VALUE - ADDED CORNER
No loafing
Booming business leads wheat cooperative
to expand Gerard’s Bakery to East Coast
By Tony Kindelspire
Editor’s note: This article is reprinted
courtesy of The Daily Times-Call,
Longmont, Colo. All rights and control
remain with the Times-Call.
tour through Gerard’s
Bakery is like observing a
carefully choreographed
version of “The
Nutcracker” — performed
seven days a week, 365 days a
year. The dough must be just the right
consistency and temperature before it
runs through the cutting and molding
machines, which must be constantly
monitored to make sure the resulting
hoagie rolls or hamburger buns coming
out the other end are just right for
baking.
Meanwhile, at the other end of the
plant, while the loaves rising in the
proofing ovens must be removed at the
precise time, the packaging department
is running like a well-oiled machine.
“We make 150 different types of
breads and rolls out of this plant,” said
Gary Knight, Gerard’s president and
CEO.
The bakery makes what are known
as “artisan breads.” Unlike mass-produced
breads bought in the grocery
store, the bread batches are smaller
and the ingredients are much higher
quality. But you couldn’t walk into a
store and buy a loaf of Gerard’s if you
wanted to.
The company’s customers are primarily
restaurants, wholesalers and
franchises; Quizno’s and IHOP are two
of its better-known clients. Though
the client base already spreads from
coast to coast, it’s about to get a lot
bigger: Gerard’s has just invested $7.5
million in a plant in North Carolina as
a counterbalance to its West Coast
presence in Livermore, Calif., just outside
Oakland, which opened in 2001.
The company will keep its headquarters
here [in Colorado], on the Interstate
25 Frontage Road, but expansion into
larger population areas is a natural evolution
of the company, Knight said.
And the growth has been explosive.
Since Gerard’s French Bakery — a
longtime local staple — was bought by
Mountain View Harvest Cooperative
in 1996, the company has grown 20
percent a year.
In 1999, Gerard’s had about $12
million in sales, a figure that had
grown to between $25 million and $30
million last year, Knight said.
“We have been growing so fast that
most of our capital goes into buying
new pieces of equipment so we can
make another piece of bread,” he said.
The Mountain View Co-op, a group of
Colorado wheat farmers who were
interested in forming a value-added coop,
rose from the ashes of the bankrupt
Farmer’s Marketing Association (FMA).
“The whole value-added part of it is
farmers trying to get away from simply
producing generic quantities of commodities,”
said Dave Carter, one of
Mountain View’s founding board
members. A national agricultural consultant
on co-op development and
organic production, Carter was president
of the Rocky Mountain Farmer’s
Union at the time of Mountain View’s
inception.
By making the co-op value-added,
Carter said, “the farmer maintains control
throughout the whole process. In
the traditional systems, the farmer gets
cut out very quickly. They’re on the
bottom rung of the ladder.”
Mountain View has 232 members,
or shareholders, most of whom are
wheat farmers, Knight said. Carter is
no longer involved with Mountain
View, other than as a shareholder.
“One of the initial challenges that
we faced was that when producers
stepped into this value-added business,
there was the feeling that there would
be a quick turnaround in (return on
investment),” Carter said, explaining
that it took time to grow and any profits
had to be put back into the business.
“I think that was a real turnaround
for the cooperative, when the shareholders
said, ‘Look, we are going to be
patient, and we’re willing to put in the
time it’s going to take to build this into
a successful business,’” he said.
At the time it was moving away
from the FMA and becoming
Mountain View, the board received a
grant from the U.S. Department of
Agriculture to study the feasibility of a
co-op run by wheat farmers.
The study they commissioned had
two main recommendations. One was
to partner with an existing company, in
this case Gerard’s, which had been
around for decades. The other recommendation
was to specialize in what
are called “par-baked breads,” basically
high-quality breads and rolls that are
baked almost to completion and then
frozen for distribution. The end user
— a Quizno’s, for example — will
complete the baking, ensuring a fresh
taste every time.
Four years ago, the Mountain View
board of directors tapped Knight, a
veteran of the food industry who had
run his own $100 million company and
a $1 billion division when he worked
for Frito-Lay, to come in and run the
company.
Knight said the thump-thumpthumping
of the dough mixers through
the walls was music to his ears. The
fact that Gerard’s is a smaller, leaner
company with the ability to make decisions
quickly and room for an added
emphasis on customer satisfaction has
a great deal of appeal, he said.
The American Institute of Baking,
he said, conducts 5,000 audits a year
worldwide, and only 3 percent of the
companies audited receive a “superior”
rating.
“This one’s gotten those nine years
in a row,” Knight said with pride.
Gerard’s employs about 170 at its
headquarters, 40 in administration and
the rest in the 19,000-square-foot bakery
portion of the plant — which doesn’t
include freezer space.
About 100 more are employed in
California, and the North Carolina
plant is expected to add 108 jobs over
the next three years.
The company’s current locations —
here and Livermore — produce about
350,000 bread items every day. If one
of the three lines that runs continuously
is putting out baguettes, it’s making
2,400 of them an hour. For hoagie
rolls, that number is 7,200. “It takes
about four hours from the time the
ingredients are mixed to the time the
product is finished,” Knight said.
He said that in Europe, he’s been to
bakeries roughly the same size that are
fully automated, every step of the way.
Unlike at Gerard’s, all of the ingredients
and spices are not mixed by hand.
The temperature of the dough is not
monitored by humans. And the cornmeal
on top of the hamburger buns is
not put there by hand.
But Knight said the dance will continue
as it has at Gerard’s, and customers
will continue to be the better
for it.
“We don’t have the demand for
automation, and we want to have the
flexibility in what we do,” he said.
USDA helps Colorado farmers cook up profitability
By Dave Carter
Editor’s note: Carter is one of Mountain View’s founding
board members and a national consultant on co-op development
and organic production.
More than a decade has passed since a small group of
farmers huddled around a breakfast table in a Denver area
café to discuss opportunities to develop a new valueadded
business. These farmers understood the difficulties
facing producer-owned businesses because they all
served on the board of directors of a grain handling and
feed milling cooperative that had been forced into bankruptcy
from a series of disastrous events. Yet, they were
confident that a new producer-owned venture could capitalize
upon the emerging opportunities in value-added agriculture.
The question they asked at the breakfast was: “Which
opportunity?” Discussion ranged from grain milling to straw
fiberboard processing. They realized they needed help in
finding the answer. With the assistance of the Rocky
Mountain Farmers Union, the group approached USDA Rural
Development and received a $100,000 Rural Business
Enterprise Grant, which they used to finance a feasibility
study into 14 potential opportunities for value-added processing
for Colorado wheat farmers.
The studies funded by USDA Rural Development concluded
that emerging developments in the baking industry presented
a strong opportunity for a farmer-owned enterprise.
The studies also encouraged the producers to partner with
an existing business rather than construct a new facility.
Armed with the feasibility results and an ensuing business
plan, the key leaders organized a new cooperative in
1996 as Mountain View Harvest. They located an existing
state-of-the-art bakery north of Denver and successfully
negotiated an arrangement to purchase the business. An
equity drive conducted between November 1996 and
March 1997 generated $5 million in producer capital, and
on April 15, 1997, Mountain View Harvest Cooperative formally
purchased Gerard’s Bakery.
Gerard’s was a small regional company producing
roughly $6 million in baked goods that were sold primarily
in the food service channel. Under the ownership of 225
Colorado wheat farmers, Gerard’s generated $26.8 million
in sales and earned a net profit of $1.2 million for its shareholders
in 2004.
But that growth didn’t come without pain.
At the time of purchase by the cooperative, the majority
of sales from Gerard’s went to one foodservice outlet. As
that outlet grew rapidly, the bakery cooperative struggled
to keep pace. Every dollar earned by the new cooperative
was poured back into expansion. And, because of the lowmargin
business, the bottom line suffered significantly.
Again, the wheat farmers turned to USDA Rural
Development. In 2002, Mountain View Harvest successfully
applied for a $342,210 Value-Added Producer Grant (VAPG)
to finance the expansion of its product line and to fund
marketing efforts to diversify its customer base. With the
assistance of the VAPG funds, the board and management
were able to establish new products and outlets that
helped transform a $1.3 million operating loss in 2001 into a
$1.4 million net profit in 2003.
