For years, a family bakery sold unbranded pastries to supermarkets. Should the owner now put his name on the box?
His bakery business was doing just fine. But in the fall of 2007, Jim Skinner called a meeting of his executive team and three-person sales force to discuss a big strategy shift. It was time, he believed, to reinvent the company and its image. For most of its 25-year history, the James Skinner Baking Company had been strictly a wholesale operation, selling unbranded Danish, coffeecakes, and cinnamon rolls to supermarkets and national bakery brands. Over the years, the business grew steadily, under the radar of consumers. The strategy produced profits nearly every year, and today the company, which employs 300, has yearly sales of about $60 million. Not bad for a family business in Omaha whose first customer was a six-store supermarket chain called Hinky Dinky.
Yet Skinner always had his sights on something more. If Skinner Baking was already selling nationwide, why not get the recognition and the riches that come with a successful national brand? The pastry packages already carried a label instantly recognizable to customers. All the company needed to do was add the Skinner name. Skinner floated his idea with his vice president, Audie Keaton, who warmed to the concept. But convincing the veteran sales team proved another matter. Longtime sales chief Doug Dinnin doubted a branded product would ever be worth the trouble, particularly because it could threaten one of Skinner Baking's main businesses -- providing no-name Danish and crumb cakes to supermarkets. (If the product is unnamed, the thinking goes, consumers will assume it was baked on or near the premises.) "The last thing I wanted to do was jeopardize the business that we had built," says Dinnin.
For Skinner, the fascination with branding was part instinct and part sentimental longing. As much as he wanted to expand the business, the pull of family lore also tugged at him. Back in 1911, his grandfather and great-uncle founded the Skinner Manufacturing Company. Besides developing one of the first macaroni-and-cheese products, the company created the iconic Raisin Bran brand, which became a bestseller before it was sold to what is now U.S. Mills. Hershey then purchased the rest of the Skinner company in 1979.
In 1983, Jim Skinner and his father, Lloyd, itching to get back into their own business, bought Hinky Dinky's baking facility, for just under $1 million. For a few years, the company sold its products as far afield as New York under the Catherine Skinner Danishes brand, named for Jim's mother. But in 1985, a national baking company offered Skinner Baking a large contract to produce goods to be sold under the national baking company's name. Skinner had a lot to gain: a guarantee of year-round business and an established company willing to tutor its younger partner. The downside: Skinner had to forfeit its own branded line.
The move paid off. But over time, Jim Skinner felt the business was too dependent on a few contracts from big-brand bakeries and supermarket chains, such as Kroger and Hy-Vee, a 200-store Midwestern chain. He had never forgotten the fate of another midsize food manufacturer he did business with in the 1970s. After it lost its two largest contracts, including one with the U.S. military, that company went belly up.
The only sure way to avoid that fate, Skinner was convinced, was to build a consumer brand. In March 2007, the company hired Andy Greenberg, a former paper company executive, as the company's first marketing chief, charged with developing a branding strategy. Greenberg had never worked for a food company, but he had a deep knowledge of packaging after nearly 25 years of selling labels to the supermarket industry. "I wanted someone who really would be looking from the outside in," Skinner says.
In September, Skinner met with his staff in the company's bunkerlike conference room. What followed was a three-hour conversation in which the executive team made its case to the sales staff. Keaton announced that the company was ready to take a new step by creating a branded product that would be sold in supermarkets' in-store bakery sections. (There is an important distinction in the grocery business between the in-store bakery and the shelves on which national brands are displayed.) He argued that the 8 percent annual growth rate of strip-Danish sales could double once customers associated the Skinner Baking brand with its cranberry and apple Danish. Without a strong brand name of its own, moreover, Skinner Baking would face a future in which it would remain hostage to the whims of a few big customers. "If you don't have a brand, you're a manufacturing facility," Keaton said. "If you do have a brand, you're a company."
Greenberg stressed that the branding push would work only if the sales team's members were fully on board. After all, they had been with the company for years and had close ties to customers. He asked them to think about re-creating the initial vision of the company. "If we could blow this company up and start over," he said, "wouldn't you rather go to market with a branded product?"
The sales team pushed back, worried that branded Danish would diminish the locally baked feel of the product. "There are a number of large retailers that could have a significant problem" with branded baked goods, Dinnin said. "We're risking losing their business. Why would we change what's been working so well?"
Good question, given that the company had yet to approach its supermarket customers to discuss the change. In fact, Skinner Baking had done no market research to support the plan. All along, it was clearly Jim Skinner's desire to see his family's name on store shelves across the country that was driving the strategy shift. The meeting ended with the sales staff still on the fence.
A few weeks later, Skinner called another meeting. Greenberg flipped on an overhead projector and unveiled a six-slide PowerPoint presentation titled "What's in a Name?" The slides had headings such as "Encourages repeat purchasing" and "An identity associated with a promise and reputation." The presentation moved on to the drawbacks of lacking a brand: "Zero name recognition" and "Neutral consumer mindset associated with 'generic' products." Dinnin and his two regional managers started to come around. They were relieved to hear that prices wouldn't rise. Those $3.99 strip Danish and cinnamon rolls wouldn't suddenly reappear as premium-priced branded products.
But there was still one nagging doubt. "What happens if a supermarket doesn't want the brand?" they asked. Would customers simply walk away from Skinner Baking and turn to another unbranded supplier? Skinner couldn't promise that wouldn't happen. The best he could do was reassure the group that his gut told him such an outcome would be unlikely. "If they've been an account for 15 years and seen success," he said, "selling them shouldn't be that hard."
And that was that. Over the next year, Greenberg and Skinner's 23-year-old son David, who joined the company as its marketing manager, moved into gear. They decided the Danish packages would simply carry the full name of the company. "If you look at the history of brands," Greenberg explains, "there is often a higher degree of loyalty with a brand named after a person or place." The company would leave in place the design of the black labels, along with the images of colorful fruit, but would add the company's name in large red and orange letters. As supermarkets switched over, the company would phase out the unbranded business.
The label will eventually include "Skinner Baking 108," for the number of layers of dough in each pastry. The pitch line on the package: "Layers upon layers of flavor." The sales team has so far visited a dozen customers, showing up with samples carrying prototype labels. Dinnin says no one has ruled out buying the branded pastries, but no one has signed up yet, either. Jim Skinner isn't worried. Now, he's getting back to the kind of company his grandfather built.
A Danish With a Future
The timing is perfect for Skinner Baking to think about the next step in the evolution of the company. There isn't a major national player in the in-store Danish category, and while other companies are playing it safe because of the recession, Skinner Baking is thinking ahead and setting itself up for future growth. This should result in a huge competitive advantage as the economy rebounds. I understand the sales staff's concerns, but customers aren't fooled. If something comes in a package with any kind of label on it, they know it wasn't baked in-store. They just want a product that tastes good.
It's Not About Grandpa
This sounds like more of an emotional play than a strategic play. Skinner should have put some money into researching whether using his last name would be the best move. Just sticking the owner's name on the label isn't necessarily the answer. I don't see what's in it for the supermarkets. I'm also worried that the company is pursuing two different missions. For years, it has been producing for other brands. Now, it's all about creating equity in its own name and increasing the value of its brand. Trying to do both at the same time seems to be a bit of a contradiction and can get pretty messy.
Brevard, North Carolina
Everyone Loves a Family Name
Skinner Baking made a bunch of smart moves, starting with choosing a family name for the brand. A family name gives a connotation of having been handmade and of quality assurance. The company was also smart to keep current prices in place; you don't want to scare off retailers, and this allows the option to increase prices as the brand gains traction. I also agree with leaving the current labels largely untouched. The risk of losing customers who are familiar with the label itself outweighs the upside of attracting new people who are curious about a new label.
Food and Brand Lab, Cornell University
Ithaca, New York