Backerhaus veit

Backerhaus Veit (A) Company Background Backerhaus Veit (BV) began in Stuttgart, Germany in 1927. Over the last 65 years this single bakery has expanded to over 60 locations in Germany and has become a multi million-dollar business. In 1987, Sabine Veit, granddaughter of the German founder, brought this family tradition to North America establishing Backerhaus Veit Canada (BVC) in Toronto. BVCbegan as a fresh bakery and expanded to retail outlets. As the BVC reputation grew, Sabine Veit saw a larger opportunity in wholesaling in growing artisan bread category. By 1993, Sabine had closed all retail stores and opened a new 32,000 square foot bakery in Woodbridge Ontario. The new and revamped company began producing par-baked products for more than 2- dozen supermarket chains with over 3,000locations. BVC has successfully integrated the quality of old word tradition with the efficiency and consistency of leading bakery technology. The Artisan Bread Industry Artisan bread is not your traditional prepackaged, pre-sliced white bread. Years before the advent of breads like Wonder Bread, sliced bread had a different connotation to a myriad of cultures around the world. For many puristsand a growing army of consumers, artisan breads connote experience, bringing them back to a time of simplicity and wholesomeness. Artisan breads have come a long way and its continued rising popularity is a testament to that fact. Customers can find crusty “artisan” loaves in bakery cafes and supermarkets. Breads that are used at cafés like Panera Bread or Ecce, such as seeded French baguettes andciabatta bread infused with olive oil, have been appearing on the tables of gourmet restaurants and adding a little color and variety to basic breads. The artisan bread market is estimated at $100 million. With a 20% annual growth rate, the market size in 5 to 10 years is expected to be between $250 million and $620 million respectfully. Large companies in the artisan bread industry usually lookto expand their distribution and product lines through acquisitions and consolidation. Unless artisan bakers can become wholesalers and maximize production efficiencies, artisan bread baking is not a particularly lucrative business. In part, volume sales and mechanization are pivotal to success. Basic bread margins are typically very small at 6%. The unique and craft like association of artisanbread lends itself to higher margins of 13%. For the discriminating consumer higher price is well worth the quality and taste. Nevertheless, artisan bread can be found in its many varieties at different price tiers. Bread loaves can be found anywhere from .50 cents to $3.00 dollars. Acme Supermarkets of northeast Ohio believes one of the most important developments in the industry is the adoption ofa brand name and identity. Albrecht Milling Co., for example, used its family name and marketed loaves on a tilted oak table below sepia toned photographs of Albrecht bread production in the old days. “They found that when they branded the bread it develops more of a following, it puts it a step above your everyday product.”

Copyright © 2004 by Habbershon, IFE, Babson College

1

NewGrowth Options Sabine Veit originally planned to work for the next 10 years to make her company a $50M company. As she built up her wholesale business she also hoped to create a branded product under the identity “Sabine.” Once the wholesale business was generating enough cash and “could run itself,” Sabine planned to pull back from the day-to-day operations of the business. The final step in her planwould be to set up a flagship bakery where Sabine could create innovative breads to feed into the pipelines of her private label and branded businesses. However, Sabine’s son Toby presented her with several additional ideas for growing the company. A summary of these options is presented below and simplified financial data is provided at the end of this case. The Marketing Store Front BVC will...