The amount of effort Sam Abraham puts into searching for the best bargains on equipment to outfit his bakery is well-illustrated by a call he received recently from a baker in North Carolina who heard about him from a third party in Toronto.
“They told me you can find anything,” the caller told Abraham.
He could be right. Abraham has gone as far as San Francisco in search of what he needs at a price he can afford. That kind of determination no doubt is one reason he’s been able to successfully transform his Old Vienna Baking Co. in White Oak from a retail operation to a successful wholesale bakery.
Abraham could see that larger competitors would soon squeeze out his store, a business that’s been in the family since just after the turn of the 20th century. Supermarkets found years ago that customers had an appetite for in-store baked goods, and rushed shoppers discovered that it was much easier to pick up a dozen cookies or a strudel while they were shopping for meat and produce.
As supermarkets installed bakeries, many of the region’s small shops closed their doors, unable to compete on price or convenience. Abraham knew his bakery, as good as it might be, had little chance of survival, much less growth, so about two years ago he began to sell to the food service trade.
“The supermarkets were going to eat us up,” says Abraham. “We fought them tooth and nail as long as we could.”
Abraham decided that the way to make his business grow was to go into wholesaling, baking bread and rolls and delivering them to restaurants, hotels and other commercial customers. His father, who still holds a minority stake in the company, balked at the idea, but Abraham persisted.
The conversion looks like it is paying off. Old Vienna Baking is running more than 100 percent ahead of last year’s sales. In fact, wholesaling accounts for about 75 percent of its business, a turnaround from a few years ago, when 95 percent of the dollars came through the retail side.
Abraham has reduced costs, too. He has cut production time by 25 percent, trimming labor expenses while increasing output.
Cracking the large nut
It hasn’t been easy. Old Vienna Baking is up against The BreadWorks, a highly visible vendor that serves many of the same customers that Abraham is seeking. Small accounts are relatively easy to come by, but it’s the big ones that build credibility and lead to other large customers.
The big ones, however, often require negotiating through a bureaucracy to get approved. It took Old Vienna Baking six months and myriad meetings and phone calls to snatch the Hilton & Towers business, its first large account. The work paid off, though, and Old Vienna Baking now has about 30 customers, including the Sheraton Station Square and the Doubletree Hotel.
Smart purchasing
The equipment used in a retail baking operation isn’t always suitable for baking the large volumes of product needed to service commercial accounts, so Abraham has invested in several new machines to increase productivity. Commercial bakery equipment is expensive, so Abraham has chosen to purchase serviceable used equipment.
The process isn’t easy. He has spent hours on countless phone calls and days traveling to inspect an oven or a mixer, often finding that it wasn’t what he needed or expected. Still, the savings have been substantial; Abraham figures that he has saved $70,000 to $80,000 by purchasing used equipment, most at a small fraction of what new units might cost. He even purchased a used all-wheel-drive minivan to make deliveries rather than a larger, more expensive commercial-duty vehicle.
The right customers
Abraham is as careful, it turns out, in choosing his customers as he is when it comes to buying an oven, and he refuses to sacrifice profitability just to buy business. Some potential customers will squeeze him hard for a few pennies, but if Abraham can’t make a profit, he’ll refuse even if it means that he won’t get the business.
Too many businesses fall into that trap, he says, only to find that they end up gaining volume but losing money.
“That’s what a lot of people do,” Abraham says, “but we won’t.”
