, and Reubens chains, and was chief operating officer of the House of Blues chain. But then, Harris is a study in contrasts. He drives a Jaguar XK8 convertible with a vanity plate (K HARIS), but pumps his own gas. He dines at Wolfgang Puck's see-and-be-seen restaurant, Spago, where the hostess greets him by name, but prowls corporate auctions to pick up used office furniture.

In fact, frugality is an integral part of his strategy. "We treat this business as if we're spending our own money," he says. (Actually, he is spending his own money. Harris and two other executives are part owners in Mrs. Beasley's; Harris declines to reveal percentages.) So he holds overhead to 5% while monitoring the competition.

But ingredients are the one thing that Mrs. Beasley's doesn't pinch pennies on. Bakers remain faithful to Nancy Fox's original recipes, using not only her favorite brand-name products but also her labor-intensive methods. Workers hand-squeeze the lemons, for instance, for the company's Miss Grace Lemon Cakes. (Mrs. Beasley's acquired its rival, Miss Grace Lemon Cake Co., in 1995.) They hand-place M&Ms on cookies and press them in, hand-roll chocolate chunks in powdered sugar, and hand-pour glaze over brownie bars. "That's the reason these cost what they cost," Harris says, pointing to a small basket of treats that sells for $30 plus shipping.

As late as mid-1999, Harris was an Internet novice. "My only experience was ordering dog food -- and books from Amazon," he admits. But he quickly realized that Mrs. Beasley's and E-commerce went together like, well, like sugar and butter.

The Web offered an obvious new way to reach consumers. Mrs. Beasley's was already selling to companies that routinely sent gifts to 20 or 200 or even 2,000 recipients. Harris wanted to build a Web site that would make life easier for the corporate buyer ordering all those baskets.

First, Harris struck a deal with Guidance, of Marina del Rey, Calif., which had built the Web sites Footlocker.com and Rightstart.com, among others. Guidance took 12.5% equity in Mrs. Beasley's for what Guidance CEO Robert Landes unabashedly calls "a world-class Web site." In exchange for its equity stake, Guidance cut its normal $150-an-hour rate down to $60, says Landes, who, at six feet eight, looks like the Holy Cross basketball player he once was. At full price, Landes estimates, the site would have cost $1.5 million; on account of the equity deal, the price tag for the 90-day job came to $900,000. Harris expects to spend $500,000 to $750,000 annually to maintain and expand the site.

Compared with many E-commerce sites, Mrs. Beasley's is actually quite simple. The site uses just 200 SKUs, or product numbers; there's no animation; it doesn't upsell, Ã la Amazon ("Customers who bought the lemon cake also bought these products"), because Harris finds that tactic annoying. But the site is a powerful tool for overburdened buyers. They can include up to 500 recipients in a single order. They can send the same item to many different recipients: a $30 gift basket to 300 customers, for instance. Or they can send different items to different recipients: a $50 gift basket here, a $100 version there. Thanks to the personal address book, they can easily send the same gifts to the same recipients year after year (or avoid doing so). They can establish a corporate account and track orders. And they can start a big order (orders for $2,000 to $5,000 are routine during the holidays), save it online, and finish the transaction later.

 PREV  1 | 2 | 3  NEXT 

Read more:

Sign-up for our Start-up Newsletter

Email Address: