Mixing the Right Ingredients for Growth

Operations are humming at the 56,000-square-foot Norwalk, Ohio, bakery. The facility’s 160 employees, nearly all wearing bouffant caps and what appear to be white lab coats, toil alongside large mixing, baking, and packaging machinery. Elaborate conveyers prepare, mix, bake, and pack plain, seeded, and double-cut hamburger buns at a rate of roughly 4,000 dozen per hour.

Just about 140 miles away in Fremont, Indiana, a facility of similar dimensions produces not only buns at the same rate, but also 2,000 dozen English muffins per hour. All told, the process consumed some 65 million pounds of flour last year–mostly for McDonald’s restaurants in Ohio, Pennsylvania, West Virginia, Kentucky, and New York.

Here Tilmon F. Brown, CEO of New Horizons Baking Co. (No. 58 on the BE Industrial/Service companies list with $67.45 million in revenues) is in his element. And at 65, he’s showing no signs of slowing down. “I think what I’m doing now keeps me very young and active, and I enjoy what I’m doing,” he says. “Coming to work is not a labor. It’s a pleasure.”

It wasn’t always the case. When Brown acquired a minority stake in New Horizons in 1995, he discovered redundancies, operational inefficiencies, and lackluster quality controls. The latter was the reason the company was about to lose its largest client: McDonald’s. But within a span of 18 months, Brown and his team restructured the workforce and operations, and invested in new technology as part of a textbook turnaround. For those efforts the company enjoyed steady growth year over year and a 3.2% rise in recession-torn 2009 that catapulted New Horizons up 11 spots on the 2010 be industrial/service companies list.

The Accidental Entrepreneur
Brown became an entrepreneur late in life. At the age of 50 while vice president of sales at Continental Baking Co. (which is now part of Hostess Brands Inc.), his plan was to put in five more years and retire at age 55. However, that wasn’t in the cards. In May 1994 he received a call from Baltimore businessman John Paterakis Sr., who 20 years prior had handled some outsourced baking business for Continental. “He said, ‘Hey, Timmy, are you ready to go to work for a living?’” Brown recalls. “The only caveat was that I would, in fact, leave Continental and not second-guess myself about making that decision.”

Paterakis and his partner, Peter Grimm, were looking to acquire the facilities and felt Brown would be a solid addition to the team. Brown looked over the offer and felt it made sense. The business had a major customer locked in, and with decades of experience, Brown knew the baking business inside and out. On the downside, the bakery carried a hefty amount of debt and quality control had slipped. “If I had maybe started selling widgets instead of baked goods, it might have been more difficult,” he admits. “But to go from bakery to bakery was no big deal.” Brown signed on the dotted line and acquired a 20% stake in the business. By 2002, Brown’s stake would increase to 51%, while Paterakis and Grimm owned 24.5% each.

The Turnaround Guys
The business was on the block for a reason. The bakery had been successful in the past, but had been bought out by a venture capital firm that did very little reinvestment. Inefficiencies cut into profitability. Little was invested in technology, and processes were only 60% automated. As a result, headcount numbered more than 330 employees, much higher than it should have been. “We [purchased] some robotics. We did some highly efficient technological replacements that enabled us to increase our productivity almost two-fold,” recalls Brown. “So, with fewer people, we were putting out twice as much product.”

All told, the payroll was reduced to 260, mainly through attrition. “If we knew that we were going to add a piece of equipment that was going to make the job better and maybe eliminated a person, we waited until we had something through attrition,” says Bob Creighton, senior vice president of sales. “Somebody retired, somebody left our company for whatever reason; if we had a void we wouldn’t fill it, so we never really had to lay anybody off.”

Prior to Brown and company acquiring the business, the funds earmarked for new equipment totaled $300,000 per location. In the first 15 years, Brown and his team invested more than $30 million and its two locations are now more than 85% automated. “This company that had the business before us had such a low capital investment budget that it was almost impossible to think that you could run two bakeries on the kind of investment they were willing to make,” Brown says. “And as a result, the bakery showed it. They were dismal places to work in, poorly lit, poorly equipped, and coming to work had to be drudgery.”

Part of that turnaround plan was to diversify the company’s client base. At the time of the acquisition, 95% of the company’s business came from McDonald’s. These days that number is closer to 60% now that New Horizons supplies local and regional bakery chains like Perfection Bakery and Nickles Bakery, as well as prepackaged sandwich makers and food service companies for municipal school systems. “If you wanted your own brand of eight-pack hot dog and hamburger buns, I would make that product for you, put it in your bag in your label, and sell it to you,” Brown says.

Cooking Up Success
The entire process from raw materials to shipping takes five hours. The baking process starts with ingredients such as flour, sugar, water, and shortening. Depending on the recipe, varying amounts of each ingredient are blended within a supersized mixer large enough to hold a small car. Roughly 1,800 pounds of raw ingredients are mixed until dough is formed. A dough pump then pushes the dough into an extruding machine that divides the mass into eight parts. Each piece is scaled to a specific weight and then flour is added to allow the dough to be manipulated. The dough rests for about 90 seconds before going into large sheeting rollers, where it is flattened and moved into large pans with small cups built into them for the desired shape or size. The pans then go on a conveying system called a proof box, where the dough is exposed to specific amounts of heat and humidity to get the yeast to grow within the dough and expand to a specified size.

The conveyor brings the dough to an oven to be baked at about 500 degrees for seven to eight minutes. Once the dough is fully baked, a device called a depanner uses suction to automatically remove the buns from the pan. The empty pan goes off in one direction and the buns are automatically conveyed to a cooler to reduce their temperature to around 150 degrees, cool enough to slice and package. Once out of the cooler, the buns are whisked into a bulk packing machine that wraps 30 buns at a time in 31-inch-wide poly. The air is sucked out of the packaging and all the ends are heat sealed. From there, the sealed buns are stacked and transported to shipping. The company’s fleet of 25 trucks then takes the finished product to its final destination.

While the company’s largest client was less than happy with the bakery’s previous ownership, the golden arches now speaks highly of New Horizons. “Under Tim’s leadership, New Horizons Bakery Co.’s expertise and insight combined with their energy and willingness to collaborate, has helped us to make great strides in a number of important areas–most important, driving long-term growth against the core McDonald’s U.S. business strategy,” says Marion Gross, vice president, supply chain, McDonald’s USA. “Tim has an unwavering commitment to quality, to value, and to people–always putting the system first, above all else. We appreciate his partnership, leadership, and commitment to our business.”

Hundred-Million-Dollar Man
Brown is at the age where most have an eye toward retirement. In fact, one of his goals is to pass the business on to his children, all of whom work for the company: Aaron Brown, as plant manager of the company’s Norwalk bakery; Melissa Williams, as human resources director; and Trina Bediako, as executive vice president.

“All three are working with me, learning from me, and my immediate objective is to try and pass on 44 years of knowledge to those three in some way, shape, or form so that I could spend a lot less time here,” he says. “Hopefully, you know, in the not-too-distant future, I’ll be able to be away a couple of weeks out of the month or more and know that everything is in good hands.”

To that end, Brown has been grooming Bediako as his successor. Having joined the company in 2002, Bediako is learning the ropes and shadowing her father, focusing mainly on building upon the company’s McDonald’s accounts. “I’m in school every day. And to be by his side and learn from him every day is an experience I can’t even put into words,” she says. “I want to keep this business strong and make it grow. That’s the desire of my brother and sister too. We want a legacy to pass on to our children.”

Brown’s other objective is a bit more ambitious and involves nine digits: He wants New Horizons to grow into a $100 million force among food manufacturers. For starters, he could be on the prowl for an acquisition at the right price. Though the company has had its best sales year ever, he’s looking to add capacity. He’s already put another muffin line in the Norwalk location that should boost output by 25%. “I’ve set some targets for [us] that, you know, we need to be thinking about a hundred million dollars as a threshold, and I think we can get there.”