Originally appeared on Bakingbusiness.com
9/1/2012 – by Dan Malovany
Paul Pigott plays by his rules when running a business these days. Shortly after earning his MBA from the University of Washington during the 1990s, the young entrepreneur got swept up in the dot-com era. While many business owners ended up either in rags or riches, he survived the time’s mania with one highly successful venture and two that didn’t do so well.
It’s funny how, unlike college, life in the business world teaches experience first and lessons later.
“I’ve learned an awful lot of what it’s like to run businesses, and I really began to appreciate businesses that have a positive cash flow because in the dot-com era that was rather scarce,” Mr. Pigott recounted. “I also learned to value competent people and having them in the right positions.”
In 2003, Mr. Pigott bought Seattle, WA-based La Panzanella. The Italian bakery operated a neighborhood deli and distributed its rustic bread to about 100 customers, but the linchpin of the acquisition was the all-natural Croccantini, a rectangular artisan cracker sold in regional grocery stores and specialty retailers and served in the bread baskets of the area’s hotels and fine restaurants.
Using a formulation developed by the mother of the bakery’s founder, La Panzanella’s Croccantini — “crunchy little bite” in Italian — are 4-by-7-in., herb-infused, kosher crackers that won seven honors at the National Association for the Specialty Food Trade’s Fancy Food Shows since 2001. Recognizing its potential for growth, Mr. Pigott sold the labor-intensive bread business, ditched the money-losing deli and focused on the profitable Croccantini operation.
With Antonio Galati, director of business development for the cracker line, who worked for the original owners, Mr. Pigott began the arduous effort of developing a national network of distributors.
“We’re fortunate. The crackers almost sell themselves,” observed Mr. Pigott, owner and CEO. “They’re not a me-too product. People come up to me and say, ‘I know your crackers. I had them at a party.’ I hear that all the time. We just needed distribution, and we’ve been consistent about attending shows to get the product noticed.”
The diligence paid off. La Panzanella’s Croccantini sales have increased more than tenfold since Mr. Pigott purchased the company. It now operates a 27,000-sq-ft automated plant in Tukwila, WA, and opened a 57,000-sq-ft facility in Charlotte, NC, in October 2011 to more affordably serve its Midwest and East Coast customers.
The golden rules
La Panzanella has prospered by following Mr. Pigott’s rules. The first: Stay the course and never compromise on quality. “Our role here is to protect the recipe, protect the process and don’t mess with something that is a very well-loved product,” he said. That’s why production remains in-house instead of moving it to a contract manufacturer as volume grew.
Another rule: Create new products that reflect consumers’ changing tastes and offer them multiple options for snacking and meal occasions. The large Italian crackers come in top-selling Original and Rosemary as well as Sesame, Fennel, Garlic, Onion, Black Pepper, Whole Wheat and Tomato/Oregano varieties. They are packaged in 5-oz boxes, 8-oz bags or bulk for food service accounts. Introduced in 2010, the 1.25-by-2.5-in. Mini Croccantini made their debut in Original, Rosemary, Sesame, Black Pepper, and Garlic flavors and are sold in 6-oz. trays or 6-lb boxes.
Initially, Mr. Pigott feared the minis might cannibalize the larger cracker business, but the two ended up complementing each other. That’s because the large crackers are used for special occasions, while consumers perceive the minis as snacks. “The big [crackers] are really artisanal, rustic and cool-looking, and there is a real charm to them,” he said. “But if you are at home and want to have a couple of quick crackers, having a mini that’s already cut to the right size is helpful.”
To spearhead further product development, the company hired a Culinologist to identify trends that are appropriate for the line.
In the specialty cracker market, Mr. Pigott noted, the new product challenge involves developing not only different shapes and flavors, but also multiple packaging formats to target myriad snacking and meal applications. One example is packaging a couple of minis to accompany airline meals.
Yet another rule: Diversify as the business expands. La Panzanella started with small distributors, retailers and food service accounts. “Once we had success there, the bigger chains noticed, and then the biggest guys said, ‘We better bring you in.’ It kind of snowballed,” Mr. Pigott said.
He considers these big accounts frosting on the cake. “You never want them to be the cake because you never know when they’ll change their minds and want something else,” he noted.
Rules to manage growth
As the company expanded during the past two years, Mr. Pigott built a professional but entrepreneurial team with many members who had success taking small businesses to a national scale. “I wanted people who were comfortable in businesses that were in a start-up phase,” he explained.
To complement Mr. Pigott and Mr. Galati, who continues to be responsible for the company’s cracker business development, the company added Mark Juranek, CFO; Terry Wakefield, COO; Bob Culleeny, director of quality assurance; Andrea Arnold, director of human resources; and Todd Whitten, director of sweets business development. Mr. Whitten oversees sales of the tea cookie products that La Panzanella acquired two years ago. With these managers supervising their different departments, Mr. Pigott takes a more strategic role on guiding its future.
“From when I bought the business to today, it’s night and day, especially for the production process,” he said.
When he purchased La Panzanella, Mr. Pigott acquired a bakery that needed to focus on the fundamentals. Just like a virtual business, a brick-and-mortar operation comes with its share of headaches. “When I got here, I spent a lot more time on the production floor looking for ways to improve our processes,” he recalled. “Antonio Galati was — and is — doing a great job growing our sales, but our operations were extremely inefficient.”
In the beginning, production yields averaged 45 to 50%, and Mr. Pigott said it was easy to see why. Mixer operators, for instance, would check the weather before making dough. On a hot day, the operators would add cool water. On cool days, the water would be warmer so the dough didn’t get too sticky or soft. “Talk about taking a rustic or artisan approach to baking,” he said.
La Panzanella eventually set guidelines for mixing times and stored doughs in a temperature-controlled room until they’re used. “I didn’t hire these guys to be meteorologists,” Mr. Pigott recalled. “It wasn’t fair to them, and it wasn’t helping our product consistency.”
Likewise, the dough got beat up during the sheeting process, baked unevenly in a jury-rigged system made up of three pizza ovens and the crackers cooled in tubs because there was no room for a conveyor in the original facility.
After moving to the Tukwila plant and nearly a decade of strategic investment in automation, yields now average above 90%. “Every time we invested in equipment, we made sure that it didn’t have any impact on what the product looked like,” he said. “We want each product to look a little different, but it needed to be lighter, darker or crispier within a range of acceptability and prescribed boundaries of what we considered consistent.”
Production by the rules
In production, Mr. Pigott follows two overriding rules. First, attention to best practices delivers powerful dividends for productivity and profitability. Second, new and well-maintained equipment beats repairing old equipment every time.
Located in suburban Seattle, the Tukwila facility houses cracker, tea cookie and seasonal hard candy lines and has 14,000 sq ft of processing and packaging, 10,000 sq ft for warehousing and 3,000 sq ft for offices. La Panzanella’s headquarters is located a couple of blocks away in an office building, thus maximizing production space at the bakery. The Charlotte bakery houses an artisan cracker and tea cookie lines and has a 30,000-sq-ft warehouse, 20,000 sq ft for processing and packaging and 7,600 sq ft for offices and administration.
Both bakeries are working toward British Retail Consortium certification under the Global Food Safety Initiative. “There are a lot of things I have to think about today that I didn’t have to worry about in 2003,” Mr. Pigott said.
At the Tukwila plant, 35 employees work on two 12-hour shifts between four and five days a week. The size of the workforce can vary as volume increases with the holiday season or new orders come online.
Flour is stored in a 70,000-lb silo, and operators add minor ingredients to a horizontal mixer by hand. The cracker dough is stored in troughs that are rolled into a temperature-controlled room to ensure better product consistency.
A lift automatically elevates the troughs to the hopper of a Thomas L. Green sheeting system custom-designed for producing La Panzanella’s Croccantini crackers.
After dough is extruded on the belt, a series of reduction stations rolls it to an appropriately thick sheet. A docking system perforates the dough sheet to create the crackers’ bubbly appearance and crunchy texture.
The sheet is then cut into four full-size Croccantini or 16 mini crackers. Each full-sized cracker can be evenly divided into four minis. The sheet is lightly salted before baking in a 60-ft tunnel oven from Gemini Bakery Equipment. “With the new oven, our products are a lot more consistent and even colored than what they used to be,” Mr. Pigott said.
After cooling for a few seconds, the freshly baked crackers travel under a simple roller device that separates the Croccantini pieces. The large crackers slide down a metal chute to a 75-ft-long mesh cooling conveyor.
During Baking & Snack’s visit, the bakery produced mini sesame crackers. Employees manually snap the crackers into minis and put 40 to 42 pieces into plastic trays. The trays pass through a Bosch Doboy flow wrapper, metal detector and a Hitachi industrial inkjet printer that adds code dates and lot tracking data to the packaging before they are packed 12 into a case. A variety of other packaging systems can be rolled into place for boxed, bagged and bulk-packaged products.
Room for expansion
The Charlotte facility’s production mirrors the Tukwila operation. The biggest difference is that the custom-designed sheeter and oven are 40% wider. About 50 employees work three 8-hour shifts three to four days a week as the company further ramps up its business. “This facility also has the extra space to drop in additional production capacity to support incremental business growth,” Mr. Pigott observed.
La Panzanella currently sells about as many products in Washington and Oregon as it does from Virginia to Maine. Expanding to the East Coast provides a huge opportunity for growth. “If you think of the relative population sizes, we should be doing 10 times the business in the Northeastern corridor than we do around here,” he said. “But the market is different out East. There are a lot more small stores and fewer large chains, and it’s expensive to ship product there. Now that we have the Charlotte plant, those distribution issues go away.”
In an effort to expand internationally, La Panzanella lined up distributors in Canada, England and New Zealand, and the company recently exhibited at shows in Japan, Singapore, Germany and France. Additionally, it’s exploring ventures in Australia and parts of Asia. The company is developing smaller packaging formats for the Asian and European markets as well as exploring ways to extend the products’ shelf life.
Eyeing new national and international markets is part of a long-term strategy to double the company’s revenues over the next five years. For Mr. Pigott, chasing the fast buck is in his dot-com past. Now, he’d rather play by a different set of rules. “We’re profitable and want to remain profitable,” he said. “It’s not only about growth. It’s about remaining healthy, and we want to be prudent in how we grow.”