The Fall of Tastykake

With the sale of the 100-year-old Philadelphia brand to a Georgia company, serious questions arise about Tasty Baking’s demise, from installing politically connected Charlie Pizzi as CEO to taxpayers shelling out $32 million to build a new factory in the Navy Yard. In the end, Tasty’s long rise and recent fall are the story of how this city works — or more accurately, too often doesn’t

IN APRIL OF LAST YEAR, the Chamber of Commerce presented Charlie Pizzi with its William Penn Award, an annual business honor. At a Bellevue ceremony packed with the city’s political and business elite, Walt D’Alessio stood up and said that Pizzi’s business savvy “took a Philadelphia icon and put it back on its feet, and now he’s basically outstripped everybody else in the baking business.”
But even then, months before the full extent of Tasty Baking’s woes were publicly known, D’Alessio’s assessment was wildly off. By all objective financial standards, Pizzi’s tenure as CEO had been a failure.
During Pizzi’s eight years as Tasty’s boss, the company’s stock plummeted 84 percent. And however retrograde the pre-Pizzi Tasty Baking might have been, it was nonetheless profitable, averaging a net income of about $6 million a year over the seven years just before Pizzi took over. Under Pizzi, the company lost $6.8 million in 2008 and another $3.4 million in 2009. The most recent accounting has Tasty a staggering $12.2 million in the red.
If Pizzi — whose total compensation topped $1 million in 2009 — had been talking publicly, he would have almost certainly attributed Tasty Baking’s crisis to an unlucky confluence of events: the crappy economy, a sudden spike in the prices of commodities like sugar and milk, unforeseen production woes at the new plant that cut into the savings he expected to get from a more efficient factory, and the late 2010 bankruptcy of the A&P grocery chain (including Pathmark and Super Fresh), which stuck Tastykake with a big unpaid account at the worst possible time. Not to mention all the broad, long-term challenges that the entire snack-cake industry is confronting, like changing consumer tastes and tougher nutritional guidelines keeping junk food out of a lot of public schools.
Given all these challenges, perhaps no CEO could have managed to both build a new factory and maintain a healthy bottom line. But some former Tasty Baking executives say Pizzi got in over his head. They say he gave up too early on national sales efforts and botched expansions into new markets. They claim he made the company too dependent on data and information systems and — ironically, given Pizzi’s mastery of relationships — devalued the connections the sales force had with clients. They argue that morale at the company, though it surged shortly after Pizzi’s arrival, has been flagging for years. Most remarkably, they contend that workers now view Tastykake as “just another job” and lack the pride they once felt working there.
I THOUGHT ABOUT what the former executives said during the tour I was given of the new bakery, which sits between the Sunoco refinery and I-95 on the western edge of the Navy Yard. The facility is vast and open, with ceilings as tall as an airplane hangar and walls of white cinderblock. Sugar and flour hiss like white noise as they fly through elevated pneumatic tubes that connect supply silos to mixers. The overwhelming impression is of cool efficiency. The only splashes of color in the scene are the cakes themselves and columns painted blue and yellow. It feels like an Ikea warehouse.
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  • Diane

    Anyone who cannot distinguish between Tastykakes and Devil Dogs, Zebra Cakes and Twinkies probably should not write about them.

  • Ellen

    Ex-Philly girl misses TastyKake’s and is not beneath begging her relatives to bring boxes when they come to California to visit. Though not as memorable as they once were (can you say preservatives?) I still jones for them and Habersett’s Scrapple and Taylor’s Pork Roll. Now we’ll see another Philadelphia institution lost and a relocation to a baking company (in Georgia?) that will likely turn the Krimpets into a Twinkie (gag!) or worse develop a grits Krimpet. I shudder to think of it.
    However, if the new baking company can manage to crank out a decent TastyKake please ensure distribution to southern California Ralph’s or Albertson’s stores please!!!

  • Stephen

    one has to look far and wide to find a few examples nationaly where taxpayer support of businesses in competitive markets has succeed. All it does is postpone the tough business decisions to the the point where it is no longer possible to save the business, its jobs and its tax revenues. Tastey subsidies are like deserts, a sweet taste that is soon gone and the debilitating flab remains.

  • Stephen

    one has to look far and wide to find a few examples nationaly where taxpayer support of businesses in competitive markets has succeed. All it does is postpone the tough business decisions to the the point where it is no longer possible to save the business, its jobs and its tax revenues. Tastey subsidies are like deserts, a sweet taste that is soon gone and the debilitating flab remains.

  • DAV

    I think the writer stated the obvious fact: “Charlie had no experience with running this type of company”. But someone who may have done it better is Vincent Melchiorre who was a Marketing Exec. for Tastykake and is now with Bimbo.

  • suzanne

    Tastykake sold out to an out of town company who doesn’t know Philly tastes,customs,traditions,or expectations.The product will probably shrink in size,rise in price and be made with corn sirop instead of sugar.Will be known as TastelessKakes or worse.

  • Robert

    When I moved from my home in Maryland to Georgia in 1985, the thing I missed most after family and friends were Tastykakes. Thanks to Flowers Bakery I now enjoy Tastykakes whenever I want. I close my eyes, take a bite, and for a moment I’m home again. Flowers did more than preserve jobs, and for that I’m a grateful customer.