Marketing knead

Natural Ovens transitioning to new owner while battered by high prices

By: Doris Hajewski, Milwaukee Journal Sentinel

Manitowoc - A year after being sold to Alpha Baking Co. in Chicago, nutritious bread is still rising at Natural Ovens, but sales aren't.

Alpha Baking, the new Chicago-based owner, bought Natural Ovens in 2007 for an undisclosed amount from founder Paul Stitt and his wife, Barbara. Under the Stitt's ownership the company had grown from a traditional small-town bakery to an $18 million business focused on nutritious breads and bagels distributed to grocers across the Midwest.

The Natural Ovens acquisition was part of Alpha's growth strategy, said Mike Marcucci, co-founder and chief executive officer of Alpha Baking. The plant, just outside of Manitowoc, has plenty of room to expand baking operations. Alpha needed that, Marcucci said, because its Chicago plants are landlocked.

The Natural Ovens business also complemented Alpha's, which had been mainly focused on selling bread and rolls to restaurants. Natural Ovens sells its breads and bagels to supermarkets in Wisconsin, Minnesota, Illinois and Indiana.

"Sales are doing OK," Marcucci said about the Natural Ovens products. "A lot of that is that we're giving it broader marketing."

Unit sales are flat, but dollar volume is up because of price increases that the company was forced to make to account for skyrocketing prices for flour and other ingredients.

And that gives Marcucci mixed feelings about the acquisition.

"Everything we thought would be there has been there: great people, a strong work ethic," he said. "What I didn't anticipate was the tripling of the cost of flour."

Natural Ovens is paying 40 cents a pound now for flour, up from 11 cents a pound a year ago, Blaszczyk said. Organic flour, used in a new line of organic breads and bagels introduced last year, is 70 cents a pound.

"Soon it will hit a dollar," Blaszczyk said. Those increases have pushed the retail price of organic Natural Ovens bread to $4.79; the standard version is $3.89 at Pick 'n Save, up from $3.49.

Natural Ovens bread has historically been priced higher than the average for all bread because it is baked with flaxseed and other expensive ingredients, Blaszczyk said.

Those ingredients are the basis of the appeal of the product, along with the charisma that surrounded Stitt, an outspoken critic of large food companies.

Maintaining connections

Mariano compared Natural Ovens with Lenders Bagels, another brand with a strong connection to its founder. Buyers of such brands often face a challenge in maintaining their connection with customers, he said.

"Alpha purchased us not to change us, to make us better," Blaszczyk said. The staff level at the headquarters is about the same as it was before the sale, with 124 people. More of them work in production now, fewer in the office.

Under the new owners, a few slower-selling items in the product lineup have been eliminated. The core products that continue have been reformulated to improve nutrition with higher levels of fiber and whole grains, Blaszczyk said.

Alpha has improved the baking and packaging process, including a change that will extend the shelf life of the products. Natural Ovens will launch a new line of organic bagels in May. They will be the first organic bagels on the market, Blaszczyk said.

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