Pogens Pointed Toward New Products
[An article about the Pogens Family Bakery, who made the Florentine Pogen cookies. By Bernard Pacyniak, provided by the Duke: "I found the following article on what happened to Pogens Family Bakery after it was sold. I thought you might appreciate it in the spirit of absurdly detailed Frank Zappa scholarship".]
Copyright 1992 Information Access Company, a Thomson Corporation Company
SECTION: Vol. 27 ; No. 2 ; Pg. 140; ISSN: 0005-4127
BODY: David Aulik was no stranger to orchestrating turnarounds. As head of his own consulting group, he specialized in helping food companies - from fast-food chains to wholesale bakeries - redirect their efforts in the marketplace. He would develop strategic plans that capitalized on inherent strengths and tailor them to existing market realities.
More often than not, those plans included new product introductions. As a food technologist, Aulik knew exactly what kind of formulation or processing changes could invent or help revitalize a product category. By introducing more than 2,500 successful new products in both retail and foodservice arenas, Aulik developed a track record that confirms his ability to create winners in what many observers considered a crap shoot.
Thus, when Aulik discovered that Pogens Family Bakery in Compton, Calif., was for sale, he felt confident about testing his talents anew. This time, however, with the help of colleague and financial whiz, Leslie Saleson, he decided to wager his own money.
Despite a 14-month, trans-Atlantic negotiating process, one that had both Aulik and Saleson ready to walk away from the deal, the two entrepreneurs persisted. Last June 28, Pogens AB, the $ 300 million Swedish bakery conglomerate, finally sold its American subsidiary, also named Pogens, to the pair.
Given Aulik's experience in the food industry, he could have chosen any number of food companies to invest his time and talent. Aulik, however, saw the baking industry as ripe for innovation and targeted niche marketing.
"I saw a greater leveraged opportunity in the '90s for the baking industry," Aulik says. "I see a mature industry where the margins are razor thin. As a result, the industry hasn't attracted many of what I call 'strong people.' There hasn't been a lot of innovation, merely lots of line extensions."
Aulik, who has a doctorate in food technology and an MBA in marketing, views new products along the line of new processes. He sees health and sensory impact as playing a key role in new product development during this decade.
Food Technology Opening New Doors
"Advances in food technology are coming forth to addressing those needs," he says. Those advances are occurring faster in the baking industry than in any other segment of the food industry, Aulik asserts. He attributes the rate of change to the core technical problems that have to be solved, a relatively straightforward matter of manipulating starches, proteins and stabilizers.
As a result, Aulik sees technological parity in the no- and low-fat and low-calorie bakery categories in three to five years. That scenario will play itself out with even greater intensity as new ingredients receive approval and enter the manufacturing pipeline.
For Pogens, the greatest opportunity rests with sensory impact products, Aulik says. "Consumers look at cookies as inherently satisfying, as treats," he says. "Our challenge is to see how much better we can make cookies, how we can make them look better and taste better.
"There are a lot of tools available in the industry," he adds. "Flavoring technology has advanced to the point of creating sensory impact products. You can get a sensory hit from a smaller quantity, thereby delivering much more flavor, texture and mouth-feel."
In that light, Aulik contends that Pogens provided the perfect vehicle for him and partner Saleson with which to make their debut.
Although Pogens had a good quality image, the company did little or no brand marketing. The name was not well recognized despite research showing that consumers - once reminded - clearly identified certain products with Pogens, such as gingersnaps and raspberry shortbread cookies.
While this kind of delayed recognition had worked well in the past, both Aulik and Saleson knew that the competitive and recessionary '90s prevented any company from resting on its laurels. Still, projections for 1991 showed sales topping $11 million, certainly a decent starting point.
When Aulik and Saleson purchased the firm, 45% of the company's business focused on retail, primarily to 1,200 supermarkets in southern and central California. Vending and airlines accounted for 40% and 15%, respectively.
Unfortunately, when the two partners finally consummated the purchase, they did so just as the recession began to hit California full force. Sales for supermarket chains dropped 15% to 30%. Not only were dollars down, but traffic counts had also decreased, alerting retailers and manufacturers alike that consumers were, indeed, cutting back.
And although Aulik attributed Pogens' 60,000-sq.-ft. production facility as one of the key factors in closing the deal, closer examination revealed significant problems in the plant, particularly in the area of deferred maintenance. The "unpolished gem," as Aulik describes it, was built in 1969 and housed five cookie lines. At the time of purchase, the plant was operating at 15% production capacity.
Turning the Company Around
Still unabashedly confident, Aulik and Saleson thrust themselves into steering a drifting cookie company toward profitable ports of call.
"We will be a niche marketer, not competing directly with other cookie companies," Aulik says. "Above all, we will be an innovative, market-driven company, answering to consumer needs not adequately addressed by other manufacturers."
Getting Pogens under full sail, however, meantk marshalling money and manpower. Saleson, who was especially experienced in securing venture capital for other companies, turned her energies toward meeting Pogens' capital needs.
She secured financing from ITT, a lender experienced in funding turnarounds. Together with Aulik, they mapped out an aggressive plan, detailing cash flow projections over 24 months. A strategic plan covering the next two to five years was also developed.
"The fundamentals of a turnaround are well understood," Aulik explains. "You can do one of two things: you can slash and cut to purely maintenance levels or you can invest and build. It wasn't necessary here to do any slashing or cutting. What was necessary was to direct money into people and systems.
"We wanted to create an instructional hierarchical environment," he says. "In doing so, we created chaos, so we had to micromanage every part of it. It was a 180-degree turn from the previous management. It was a process of education and motivation."
Part of that process involved Total Quality Management. Aulik wanted to build TQM into all systems at the plant, beginning with ingredient specifications, continuing on with sanitation and production quality control and culminating with preventive maintenance, employee training and safety awareness.
"We were looking at upgrading the capability of our workers so we can implement quality assurance/auditing programs as well as criticall control point analysis," Aulik says. "We are getting there. We're almost at the halfway point."
Few, if any operations at the bakery, were left untouched by the TQM push. For starters, half of the plant's management team was replaced. It was a matter of finding food and bakery professionals thinking along the same lines, Aulik explains.
He hired a professional purchasing agent, Diana Pownall, to assure better prices for products and services. Pownall quickly established an ingredient purchasing program and began reviewing existing suppliers. The end result, 20 suppliers were discontinued and the company reduced its ingredient costs significantly. With the help of Aulik, Pownall moved toward locking in major ingredient prices through futures contract buying.
Aulik also recruited Bob Christensen, a 23-year food technology veteran and long-time friend and co-worker from the WARF Institute Inc. (now Hazleton Laboratories), to head the newly established quality assurance and research and development departments.
At the same time, Aulik himself took on the task of reformulating each of Pogens' 19 cookie recipes and revamping baking procedures. Oven speeds and temperatures were reduced by 20%.
"We're producing a softer, chewier cookie now," plant manager Genevieve Reyes says. "Before, we were baking hard cookies, the Swedish way. The process, however, baked out all of the flavor and texture."
By eliminating overbaking and through use of better ingredients, product quality has improved, Christensen emphasizes. That, coupled with more attention to on-line product sampling and sanitation procedures, prompted employees to increase their focus of TQM.
"We're taking samples of all our ingredients," Christensen says. "We've established a certificate of analysis and are setting up our own specifications. We pull samples every 15 minutes from each line. We also pull dough samples from the mixing area every 15 minutes. All baked products are scored daily as well as set aside for shelf-life observation. We also check product defects after packaging. In the past, the majority of quality control efforts were directed at policing."
Reyes, one of the managers retained by Aulik, confirms the difference a change in ownership has made. She estimates that it will take another year before all of the necessary improvements are put into place. Nevertheless, during the brief eight-month period since the purchase, productivity has climbed 75%, despite the fact that only three of the five lines are operating.
"We were running four lines, but because we needed maintenance parts for one of our ovens, and parts were not immediately available, we had to cannibalize one line to service the other," Reyes says.
At the present time, Reyes says the plant runs two, eight-hour shifts. Each shift, on average produces about 37 pallets of product, each pallet weighing between 1,200 to 1,400 lbs.
Polishing Up the Gem
Reyes expects to double that number once the plant returns to a preventative maintenance routine and gets the fourth line running. "We've taken inventory of what's needed, and we are in the process of prioritizing," she explains. "It's a matter of acquiring the right team and fully implementing the TQM program."
Reyes points to newly hired production manager, Larry Duran, a wholesale bakery veteran, as proof that Pogens is headed toward that direction.
Duran served as a consultant for food and bakery snack firms and had worked for a major wholesale bakery in California for more than 10 years. He knows what it takes to instill pride of ownership on the production line. "You need to have discipline, stability and consistency on the production line," he explains. "To ensure those characteristics, a production manager must plan, organize and control. Often, it's a case of planning for the downtime, of being prepared for everything that can go wrong. You have to plan for it."
Nothing happens overnight and Duran recognizes that introducing change among Pogen's 92 production employees requires leadership, experience and patience. It also means keeping the lines of communication open, he adds.
For Duran, that means being out on the floor most of the time, talking, cajoling, checking and calculating. "Right now, our labor costs per case range between $ 1.19 and $ 1.50," Duran says. "We are shooting to bring that labor cost down below a $ 1 per case."
One of the ways Duran expects to accomplish this is by minimizing changeovers during production. Currently, the plant's No. 1 line, which can switch from conventional cookie depositors to a modern cookie estruder, feeds into a 375-ft. long band oven. After cooling, two portion-control packaging machines handle all packaging for vending accounts. The single-portion packaging units can handle 78 bags per minute.
Line 2 and soon-to-be running line 3 serve airline sales accounts. Here, moveable depositor and wire-cut units feed two, 280-ft. long band ovens, which also feed into portion-control packaging machines.
All retail products are channeled into line 4, with line 5 also available to meet future production needs. A 460-ft. band oven handles production for line 4 while line 5 has a 515-ft. band oven. Line 4 features two packaging units that are capable of handling 8- or 10-oz. packages for retail stores at a rate of 47 bags per minute.
Presently, baking times for the three operating ovens vary between 10 to 13 minutes, although some products receive a 15-minute bake. Oven temperatures also vary from 310 degree to 450 degrees F, depending upon products.
Having specific lines dedicated to distinctive markets encourages long product runs, and Duran has begun capitalizing on those opportunities.
As Pogen's new production team takes the plant's operations to a higher productivity and quality level, Aulik has focused on repositioning Pogens through new products, new packaging and new markets.
Black Forest Cookies a Big Hit
The company's first new product introduction, the Black Forest cookie, made an immediate impact. Launched in Chicago last year at a vending association conference , the Black Forest cookie immediately brought smiles to national sales manager, Mark Kelley.
"The Black Forest cookie was the best product launched in the vending sector for us in the last eight years," he says. "In the first month, it became the third best-selling cookie. I expect it to become our No. 1 or No. 2 best-selling cookie."
What was behind the new cookie's success? Well, the chocolate, cherrytopped cookie is the first to incorporate the new ingredient technology Aulik described. "It's a chewier, intensely flavored product," he explains. "We've learned how to flavor flour- and stabilizer-based systems, and we're introducing the flavoring system directly into the dough. This way, the flavor is in both the cookie and the topping. It's a natural flavor and proprietary to Pogens."
More importantly, the Black Forest cookie has created a "halo effect" Aulik says. "We've restimulated the rest of our products without any cannibalization," he notes.
The Black Forest cookie, however, represents only the first of several cookie innovations Pogens will unveil. Plans call for three or four new cookie products to come out in 1992.
One that's waiting in the wings is a chocolate chip cookie with a fudge center. Known as Chocolate Chip Plus, the new cookie offers consumers a distinctive texture in a familiar setting.
Conscious that chocolate chip cookies lead the cookie category in popularity, Aulik wanted to ensure his product would offer consumers a reason to buy as well as distinguish Pogens' product from the crowded cookie shelf.
That same thought process applies to another new product set to debut, a "pie cookie."
"We're looking to unveil it sometime during the second quarter this year," Aulik says. "It involves using no-fat/no-cholesterol technology. We can go one of three ways with this product: one, do a straight wire-cut cookie that tastes like a pie; two, do a wire-cut/roll cookie that involves a larger dollop of filling, which gives it more of a pie look; or three, do a graham cracker-type cookie that's shaped like a pie. In any case, we would do a series of flavors in what we are planning to call our 'Pie Series.'"
Pioneering Recloseable Packages
Along with new products, Aulik also intends to introduce new packaging. The company has embarked on a major packaging redesign program that it hopes to introduce late in the first quarter.
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