The new home of Butterscotch Krimpets at the Navy Yard in South Philadelphia is a study in contrasts.
A larger-than-life-size 1920s image of a little girl eating a Tastykake hangs outside the building and greets visitors from the parking lot. The lobby centerpiece is a Ford Model A from 1914, the year of Tasty Baking Co.’s founding.
But down a long hallway lies a new bakery as modern and efficient as $78 million can buy.
“It’s like moving from a 1946 pickup truck to a Maserati,” Tasty’s chief executive officer, Charles P. Pizzi, said this week, referring to the company’s move from the bakery in Philadelphia’s Nicetown section it had occupied since 1922 to the Navy Yard facility.
The plan for the 350,000-square-foot bakery and warehouse was announced in May 2007, and the project was paid for with the help of $31 million in publicly subsidized financing. Tasty’s total cost is a huge bet for a firm whose market value was just $60 million yesterday. The company moved its headquarters to a nearby building in April 2009.
Swapping an inefficient, six-story bakery with equipment jammed in every which way for a one-story bakery substantially smaller in square footage but much more open and easier to use is expected to have a big financial payoff. The new site also has twice the capacity.
Tasty has estimated that it will log annual pretax savings of $13 million to $15 million, which would amount to a cost reduction of about 11 percent, based on last year’s results. A one-third reduction in the bakery workforce, from 500 to 315, made possible by automation, is the biggest factor in the cost savings.
The challenge now for Pizzi and his management team is to use the new bakery as a platform to “be as relevant to today’s consumer as we were in 1950,” Pizzi said.
The old equipment in the Nicetown bakery made it tough for Tasty to evolve with consumer tastes, said Mitchell B. Pinheiro, an analyst at Janney Montgomery Scott L.L.C. Now, it can bake just about anything it pleases, except bread, Pinheiro said.
The new bakery will pay off for investors, Pinheiro said, because the savings from it will allow the company to spend more on developing new products and on marketing outside the Mid-Atlantic region. “Their growth in other markets has always been sluggish because they don’t have enough marketing money to support it,” he said.
As possibilities, Pizzi mentioned a high-fiber snack cake, products for school lunches without sugar as the first ingredient, and individually packed Kandy Kakes.
Pizzi said he was confident there would be a payoff for shareholders. “This puts us in a very good position to move the company forward.”
For now, the company, which is renting the building, is in the midst of a tricky move. Four of seven baking lines are running at the new plant. The completion of the move is expected this spring. Some of the old bakery’s 15 lines are still running.
A big concern for management was to make sure the products, after being baked for decades in the same pans and in the same ovens, did not come out differently in the new bakery.
Butterscotch Krimpets provided a particular challenge because they had long been baked in cast aluminum pans that gave the sponge cake a particular texture.
But those pans were too heavy for the new ovens, which move the cakes through a vertical “S,” or serpentine, pattern rather than through a long tunnel, as was the case at the old bakery. The solution was an aluminumized steel pan.
The new bakery is bringing lots of smiles to workers’ faces. “It’s like night and day,” said Frank DiPompeo, who has worked at Tasty for 35 years and supervises the pie line. Work that used to require three people now takes two, he said.
Job cuts were accomplished through attrition rather than layoffs, Pizzi said.
Pizzi, who greeted everybody he saw during a bakery tour, urged DiPompeo to reach a certain target for pie production by the end of the month. Referring to how much he appreciates the new bakery, DiPompeo said a quiet “thank you” to Pizzi as they parted.