Fresh Ideas for Today’s Businesses
February 1, 2006
Fresh Ideas for Today’s Businesses
By Dan Malovany
With 22 plants on four continents, Fresh Start Bakeries has created a management style that adapts to constant change and recognizes the myriad of growth opportunities in today’s global baking market.
Back in the old days, when E.F. Hutton talked, people listened. Maybe it was a simpler time when stockbrokers were respected and office managers and business travelers wore pocket protectors instead of wireless telephones attached to their ears and a BlackBerry constantly in tow. More likely than not, the Huttons of the world represented the corporate management model of the previous century, where patriarchal, if not ironfisted, executives ran their companies with limited employee feedback.
At a Glance
Company: Fresh Start Bakeries Inc.
Location: Brea, Calif.
Products: Hamburger buns, hearth rolls, English muffins, breadsticks, variety breads, fruit pies, ice cream cones, baked sweet goods, croissants, frozen hotcakes.
Estimated Annual Sales: $300 million
No. of Plants: 22 — U.S. and internationally.
U.S. Bakeries: Eight, including partnerships with Tennessee Bun Co., Best Harvest Bakeries and Galasso’s Bakery.
International Bakeries: 14 wholly owned and joint venture operations in Germany, Poland, Sweden, Spain, Brazil, Chile, Guatemala and Australia.
No. of Employees: 2,200 worldwide, including joint ventures.
President & CEO: Craig Olson
Sr. V.P., chief administrative officer: Tim Purga
Sr. V.P., chief manufacturing officer: Mike Ward
V.P., CFO: Russ Doll
V.P., Finance: Ken Hutchinson
V.P., dir. of engineering: Clyde Kawamoto
V.P., logistics & customer service: Bill Robles
V.P., quality assurance & customer service: Ron Pugl
V.P., business development: Mark Kloves
That’s not the way business is managed at Fresh Start Bakeries, producer of hamburger buns, English muffins and a host of other baked goods primarily for the foodservice industry. With 2,200 employees and 22 bakeries located on four continents, the company’s management team tries to be all ears to all people, no matter what language they may be speaking.
Ideally, Craig Olson, its president and CEO, prefers to build a consensus in the decision-making process. Such an approach may have been possible in the early 1980s, when Olson became president of Fresh Start, which operated only three plants in the United States at the time. However, that’s not always feasible, especially when dealing with equity partners in the United States and abroad, and a major customer like McDonald’s Corp., which expects no compromise when it comes to excellence. Specific goals need to be identified, and certain controls must be followed if the $300 million company plans to continue the double-digit growth rate it has enjoyed for the last 23 years.
“We try to be consensus-oriented because I really care what the team members think, and beyond the team, to the operational levels of management at our various locations,” Olson explains. “It’s easy to make decisions if there is a consensus, but real life doesn’t always work that way. At the end of the day, the buck stops at my desk, and I have to be prepared to make a decision, even if there isn’t any consensus.”
Office of the President
Although Olson’s strengths are in the financial and analytical side of the business, he recognizes he can’t be all things to all people. To properly address the myriad strategic and operational issues that require his attention on any given day, Fresh Start’s chief executive shares what he calls the Office of the President to provide two much-needed extra sets of ears. It’s a fresh approach to the decades-old dilemma of how to manage a company that’s gotten too big for one person to manage all of the day-to-day details and keep an eye open for strategic growth opportunities in the future.
“It’s really about routing the decisions to the most qualified senior executive,” Olson says. “We don’t centralize decision-making in one person. There’s no ‘Shell Answer-man.’”
As senior vice president and chief manufacturing officer, Mike Ward, a 47-year veteran of the baking industry, oversees the company’s operations and resolves any issues related to the baking process in the Office of the President
“I’m not qualified to bake hamburger buns, and that’s our core business, so I highly value our bakers and the skills they have developed over time,” Olson says. “If Mike says, ‘I need this to bake a better product,’ he gets what he needs.”
On the other hand, Tim Purga, senior vice president and chief administrative officer, focuses on organizational issues ranging from career development and management conflict, to enhancing cultural understanding among Fresh Start and its U.S. and international partners. With a background in pastoral counseling and organizational behavior, Purga is the “chief people officer,” serving as the company mentor and keeping managers of different maturity and skill levels focused on the long-term common goals, especially when Fresh Start is going through one of its many growth spurts.
“My experience is that growth creates stress on all of our people,” Olson explains. “Sometimes I say, ‘Growing creates people debris, and Tim comes from behind and cleans it up.’ If you don’t tend to the people issues, you’re going to ‘crater’ at some point. The only thing that keeps a high-growth rate afloat is the people and their energy, confidence and strength that address those stresses.”
Growing in Spurts
Over the years, Fresh Start has grown by partnering with McDonald’s, and expanding with the chain has broadened its reach in both in the United States and internationally. Currently, the company and its joint ventures serve nearly 6,000 McDonald’s restaurants, or about 20% of all McDonald’s units worldwide.
The company’s roots go back to the early 1960s, when its predecessor built the first bakery dedicated to serving McDonald’s in City of Industry, Calif., not far from where Ray Kroc sold multi-mixers to the McDonald brothers. A certified management accountant (CMA), Olson initially served in 1978 as controller and vice president of Fresh Start’s predecessor. By 1982, when Olson became president under a new corporate structure, Fresh Start had officially emerged.
Since its early days, the company’s modus operandi for growth has involved plant expansion.
“We believe building one bakery every 18 months is comfortable,” Olson says. “Two every two years is workable.”
In the United States, Fresh Start operates four wholly-owned bakeries in California, Arizona and Hawaii, and entered a number of joint ventures in Kansas and Tennessee when it partnered with minority business executives as a part of McDonald’s supplier diversity program during the 1990s.
Meanwhile, throughout the European market, which Fresh Start started entering in the late 1980s, its bakeries are wholly-owned and operated and dedicated to serving McDonalds. However, its businesses in Latin America and Australia involve joint ventures, which serve both McDonald’s and other regional accounts. In some cases, such as in Brazil and Chile, Fresh Start produces not only buns, but ice cream cones, regular and filled croissants, birthday cakes, layer cakes, cake muffins and specialty desserts for foodservice operators and McCafés. In Australia, it is a leading producer of fruit pies and frozen hotcakes, as well as buns and English muffins.
Typically in its joint ventures, Fresh Start provides the operational expertise, while its partners offer the business acumen in the market. In these markets, the company strives to blend its professional management values with its partners’ cultures.
“I think we operate with fewer paradigms than many U.S. baking companies,” Olson says. “We enter a foreign market with an open mind, prepared to address cultural differences. We don’t want to plant a U.S. company on foreign soil. We have our values, our technology and our quality expectations that we won’t compromise. But beyond that, we have to learn to deal in those environments where we do business and need to rely on the cultural insights of our partners and local management teams.”
Fresh Start now wholly owns 10 bakeries and holds significant stakes in 12 others. The newest bakery to open was a bun and English muffin plant near Melbourne, Australia, where Fresh Start partnered with Goldman-Fielder, one of Australia’s largest baking companies.
Diversfying its Business
New products and new markets also are becoming a greater part of Fresh Start’s growth strategy. Last year, it invested in its Stockton, Calif., plant to produce the new honey wheat rolls for McDonald’s new premium chicken sandwiches. In a move that significantly diversified its product line and customers, Fresh Start became a partner with Galasso’s Bakery in Mira Loma, Calif., in 2003. The 110,000-sq.-ft. bakery houses five lines that produce nearly 200 different items. Its top-selling items are breadsticks, buns, sourdough, French bread and rolls.
Unlike Fresh Start’s main business, where McDonald’s is its core customer, Galasso’s distributes to some 2,400 foodservice customers, notes Mark Kloves, vice president of business development. The bakery has 51 direct-store-delivery routes that distribute product daily throughout Southern California. It operates depots in Bakersfield, Fullerton, San Diego and the San Fernando Valley.
“Right now, the West Coast is our prime concentration for diversifying our business,” Kloves explains. “In the future, however, we will be looking to expand our business with our sister bakeries throughout the U.S. or through acquisitions.”
Still in its initial stages of development, the Galasso’s joint venture remains in the learning stages for Fresh Start management.
“It’s been a little of the Galasso’s School of Baking for us, but it’s not that we did not have the expertise to produce these products,” Olson says. “It’s been more of a change in our customer base and distribution methodology that were the biggest learnings for us.”
Goals and Controls
To manage a diversified and growing portfolio of products and businesses, a multi-national company like Fresh Start uses “goals and controls,” an accountability tool for identifying opportunities and keeping tabs on every aspect of its business.
The top management team receives weekly operational and engineering reports from each bakery detailing product reject rates, labor efficiency and production stoppages due to equipment failure, which are three of the most critical variables for measuring plant productivity.
At their monthly meeting, top managers review the company’s operations from a macro perspective and then drill down to operational issues by plant throughout the organization.
“We review the results of all of our bakeries once a month from a financial standpoint,” Olson explains. “We review goals from the prior month, whether we reached them or not. More importantly, why did we reach them or why didn’t we reach them? What was the barrier that we couldn’t get over or what was the good behavior that created this success?”
The team then brainstorms and identifies additional issues and concerns, sets goals for the following month, and creates action items that identify what’s to be accomplished, who’s accountable and a completion date. About 25 people oversee day-to-day operations from a manufacturing, human resource, quality assurance, purchasing and financial perspective.
Organizationally, Fresh Start operates in both a centralized and decentralized manner. Accounting, for instance, is centralized in the United States, but decentralized abroad for tax and other financial reasons.
Operating procedures for baking, quality assurance, engineering and sanitation is more centralized, with technical support located both at the headquarters and regional levels. For practical reasons, general manufacturing practices from a technical standpoint tend to be standardized across its 22 plants. Such practices, along with a veteran management team, help the company avoid repeating mistakes not only in Kansas City and Duisburg, Germany, but also in 1996 and then again in 2006, Olson says.
To keep everyone on the same page, Fresh Start holds global meetings to share its best practices. In October, for instance, its plant engineers will meet to share experiences and encourage communication before this year’s iba 2006 bakery show in Munich, Germany.
In general, new managers overseas often spend two weeks or more of training in the United States before starting work in their home countries.
“It helps them not only understand how we do things operationally, but it also helps them understand our company, our people and our values,” Olson explains.
Growth Equals Opportunity
At a time when the baking industry is consolidating, and many businesses are suffering from brain drain or when veteran managers are “set out to pasture,” Fresh Start tries to break the mold by identifying young talent and developing future generations of managers that are home grown, so to speak.
Clyde Kawamoto, for example, started working in Fresh Start’s Hawaii-based bakery when it was built in the 1970s.
“I was basically a gofer,” he recalls. “We were putting in our bread line in the Hawaii bakery, and I just went in as a laborer.”
A graduate of the University of Hawaii, Kawamoto is now vice president and director of engineering.
For the three top executives in the Office of the President, the goal over the next decade will be to leave a legacy of leadership for the company, Purga says.
Additionally, they will focus on strategic initiatives, such as diversifying Fresh Start’s customer base and product lines, to provide advancement opportunities for their employees and security and well-being for their families.
“We’re committed to growth, whether it’s through finding new customers, selling new or more products to existing ones, or through acquisition,” Olson explains. “In five years, you’ll see that we’ve added some plants to the Fresh Start family and created more opportunity for growth for everyone involved.” SF&WB
Empower the People
Every executive likes to talk about people, and how the company couldn’t succeed if it weren’t for its people. Tim Purga’s job in Fresh Start’s Office of the President is all about people. As senior vice president and chief administrative officer, his emphasis is on the personal and professional leadership development of Fresh Start’s management team. Internally, he’s known as the Chief People Officer.
“I’m the ‘people guy,’” he says. “I’m the person you go to [to] understand the organizational process. I’m the person you come to if there are any people conflicts along the way.”
Unlike Fresh Start’s director of human resources, who manages policies, represents the company in disputes and handles traditional H.R. functions, Purga works with managers to develop meaningful lifestyles and to achieve their professional goals.
Trained in pastoral counseling and organizational psychology at Fuller Seminary in Pasadena, Calif., Purga previously served as the dean of students at a Christian college before joining Fresh Start. A longtime friend of Craig Olson, Fresh Start’s president and CEO, Purga has worked to take the personal and religious values of the company’s leadership and transform these fundamental beliefs into organizational and secular values.
Specifically, Fresh Start is a big proponent of servant leadership, where the mission of top management is to serve and help make its people succeed. By growing the business, the company provides the opportunity for its people to grow not only professionally, but also personally. The company values outline how it treats its employees, their families and its business partners. It also outlines Fresh Start’s views on diversity, business ethics and even product quality.
In many ways, Purga says, these values are what differentiate many not-for-profit companies from their for-profit counterparts. Purga and Olson simply have taken the non-profit model and applied it to a high-growth business. In the end, the mission is to create a culture where people’s differences are respected and loyalty is rewarded by both employees and management.
“Craig and I took what’s happening in the non-profit world, which is more of a personal community of workers than a corporation of workers, and created shared values in a secular setting,” he says.
Specifically, Purga gets involved with management conflict. The company is not a proponent of Darwinian survival of the fittest.
“We believe you’re paid well for your competency, and we really don’t like people to do things at the expense of someone else’s career,” Purga says. “Rather, let’s have both survive and keep them both on the roster, and we’ll play them in positions where they will both be successful.”
Abroad, Purga often focuses on finding shared values and developing a common culture between Fresh Start and its international partners. That involves not only establishing operational standards, but also professional management practices.
Purga also is focusing on developing future generations who will run the business as the senior management team approaches retirement.
“Our job is to leave a legacy of leadership,” Purga explains. “Our job is to fundamentally empower the vice presidents to take over the running of the day-to-day operations of the company. That means Craig needs to delegate more and spend more time focusing on the strategic growth of the company, which he also loves to do.”
Since taking over Fresh Start in 1982, Olson and Mike Ward, senior vice president and chief manufacturing officer, have selected a team of protégés, many of whom have been with the company 30 years or more. The emphasis now is to let go of the reigns and allow their protégés to develop their own management team.
“Mike and Craig have moved to grandparent status, and their vice presidents and general managers are now the parents,” Purga says. “We’re stepping back as the Office of the President and being more strategic and less operational. That’s our test for the next five years.”
Partners in the Truest Sense of the Word
When it comes to expanding across the globe, Fresh Start Bakeries takes the team approach to a new level. Over the years, the Brea, Calif.-based company has partnered with investment firms, employees, international businesses, and even minority business executives who wanted to get into the supplier business as part of McDonald’s diversity program.
In fact, almost half of its 22 bakeries world-wide are wholly-owned, while the remaining operations are often part of a unique 50/50 joint venture that forces both parties to work together to grow their businesses instead of relying on a majority-owned partner running the show.
“On paper, it makes it difficult for making decisions, but as a practical matter, it’s easy to make a decision by asking the question, ‘What’s best for the customer?’” says Craig Olson, Fresh Start’s president and CEO.
While its European bakeries are wholly owned, the company has tended to team up with local entrepreneurs and family-owned businesses as it expanded into Central and South America. In these joint ventures, Fresh Start often brings in the technical and operational expertise that McDonald’s expects of its suppliers worldwide, and Fresh Start relies on its partners to provide the sales and cultural know-how to run a business overseas.
“Our challenge is to not take away their family culture, but still bring in Fresh Start’s technology, Fresh Start’s professional management practices and bring the two cultures together,” says Tim Purga, senior vice president and chief administrative officer.
Today, Fresh Start has partnerships in Brazil, Chile and Guatemala. It also has a venture with Burns Philp (successor of Goodman-Fielder) in Australia, where the two produce hamburger buns, fried pies, frozen hotcakes and English muffins near Sydney and near Melbourne.
In the United States, Fresh Start has teamed up with a former McDonald’s owner-operator and executives in an effort to help McDonald’s meet its diversity goals in the supplier community.
In 1997, it teamed up with outgoing Cordia Harrington to build the Tennessee Bun Co. in Dickson, Tenn. In 2001, Harrington and Fresh Start expanded their venture with a second facility in Nashville, Tenn. Today, the two plants not only serve the Mid-south with English muffins, buns and chicken sandwich rolls, but also with frozen product throughout 40 states, the Caribbean and even South America.
Likewise, in 1999, Fresh Start teamed up with former McDonald’s executives Bob Beavers and Ed Honesty, who acquired a 75% interest in Fresh Start’s Kansas City plant. The 34,000-sq.-ft. plant supplies buns to McDonald’s restaurants throughout Kansas, Missouri and Nebraska.
“In each case, we look for a partner who can add value to the business, is a proven successful entrepreneur and shares our values in operating a business,” Olson says. “They also have to bring money to the business. There is no such thing as a free ride.”
Corporately, Fresh Start is privately-held and owned by a combination of the company’s management team, its profit sharing plan and Boston-based Berkshire Partners, an investment firm that seeks out niche companies that show potential for growth and are led by experienced management teams. Throughout the company’s history, Berkshire has partnered with Fresh Start twice. In 1988, it helped Olson and other top managers buy the bakery business from giant foodservice distributor Sysco Corp. After selling Fresh Start to Campbell Soup Co. in 1994, Berkshire came into the fold again in 1999, when Campbell was unloading its non-branded operations.
“Part of the reason they came back is that we share the values, the trust and the mutual respect for each of our management teams and management style,” Olson says. “I view Berkshire not only as a financial partner, but as a resource to help us make better decisions. They have a different set of experience and expertise. They’re not so close to the trees, so they can see the forest. I can’t imagine better partners.”