Getting into grocery

A small bakery has made a name for itself carving out supermarket shelf space in a competitive market.

A small bakery has made a name for itself carving out supermarket shelf space in a competitive market.

Kevin Ceretti purchased Kookie Kutter Bakery bake in 1992. At the time, the three-year-old retail operation in Sackville, N.B., specialized in catering, scratch products and specialty items. For the first few years, a staff of three manned the 600-square-foot space, turning out the bakery’s signature home-style goods. Over time, Ceretti realized that the bakery’s low output wasn’t sustainable.

Kookie Kutter was struggling to survive in a tiny town of just under 6,000 people, almost half of whom were students enrolled at Mount Allison University. Sackville’s small population was also served by nearby chain grocery stores with in-store bakeries.

“We either had to expand into wholesaling or get out of it because there just wasn’t enough volume to justify the walk-in business for Sackville,” Ceretti explains.

Ceretti got in touch with head offices for the major grocery chains in the area. He was passed from one employee to the next for months before finally getting in touch with the right people. He learned that getting on the shelf would mean investing in new packaging. Through its retail storefront, the bakery sold gingersnaps in two-pound plastic bags. To crack the wholesale market, Ceretti had to offer the cookies in a more robust package. Creating an all-new machine die to cut the plastic for a package can be a pricey proposition but it may be an unavoidable expense if your product will be an uncommon shape or will sell in an unusually small or large quantity.

Retailers also required a proper label complete with a nutrition information panel and a best before date. For a fee, a lab at the University of Moncton studied the gingersnaps and determined that the dairy- and egg-free cookies had a shelf life of three to four months.

Last but not least, Ceretti had to invest $800 to claim a barcode for his gingersnaps. The barcode has proven to be a valuable long-term investment. One barcode can be adapted to accommodate a total of 999 different products, giving Kookie Kutter the freedom to grow its wholesale offerings. This came in handy in 2004, when the bakery added Vanilla Flax Snax to its lineup, and again in 2008 with the launch of its cinnamon and honey snaps. When a new product is ready to go to market, Kookie Kutter increases the final three-number sequence in its 12-digit barcode – gingersnaps are 001, the Vanilla Flax Snax are 002 and the cinnamon and honey snaps are 003.

Kookie Kutter’s gingersnaps finally hit the shelves in 1998, 13 months after Ceretti began exploring wholesaling opportunities. The cookies sold well and Ceretti soon set his sights on expanding into other markets in the area. Growth presented a whole new set of challenges to be tackled.

“They said, ‘you’re a local company and people from Sackville and Moncton know you, but Sussex and Saint John are farther away’,” Ceretti says. “I had to guarantee my sales to get those doors open. If the cookies fell out [of the package] or broke, I’d have to take them back and give [the store] a percentage on that. They started asking for about 20 to 25 per cent; now they’re up to almost 40 per cent.”

Over the next year, Kookie Kutter branched out, bringing its gingersnaps to Atlantic Superstores, Sobeys, Costcos and Co-op stores in New Brunswick, Nova Scotia and Prince Edward Island. Increasing market share meant Kookie Kutter needed to step up its output. The bakery moved into a 2,300-square-foot space and increased staffing levels to triple its production capacity.

Success in Atlantic Canada encouraged Ceretti to continue expansion. He zeroed in on Quebec and began the familiar back and forth routine. Tapping the new market meant a host of new requirements, so Ceretti weighed the risks versus rewards.

“I had to spend $20,000 to give them what they wanted, which was a better package, a shrink band to put around the cookies and a French and English label in the same font. I gave them what they wanted and they said ‘if the sales aren’t where they need to be in six months, we’re going to have to get rid of you,” Ceretti says. “I had to give them a bigger clamshell, so I had to have a die made for the shell. I had to find shrink bands that would go around the package and have those made, which increased the cost of the product.”

Three months into the trial, the retailer pulled Kookie Kutter’s gingersnaps off its shelves. The retailer told Ceretti it wasn’t selling sufficient volumes to continue stocking the bakery’s products. This took him by surprise, not only because they were only halfway into their trial period, but also because he says the retailer would not discuss the situation with him.

Losing the Quebec market so soon after entering it was disappointing, but Ceretti remained committed to growing Kookie Kutter’s reach. He has branched out into Ontario, appearing in more than 100 Sobeys stores. Two years ago, the bakery made its way south of the border, claiming shelf space in stores across the New England states. Although there’s no shortage of new markets to explore, Ceretti is mindful of Kookie Kutter’s current limitations. It was flattering when one retailer suggested national distribution, but Ceretti knew this wasn’t a realistic option.

“We’re a small bakery. There’s not a lot of automation. A lot of it is hands on. I can’t afford to go to automation until we get more volume. It’s coming though.”

In the meantime, Kookie Kutter’s staff of seven will continue to work three to four days per week, turning out between 50,000 and 60,000 gingersnaps.

“My goal is to focus on Atlantic Canada and do it very well, and move into Quebec, Ontario and the New England states, and focus on that little circle. That would be phenomenal,” Ceretti says.
His advice for other bakers looking to get into the game is simple: “Keep it low-scale because at first you don’t have the funds to afford all these marketing people. When you get a little larger and you can’t handle it anymore, when it starts to get a little too complicated, then you step out and hire somebody in marketing.”

Last but not least, whether you’re an old hand or the new kid on the wholesaling block, the most important thing is to be persistent.

“Go for it, don’t ever give up – never give up – and be very patient. If they say no, you say ‘OK, what do you need? What do I have to do to open these doors?’ The company you’re looking at may be too large, so maybe you go to a smaller company, but don’t give up.”