QUILLIN'S SHUTTERS CENTRAL BAKERY

Roseanne Harper

LACROSSE, Wis. -- Quillin's is in the process of closing its central bakery facility and has struck up a partnership with Dick's Supermarkets to supply it with a full array of bakery products, officials told SN.

The company received its first shipment of sweet goods from Dick's this past Tuesday and is now getting ready for the first shipment of bread and hard-dough products. Delivery of fresh-baked items every morning early enough for associates to get them ready for sale by 6 a.m. is part of the deal.

Dick's, a wholly owned subsidiary of Fresh Brands, Sheboygan, Wis., has supplied other independent retailers -- as well as its own eight retail units -- with its private-label bakery and deli lines for years, and it also numbers among its wholesale customers a regional division of Sysco, the giant Houston-based food-service distributor.

The decision at Quillin's to close its facility reflects what is going on in the industry. Letting someone else -- with a larger, cost-efficient operation -- do the baking in order to profitably market a customer-pleasing variety of items is gaining ground. For many, it's the only option that makes sense in the face of rising labor and production costs, industry sources said.

Quillin's officials told SN that its 9,000-square-foot central bakery, built from the ground up in 1997 [see "Center of Attention," SN, July 7, 1997], has never turned a profit. And with the imminent arrival of a Wal-Mart supercenter just six blocks from Quillin's flagship store, it was time to cut some losses, said Mike Quillin, stores director for the eight-unit, family-owned independent.

"For us, it was a volume issue. We never were able to get enough large wholesale accounts to make the [bakery] operation profitable. We would have had to increase volume by 40% to 45%, and now, with the advent of Wal-Mart, we couldn't afford to absorb any more losses.

"It was a very difficult decision because we've been baking for nearly 50 years, and some of our bakers had been with us for 20 years. That's the hardest part. We can't retain everybody," Quillin said, adding that in one case, Quillin's referred a veteran baker to a competitor who hired him on the spot.

Prior to investing nearly $1 million in its new facility in 1997, the company had been supplying its in-store bakeries from a 2,800-square-foot plant that was operating at capacity.

Though it was a hard-wrought decision to get out of the baking business, once it decided to outsource, choosing Dick's was pretty easy, Quillin said.

"The taste profile and the quality of Dick's products are so similar to our own, and the corporate culture of our companies is the same."

Some products -- such as Quillin's bagels and its signature Blarney bars -- will be made to Quillin's specifications, but for the most part, the products will be ones Dick's is already making. All will be sold under the Quillin's label.

With nearly 300 items to choose from now, Quillin's has the potential to nearly triple its bakery variety from the 120 it had. Indeed, the company will be able to offer some sought-after products it hadn't had previously.

"For instance, we can now offer a half-pound loaf of bread, which our seniors wanted. Previously, we couldn't afford to do that, but Dick's can. And we'll even have some new varieties in our popular doughnut line. We're particularly pleased that our customers can still get fresh doughnuts every morning, and 85% of them are coming in on case-ready trays so there's not much labor involved," Quillin said.

There are items, such as hand-twisted Danish, that will be relinquished.

"This whole decision has forced us to look at some of our slow-movers and eliminate them or substitute a Dick's product. With the hand-made Danish, there is another product with a similar taste profile that we hope will fill the void. Then, we had a cinnamon product in loaf form. Dick's doesn't have that, but they have one in roll form," Quillin said.

With a 25,000-square-foot-plus central commissary, of which 17,000 square feet are used for bakery production and a hefty list of wholesale customers, Dick's can do what Quillin's couldn't -- run batches big enough to make production cost-efficient.

But that's not the whole story; the Quillin's-Dick's link-up exhibits all the elements of a true partnership.

"We're going to help them improve their sales. We think the added variety and our ad support will give their sales a push. And the addition of Quillin's gives us more critical mass, so we'll get more deals from our suppliers we can pass on," said Bob Leuth, Dick's bakery director and director of business development for bakery/deli products.

Training, too, has been a big part of the agreement. In fact, the week before the first shipment, Dick's conducted a day-long session to inform all bakery personnel about the products available and the ordering system. The latter part of the session was attended by all part-timers, as well as full-time bakery associates.

Prior to that, store managers, bakery managers and other key Quillin's people toured Dick's facility and had a session there to familiarize them with what Dick's has to offer.

"We set up a conference room like a little bakery with a representation of our products. Our bakery products have a made-from-scratch appearance, and we sampled everything," Leuth said.

He added that sampling and demo support will be part of the deal and that training by Dick's at store level will be ongoing for a while.

"This is a real partnership. The leadership and owners of our company and theirs have known each other for a long time. They're both family-owned companies and, being two hours apart, there's been no competition between them. Our goals are very much the same. We've even been using basically the same suppliers. I see this as being pretty seamless," Leuth said.

The addition of Quillin's as a customer has added 15% to Dick's volume. That, along with the addition of more than 70 Piggly Wiggly stores last year, has heated up expansion plans at Dick's. The company expects to move into a new 40,000-square-foot facility in the spring of 2004.

Industry sources' reactions to the Quillin's-Dick's arrangement varied but were mostly positive.

"Sounds like a double win for both companies, giving Dick's more volume and allowing Quillin's to jettison some of that negative burden when it's about to face Wal-Mart. I do hope Quillin's doesn't try to compete on price. Instead, the bakery should give them the differentiation to not only compete, but best Wal-Mart in providing shoppers with superior-quality products at fair prices," said Brian Salus, president, Salus & Associates, a Midlothian, Va., consulting firm.

Mike Quillin stressed that the arrangement with Dick's will provide not only top quality, but an improvement in product consistency.

"Their technology will do that. Their frying system, for instance, makes the doughnuts more consistent. We're pleased that we can still offer our customers such high quality and that same home-baked, fresh look in products that will be delivered fresh every morning, seven days a week," Quillin said.