San Francisco-based Sugar Bowl Bakery has evolved into a $40 million company, with more than 300 different products reaching widespread foodservice channels — and a growth rate of about 30% each year.

Hand scanners, user-sensitive badges, round-the-clock camera security, safety keys — it sounds like the makings of a gripping spy thriller.

Although it might not be the set for this year’s secret agent blockbuster, San Francisco-based Sugar Bowl Bakery demands that stringent food safety standards and tight food security be observed in all three of its plants at all times.

Operating as smoothly as Jason Bourne, the HACCP-certified bakery has an allergen program in place, follows rigorous guidelines for ingredient and product traceability, and even has a HACCP (hazardous analysis and critical control point) safety chairman with 31 years of experience on hand to ensure that Sugar Bowl’s products are nothing short of supreme.

The head of this impressive operation, President and CEO Andrew Ly, believes that there is no substitution for hard work, and he embodies that motto. After immigrating from Vietnam to the United States in 1979, Ly put himself through college, learned English and, in 1984, pooled $40,000 with his four brothers to buy a small coffee-and-donut shop in the Richmond district of San Francisco. The shop, named Sugar Bowl Bakery, netted $150,000 annually.

“At that time, our philosophy was to grow the coffee shop and just make some donuts, kind of like a Starbucks with food,” Ly explains. “Then we found a niche in wholesale.”

Today, Sugar Bowl has evolved into a $40 million family-owned and -operated behemoth, with more than 300 different products reaching a widespread customer base — and a growth rate of about 30% each year. Its business includes about 90% of hospital pastry departments and 60% of hotels in the San Francisco Bay Area, as well as cafés, national warehouse clubs, major supermarket chains, retailers, restaurants, casinos, airline catering companies and even sweet-seeking customers in countries as far-flung as Japan, Korea and Mexico.

“Our philosophy is to diversify,” says Ly. “We diversify our products, and we diversify our customer base. Every single day when I come in, I want to see our salespeople calling on new customers.”

Sugar Bowl’s modus operandi is definitely working in its favor. The company has been in business nationally and internationally for about 21 years and, according to Ly, has appeared in the San Francisco Business Times 10 out of the past 11 years as one of the Bay Area’s fastest-growing privately held companies, in addition to being named “Bakery of the Year” by the Consumer Business Review for the past 10 years.

Their key to success is not all top-secret, classified information.

Without giving away too many industry secrets, the answer lies in expertly managing a balancing act in all aspects of Sugar Bowl’s business, which, according to Ly, keeps a matrix of goals and plans for the company in perspective.

“Our retail clients have taught us a lot in terms of pricing, quality and efficiency,” Ly notes “Every five years, we like to pause and think about our growth [versus] profitability and how we have to balance those two.”

Sugar Bowl’s board members and upper management meet regularly to re-evaluate the bakery’s growth rate, whether the time has come to add more lines and automation, and of course, its lineup of new products fresh from its research and development lab’s ideation sessions.

“In terms of sales, we mainly focus on our existing products, but are always coming up with something in our R&D lab,” Ly explains. “We pass through about 50 different new products a year, but we like to bring about two big winners to market [annually].”

Although Sugar Bowl might have dozens of new products in its pipeline at any given time, if the product doesn’t fit in with the company’s current mission or market demand, then it goes on R&D’s back burner until it’s needed. In addition, new products are pitted against existing ones to ensure a good fit with the company’s overall product portfolio.

Sugar Bowl’s current long-standing winners are its top three best-selling items — Petite Brownie Bites, Petite Palmieres and Madeleines — all of which are trans fat-free and in high demand among its clientele.

“You know when you bring the right products to market because people try to compete and try to copy [them],” Ly says.

Ly’s other secret weapon lies in the strong family bond that literally makes up the bricks and mortar of the company. Currently, seven second-generation Lys work at Sugar Bowl, in addition to Andrew Ly’s four brothers and four sisters-in-law.

“We believe in hard work,” Ly explains. “There is just no substitute for it.”

The family’s motivation and dedication to the bakery is palpable, and the family’s drive for success extends to its 275 employees, all of whom are all considered family in Ly’s book.

“The right people who work for us are our biggest asset,” says Ly. “Perhaps some day we will [perform an] IPO (initial public offering) [for] the company when it’s the right time, because the people who have worked here for a long time or who are key employees are like family members, and it could benefit them. Everyone who works for us we view as being like a family member.”

Ly always is looking toward the future and pinpointing ways in which Sugar Bowl can become an industry leader in other channels, especially in terms of penetrating national coffee chains, C-stores and the vending category, which are next on the company’s hit-list.

“There are always new challenges and opportunities in running a business,” says Ly. “But we’ve come a long way, and I believe that we can continue to grow at about 30% a year and [excel].”

Sugar Bowl Bakery is audited by both the American Institute of Baking and NSF institutions, boasts excellent ratings, and runs a skilled operation to ensure its customers are well-stocked on a daily basis. A fleet of 15 trucks delivers its fresh-baked products by 8 a.m. every morning, making 300 stops 364 days a year.

Over the years, the company’s operations have grown into three plants, with two located in San Francisco — one on Toland St. and the other on McKinnon St.

A third 10,000-sq.-ft. plant based in San Leandro, Calif., produces 50,000 donuts a day — which amounts to three truckloads — along with three other product lines that include Apple Fritters, Cinnamon Rolls and Donut Clusters. These products are co-packed and distributed to a high-profile retail client. Co-packing amounts to about 5% of Sugar Bowl’s sales.

The 20,000-sq.-ft. Toland St. plant focuses mainly on producing Sugar Bowl’s foodservice items, including Danish, croissants, cookies, pies, muffins, puff pastry, cakes, decorated cakes and its best-selling Madeleines — delicate, buttery, shell-shaped cookie-cakes.

Madeleine production is housed in its own room, in which the entire production process takes place from start to finish.

First, butter is melted in a cream cooker, then mixed in a 340-qt. mixer for 20 minutes. Once mixed, the butter is pumped out of the mixer — 500 lb. to a batch — poured into a plastic tote and chilled overnight.

In the morning, the batter is pumped out of the tote into a 100-lb. hopper and deposited at a rate of 12 pans per minute. The pans are placed in double-rack ovens and baked for 17 minutes at 340°F. Afterward, the Madeleines cool for 30 minutes and proceed to the packaging area, where weight checks and other quality assurance processes are conducted hourly. The products then are dumped onto a processing table, where employees hand-pack them into pre-labeled tubs. The tubs pass through a metal detection system and are secured with a tamper-proof band.

Afterward, the tubs are wrapped, tagged, dated, boxed and palletized. Each pallet then is transferred to the company’s McKinnon St. plant and shipped out. Madeleines have a shelf life of 21 days.

Sugar Bowl’s 50,000-sq.-ft. McKinnon St. plant is located just one block from the Toland St. facility. It is highly automated and designed to handle the mass production of the company’s shelf-stable products, including Petite Palmieres, croissants, special-order cakes, éclairs, petit fours, various pastries, muffins and Danish.

All products follow an organized baking order — Madeleines are produced first, then muffins, cakes, pastry items and pies.

Four shifts a day run from 2 a.m. until midnight, seven days a week. Madeleines run from 2 a.m. to 10 a.m., and muffins, Danish and croissants run from 7 a.m. to 10 a.m. Muffins have a shelf life of five to seven days, and Danish have a shelf life of three to five days.

Product quotas are met based on order estimates. Final orders are received by noon every day, and Sugar Bowl meets 100% of orders without fail. Employees working the late shift pick and pack orders in the evening and ready them for distribution the following morning to foodservice institutions located in and around the San Francisco Bay Area.

The McKinnon St. plant has a 12,000-sq.-ft. ingredient handling area for shipping and receiving. Strict criteria for inventory include making every ingredient completely traceable — showing data such as the vendor name and the product on each box or tote.

An allergen program also was instituted by the company, addressing the U.S. Food & Drug Administration’s January 1 deadline for new labeling requirements. Ingredients deemed “allergen-sensitive” arrive last and are stored and handled in a separate area. In addition, although many of Sugar Bowl’s products already are trans fat-free, the company is striving to go completely trans fat-free in 2006. It already has put an action plan together to achieve that goal.

The plant has two flour silos inside the building, where 75,000 lb. of flour is pumped in every 10 days by a bulk truck. A call station sends a signal to a tube, which releases a portion of the flour and sends it to a weigh station and then to a bowl. From the bowl, the flour enters a vibrator and is transferred to a sifter.

This plant also has a 5,000-sq.-ft. freezer set at 0°F to 10°F, a 15,000-sq.-ft. makeup room and a 19,000-sq.-ft. packaging and raw materials room.

The muffin, cake and pie area of the McKinnon St. plant produces 100,000 muffins, 1,000 cakes and 2,000 pies a day.

To make muffin batter, plant employees mix eggs, oil and water for 10 minutes per batch, yielding 75 lb. A bowl lift dumps the batter from the mixer into a hopper, where a single-shot depositor distributes it into pans.

Pans then enter one of nine double-rack ovens for 30 minutes and bake at 365°F. Once baked, the muffins cool for two hours.

Cakes follow a similar mixing pattern. Most of the cake production process is manual because many of the cakes require special attention based on specific customer requests.

Sugar Bowl bakes 1/4-in. round, full sheet, 1/2 sheet, layer and roll cakes, all of which can be decorated and customized to a customer’s specifications.

Employees deposit batter into sheet, layer and roll cake pans and bake each cake according to type. Sheet cakes require about 30 minutes of baking time, and half-pound loaf cakes require about an hour. All cakes cool for two hours until their core temperature reaches 70°F.

Cooled cakes then are boxed and placed into refrigerators or a 0°F freezer overnight, depending on customer specifications and cake type. Product supply is replenished every two days.

Pre-panned Danish handled at the McKinnon St. plant is processed based on shape and design and can be filled with fruit, chocolate chips or nuts. Twenty racks of bear claws, cinnamon rolls, “snail” rolls and coffee cakes join croissants in a proof box for 45 minutes to an hour at 100°F dry heat, with 65% humidity.

The company’s croissants — 100% butter and hand-rolled — are processed from dough to their final shape and size. Dough for the croissants is sheeted from a block onto 25-lb. rolls. The rolls then are presented to an entry table on which final thickness process cutters cut the dough into triangles.

Cinnamon rolls are processed similarly, although a guillotine instead of cutters cuts the dough to size. An auto-sheeter also reduces cinnamon roll dough to the desired thickness and places it onto a 25-lb. roll, where it then is cut into triangles.

The mixing area uses metered water (cold water keeps the yeast in the dough inactive for a longer shelf life and keeps the dough “dormant”) that is mixed with various ingredients to make laminated dough for Danish, croissants and Sugar Bowl’s unique puff pastry, which boasts 384 layers.

Once mixed, tilt mixers elevate and dump the dough onto a 20-ft. conveyor, where it then feeds into a chunker and up an inclined conveyor to the dough extruder. Butter is extruded directly on top of the dough, which then moves to a folder. A guillotine then cuts the folded, laminated dough to size. Afterward, the dough is chilled for two hours at 37°F to 40°F and then re-laminated.

The entire process, from laminator to makeup, takes about three hours and is implemented in three shifts, eight hours apart, seven days a week.

Puff pastry dough — used to make Sugar Bowl’s Palmieres — is extruded, goes through both a laminating and re-laminating process, enters makeup and then is placed on a 25-lb. roll. The dough is sugared on the top and on the bottom, extruded to its final thickness and is dual-ploughed into a single fold, then a double fold. The dough then is pressed, goes through a guillotine, and is hand-rolled and hand-placed on trays.

Afterward, the trays of Palmieres are set onto an 80-ft. band oven and baked for 20 minutes at 385°F. Sugar Bowl produces 8,000 Palmieres an hour. The Palmieres are passed through a press roller after baking to flatten them and create a uniform appearance.

The Palmieres then cool for five minutes on an 80-ft. conveyor. A quality assurance manager checks color, weight specifications and size before the products are hand-packed. Packaged Palmieres pass through a metal detection system that also implements an automatic check-weigh system, and then are labeled, packaged and palletized. Each package is labor-coded, and a sell-by-date is added. Palmieres have a nine-month shelf life.

The McKinnon St. plant also produces Sugar Bowl’s best-selling Petite Brownie Bites. Employees use a single-shot depositor and a four-point depositor to distribute the batter into pans. Three flexi-pans fit across in the plant’s band/laser oven, which bakes 12,000 brownie bites an hour for 17 minutes at 330°F.

Once baked, the brownie bites travel along a 150-ft. cooling conveyor. Afterward, they are packaged, go through a metal detection system and are check weighed. Packages pass through a labeler, are shrink-wrapped with tamper-proof bands and go through a quality assurance inspection.

Much like James Bond in Goldfinger, everything the Ly family touches through Sugar Bowl Bakery’s accomplishments turns to gold. Efficiency and effectiveness remain key factors as Sugar Bowl turns to its goals for the future. With the rigors of order and stringent food security in place, competitors can only hope to catch them if they can. SF&WB