Lancaster Colony sticks to what it knows best — and gets even better at it

Innovation has come via acquisitions, too.

“We go out of our way to look for entrepreneurs that have developed a really unique product that’s in our space, where we feel like we’re uniquely suited to help them take their business to the next level,” he says.

Lancaster Colony has provided help to these entrepreneurs — even if it doesn’t buy them. This shows interest in them as people and some good might come out of it in the future, Ciesinski says. Plus, the company has another friend in the industry.

The entrepreneurs who sell typically become employees for four or five years. If they meet performance thresholds, they earn another big payout, which keeps interests aligned.

“Nobody can sell with passion and conviction like the founder of a company, and nobody understands their brand and their product like a founder of a company. So, we can help them. Let’s say they have a shelf-life problem. The shelf life is X days and they want to extend it. Well, we have the expertise to help them to figure out how to do that,” he says.

Lancaster Colony allows the smaller business to run autonomously.

“The food industry is littered with examples of companies that have bought brands and tried to integrate them, only to squish them,” Ciesinski says. “Somebody has said, ‘It’s a little bit like holding the bird. You don’t hold tight enough, the bird flies away. You hold too tight, you can squish it.’”

A playbook for the future

Over the past two years, Ciesinski has helped Lancaster Colony position itself for the future.

The senior management team and board started by answering big questions like, “How do you define winning?” Then, they looked both outside at where the industry was going, and inside at the company’s assets and capabilities to figure out where and how to build a strategy.

External benchmarking, for example, found that while Lancaster Colony’s topline growth was faster than its peers, its margins were in the lower quartile.

For the better part of the year that followed, the company implemented its new playbook. That meant accelerating the base business with organic growth through innovative products and then making sure those got onto the shelf. It meant simplifying the supply chain and improving margins. It meant considering add-on mergers and acquisitions to grow the base business — acquisitions like Angelic Bakehouse in 2016 or Bantam Bagels in 2018.

Lancaster Colony also implemented metrics to make sure these changes got traction, Ciesinski says. The management team used those to celebrate the wins and see where to coach because people were struggling.

The final piece, which started ithis year, was linking the incentive structures and bonus programs to Lancaster Colony’s strategy.

“For this thing to work, we needed to come together as a team,” Ciesinski says. “If we were going to make these investments, we were going to be pretty deliberate about setting priorities, and equally deliberate about agreeing on what we weren’t going to do.”

For example, on the M&A front, Lancaster Colony became more disciplined.

“We don’t know a lot about running dairies, or we don’t know a lot about, let’s say, protein operations and how to prepare meat and process it and ship it safely and everything else,” he says. “But we do know a lot about how to make dressings and dips.”