Pulse: Sam Katz’s Power Lunch: Many Tasty Returns


For 93 years, Tasty Baking — known colloquially around town as Tastykake — has baked the cupcakes and pies that generations of Philadelphians have claimed as their ultimate comfort food. But in the 1990s, our fast-changing culture and food preferences left Tasty in the baking powder. In 2002, their backs to the wall, Tasty’s board members took ­dramatic — and shocking — action and hired Greater Philadelphia Chamber of Commerce president Charlie Pizzi as their new CEO. Though Pizzi had been city commerce director, knew the ins and outs of city development, and had a Rolodex to die for, his only experience with baked goods had been eating them. But Pizzi, 57, has defied expectations: Tasty’s 2006 earnings were $6.5 million, up 146 percent over 2005 and a complete reversal of the $7.9 million loss posted in 2002. The stock, which sank from $15.25 a share upon Pizzi’s arrival to $7.30 six months later, is now trading at just over $10.

Sam Katz: When you were appointed CEO, a lot of people — including me — found that curious. You heard those murmurs. How did that make you feel?
Charlie Pizzi:
It was understandable, but I never worry about what others might think. I wanted to see if I could be a success as a public company CEO. It was more an emotional thing. I really believed I could do this. I probably didn’t understand how far this company had fallen, and I did have more than a few anxious moments early on.




SK: What had happened before you got there?
CP:
It lost its pizzazz. It was dormant. No advertising. No marketing. In the food business, you have to support your product through marketing and you need to innovate. Tasty lacked both. Independent distributors were skeptical about a national distribution program and they were the back on which our business had been built. I came to reinvest in the brand. Competition was killing us with innovation. New products like breakfast energy bars were costing us shelf space.

SK: Were you a Tastykake freak as a kid?
CP:
Absolutely. I grew up in West Philly. After I got done with my paper route [delivering the Bulletin], I would spend 15 cents to buy a pie or cupcakes.

SK:
Did your Mom put Tastykakes in your lunchbox?
CP:
We weren’t rich enough for that.

SK: After you arrived, Tasty’s stock, which had been as high as $20, dropped to around $6. How did you deal with that?
CP:
I had to convince investors to look at the long term rather than quarter to quarter. We had to go backwards before we could step forward. It was painful, but if you have a plan you have to put your faith in it. We had spot distribution in places like the Midwest. So we eliminated $5 million in revenue when we shut that down. In the food business, it takes five years to fix the problems. We had to stay even-keeled — not too low or too high.

SK:
How can Tasty get shelf space, given all the competition?
CP:
Guerilla Marketing 101. We’ve tried to become an East Coast business, not just a mid-Atlantic one. Now we’re heading south. We’re using coupons, product trials, and we’ll need a few breaks along the way. We have to use our capital wisely — we don’t have unlimited amounts to burn. So we have to build our brand and extend our shelf space, one chain at a time.

SK: You’ve said you want the “T” in Tastykake to stand for “technology.” What do you mean?
CP:
SAP in Delaware County has been amazingly effective in helping us. We brought in new people. We took a company with no technology — only 50 people had computers — now more than 400 do. We had a supervisor who played college football. Big guy. We did IT training. He walked out of the class one day and said, “I’m not doing this woman’s work.” So his supervisor tells him, “You better wear a dress tomorrow.” Today, he’s as data-driven as the rest of our company. We track everything and are managing our supply chain and inventory — that’s cash — so that our products are fresh when they hit the shelves. We’ve given our sales distributors PDAs to enable them to track historical sales and product choices for customers. All of this revolutionized our business. Everyone is accountable and the numbers speak for themselves. Now we’re a “pay for performance” culture. Might be a good thing to pass that idea around here.

SK:
You’re taking Tasty to the Navy Yard and pulled off a very big deal. Going through those paces must have been like going home, given your background.
CP:
This was one skill and set of experiences that I could bring that nobody else had. The emotions around Philadelphia and Tastykake made me not want to threaten a move to New Jersey or Delaware. But I had a responsibility to get the best deal I could. But there was no gamesmanship here. Everybody was straight. Pennsylvania had already helped us and understood what we wanted. I told the Rendell folks that this was theirs to lose. The same with PIDC. We tried to be transparent, but we were clear about what we had to accomplish. I had lobbied Jack Murtha and Bob Borski, and they got us $27 million for the Navy Yard. Liberty Trust was critical, and my relationship with Bill [Hankowsky, CEO of Liberty Property Trust] was important. This move gave this company the best chance for a long-term life. We couldn’t compete operating out of a building that was built in 1922.

SK: You’re moving to a Keystone Opportunity Zone where you won’t have to pay taxes. Does that bother you?
CP:
I would if the company had been a moneymaker and taxpayer. But we’re carrying losses forward and the tax aspects were much less important than getting a plant where we can grow our business by 10 percent a year or more. A new bakery is a learning curve for us. As we expand into other markets, we’ll build new bakeries. The march to the Navy Yard is a big one for Tasty. That’s how we’ll eventually develop a national brand.

SK: Is there a company that serves as a role model for “best practices” that Tasty wants to emulate?
CP:
Yeah. In the South, a company called Flowers Bakery, which makes bread and cake. Very efficient. Collaborative management style. High quality. Sales over $3 billion. The were acquisitive in their growth.

SK:
Any new products on the way?
CP:
We’ll always keep our core products — cupcakes and pies. But we believe that our brand has leverage on other shelves in the supermarket, [such] health platforms (like 100-calorie products). For example [holds up an apple pie], there is a one-day fruit serving in this pie.

SK: I think I should test that.
CP:
Go right ahead.

SK: When we were growing up, Tastykake was a primary sponsor with the Phillies. Is that possible again?
CP:
Richie Ashburn used to make the “T” sign — Time Out for Tastykake. We can’t do the kind of money that major-league sports commands today, but we’ve got a promotional campaign with Chase Utley and we’ve branded our name on the WIP studios, which may be the biggest sports machine in the city.

SK: What scares you?
CP:
Assuring that we can maintain our momentum. We have to stay methodical and focused. We’re in position to really understand our risks. We’re a real company. Our data tells us everything we need to know about our business, so decisions are not emotional but real-time based. We have this business down cold. Our SAP technology platform has been transforming for Tastykake.

SK: How are investors treating you?
CP:
Our stock is held half by retail and half by institutional, and both seem to understand what we’re doing and support us. Research analysts see how the IT work, the new people, the tightly focused marketing, the new plant will make this company a long-term success. But I think it is still too early to see that in our share price.

SK: To create a new Tastykake you had to get new people. Where did you start?
CP:
The people here were very dedicated, but they were tired and somewhat beaten down. This was critical but difficult. We started with the board. This group is world class. It should be running a $5 billion business. Our chairman, Jim Ksansnak, is truly one of the smartest business people I’ve ever been around. His experience at Aramark and elsewhere is deep and valuable.

SK: Where do you see yourself in the next 10 years?
CP:
I don’t think Tasty will be the last thing I will do. This was very important to me, to prove to myself I could it. It has given the confidence that I can do anything. One thing I am sure is that I will land in teaching, which I’ve always wanted. I am not going to retire. I think you get old when you retire. I am going to do something, whether it’s parking cars or bartending, until I get carried down Broad Street.

SK:
How do you feel the business community is doing to help the city and the region to realize its potential?
CP:
They’re at a critical point. With the new administration, the business community will have to step up and deliver even more so than it did under Rendell. We have some real ground to make up. For the business community to help get things moving in city government would be better than any marketing campaign.

SK: We both are part of a generation of Philadelphians who keep talking about Philadelphia reaching its full potential. Do you think we’ll see that in our lifetime?
CP:
I hope so. It’s like baseball. Every spring you hope for a World Series. You and I will always think that Philadelphia can be in that World Series, urban potential wise. We both know the city has the assets for greatness.

SK: Where do you see the next generation of business leadership in Philadelphia?
CP:
There are a lot of great young people around. I look at Autumn Bayles in our company. She is brilliant. She’s managed our technology and has moved on to other management roles. She started her own nonprofit. Bill Reddish, a young entrepreneur who came to the chamber out of Temple and is active on the political scene. We’re loaded with talented aspiring future leaders.

SK: Are you still active?
CP:
Yes, but when I left the chamber, I left. I knew I had to tend to the business of Tasty. When called upon, I always respond.

SK: Are you happy with where things stand with business?
CP:
Time will tell. We really need to embrace the new administration. But there is a real test to be put. If you don’t return people’s calls, if they don’t feel like you need them, businesspeople will find other things to do. Ed Rendell asked for help. But we said, “We’ll help, but you have to implement what we’re talking about.” You need someone on the second floor of City Hall to walk into the boardrooms and lay out a vision that inspires leaders and then gets them to help get it done. I’m hopeful we’ll see that on both sides. But time will tell.

SK: So what is your favorite Tastykake?
CP:
I try to eat a different Tastykake everyday.

SK:Now that’s a goal I could really sink my teeth into.

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