What an LA Bakery Says About the Economy Right Now

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1:46Hello and welcome to another episode of the All Thoughts Podcast. I'm Tracy Alloway. And I'm Joe Weisenthal. Joe, I have a very personal question to ask you. Well, we've known each other for a very long time, so there's not much left that we don't know, but go for it. Well, I actually don't know the answer to this question. Have you ever baked anything? Ah, not that much. I went through this. I'm just going to, the answer is basically no. Okay. No. Wait, you were going to say something. You went through a phase? One time in high school, I got in this weird experimental baking obsession with a friend of mine where we just sort of tried to relearn baking by first principles and see what worked.

2:25Oh, my God. What does that mean? Just like not reading any recipes. I don't think so. Not reading any recipes and just start experimenting. Just figuring it out yourself. And then seeing what caused things to rise and what tasted good without any starting principles or anything. We knew a few basic ingredients. It's fun. I should get back into baking. You should. It's really fun. Tracy, we know this is just a setup because you want to talk about your baking. So why don't you just tell us what you like to bake? Hey, look, I don't bake that much, actually. In my household, my husband bakes everything.

2:54So he does a really good Basque cheesecake, really good chocolate chip cookies, things like that. But if you were doing first principle baking, I imagine you know how difficult it is and all the things that are involved in just making a simple loaf of bread. I am aware. And the other thing is, not only I understand that it's very complex, but beyond that, I'm always flabbergasted at the idea of doing it at industrial scale or semi-industrial scale and how that even works. I have no idea, to be honest. Honestly, industrial scale food preparation at all seems crazy to me, like steaks and everything.

3:32Like, how do you do it over and over and over again and get a repeatable process is like a fascinating question to me. Right. So that's really interesting in and of itself. But the other interesting thing about the baking business at industrial scale, as you just pointed out, is it's kind of a microcosm for the economy. You have all these commodity inputs, which obviously move around along with inflation. You have labor issues. You have to get bakers who want to get into work really, really early in the morning. And obviously you also have consumer demand. So it's really an interesting lens to kind of look through.

4:05Well, one of the favorite episodes that we've ever done, which I think was 2022 or maybe 2021. Long time ago. We talked to a commercial baker in Chicago, and I've always wanted to do more. That was such a pivotal episode for us. And I was like, well, we learned a lot about what was going on with commodity costs. We learned a lot what was going on with pricing power, et cetera. Well, it's 2025 now. I would like to learn more about what's going on. All right. So we're going to dive back into baking, possibly not on a first principle basis, but we have the perfect guest. We're going to be speaking with Andy Caden.

4:41Wouldn't baking from first principles be a really good, that would be like a good name for a cookbook. All right. Sorry. Keep going. Good name for a baking podcast, perhaps. Okay. We're going to be speaking with Andy Caden. He is the owner of a bakery in L.A. that's called Bub and Grandma's. They do wholesale orders for a bunch of different L.A. restaurants, so industrial scale, as you mentioned, Joe. But they also have a retail restaurant that does sandwiches, and they're in the process of opening a pizzeria. Amazing. All the baked goods. Andy, welcome to the show. Really good to be here. Thanks for having me.

5:18Shall we start out with where did your interest in bread actually come from? Was this like a COVID trope where everyone started doing their own sourdough and got really into carbohydrates? Or maybe I'm a little proto-COVID in my obsession. I was a writer in advertising and TV for about a decade after school and learned fairly quickly after I got to Los Angeles about 16 years ago that I hated it and hated myself for contributing to sort of the advertising culture, so to speak. and I needed to escape and always had an obsession with cooking and eating and decided to focus on something that I saw missing from the Los Angeles landscape after I moved here from the East Coast.

6:07I grew up in New Jersey, kind of in an Italian Jewish sandwich mecca, and saw that there was sort of a glaring absence of those style of kind of walk into it and have a great sandwich kind of experience in Los Angeles. There are a few notable spots, but they aren't everywhere like they are in New York and New Jersey. So I decided to start writing some business plans and figure out how to open a sandwich shop here. And, you know, started working at a sandwich shop in Hollywood called Potato Chips for free on the weekends, staging at a variety of bakeries just to try and figure out how bread worked.

6:44And in that process of trying to figure out how bread work simply just to talk to bakers about what I wanted. I started baking daily at home and got into that pseudo COVID rhythm of daily baking and the obsession of that that comes from falling into its, you know, into its grasp. And, you know, started giving away all the bread I was making. And it found its way to a friend of mine who worked at a local restaurant. And the owner called me out of the blue and asked if I could make bread for him daily. And I said, yes, and it hasn't stopped for 10 years. Wait, so initially, were you just baking bread at scale in your kitchen?

7:23I started as just for me, just as an experiment. But very quickly, kind of once I had that first account, which was maybe six months after I started baking six months to a year, it the attention came quickly and I started needing to level up over and over and over again. So the first place that I would mix the bread in my house and ferment it there and then shape it and take it to a pizza place around the corner and bake it in their pizza oven. It was a variety of these hacked together, baking in other bakeries off hours to get to get things done. And as the demand grew very quickly, I quickly had to figure out how to run a business, not just bake a few of the bread out of my house and moved into a semi-legitimate space at about a year and a half.

8:14Flash forward to today, zooming out, why don't you tell us about the size and scope of your businesses? What do you have right now, just in terms of volume and number of employees, stuff like that? The Wholesale Bakery, which is what that story evolved into, is now a 50-person business. We have a 6 ,500-square-foot facility that produces bread, just bread, not pastry, for about 180 restaurants in Los Angeles. It's a pretty wide distribution and we are still trying to grow. We're kind of wall to wall in that space and need to move in the next two years. So we're starting to investigate what that would look like.

8:47We also opened a retail restaurant almost three years ago, which is insane how quickly that three years has passed in our weird time vortex that we live within now. And that is another almost 50 person business in the Glass Hill Park neighborhood of Los Angeles. we are in the process of opening a pizza place in Highland Park, a neighboring neighborhood that will be open hopefully in the next four to five weeks. So that'll be another 30 employees growing to 50 over time. Why did you decide to do the retail sandwich shop? Because I imagine wholesale actually sounds kind of nice because you're still making a product, but you're divorced from face-to-face interactions with customers, which sounds nice to me, but obviously you have a different opinion.

9:33No, I don't. I mean, we started with wholesale. We started in this less sexy, less customer facing environment for the first, say, five years of the business before we changed gears to open the retail restaurant. The wholesale business is a much more steady ship. I sort of describe it as you have this big ship. It's moving up and down in the water, but ultimately is forward moving. It's harder to capsize. It's harder to knock off course. And that makes it a little bit, let's say, less crazy. The restaurant business, which was what I wanted to get into in the first place, had I known what it would be like now that I'm there, maybe wholesale would have been better to stay out.

10:19It's so much harder. It's much more dynamic. Everything is changing all the time. Much more difficult to isolate the variables. There's far more variables to consider in the restaurant, especially when you bring in customer behaviors and how things really just consistently fluctuate across the board.

10:41Your best bottling plant employs 3 ,300 people. How do you get 3 ,300 people working at peak efficiency? Your best store has reduced waste, water, and energy usage. How do you make every store like your best store? Your best property has every guest raving. How do you make every property like your best property? The answer is Ecolab. Better performance, better outcomes, better impact. Ecolab. Now every location is your best location. For enterprise organizations, managing all your food needs is a tall order. But with EasyCater, you get a single workplace food vendor with the tools and resources to make it easy.

11:22Giving teams across your organization an easy way to order from a huge variety of restaurants, all on one platform. All while consolidating your corporate food spend so you can control costs, streamline billing and payment, and simplify reporting. EasyCater, your business tool for food. To learn more, visit easycater.com slash podcast. Running small and medium-sized businesses is hard work. Business owners need to be sure that their ads are working just as hard as they do. Amazon Ads allows businesses to track and optimize campaigns for better ROI from their marketing. With Amazon Ads, you can be more sure that your marketing is reaching relevant audiences during premium content and shows they're actually watching.

12:08Trillions of browsing, shopping, and streaming insights help you optimize your campaigns in real time. And measurement tools show you what's working the hardest. Gain the edge with Amazon ads. One of the themes that comes up in a range of topics that we talk about is distribution. And the actual, like, both distribution in terms of sales, but also the physical distribution. How does it work in Los Angeles? Do you have your own vans? Are there third parties that drop off the bread to the restaurants? Like, talk about how you, like, built up that network and how the bread physically gets from your commercial bakery into the restaurant.

12:43Sure. Yeah, currently we have six vans that are either leased or owned. And it's been a bit of an excruciating endeavor building out this whole network because it is a major, major part of what we do, especially because we're wall to wall. When I say wall to wall, it basically means there is literally no more oven space per hour available for new loaves of bread to increase our production. So if you start baking at 2.30 in the morning and you need to get bread to all of these accounts before they open at 8 a.m., you have a very narrow window to pool that bread, pack that bread, get it into the vans, and get it out to these accounts.

13:20So our ops team at the bakery are true geniuses in building out these roots because you only have this very narrow gap to hit. And if there's famous L.A. traffic or anything else that gets backed up in the baking process, you are scrambling to try and make sure that you take care of these accounts in a way where they can still do their jobs. So we have to do our job, not only just the baking job, but the distribution job before they show up, before anybody else from our accounts show up to work. Also, the vans themselves are, you know, deeply problematic. They are the number one thing that breaks, needs service, needs attention, you know, even more so than our ovens, which are in near constant use.

14:04And we have explored a number of different options, especially for when we potentially move to a bigger space about outsourcing our distribution. There are a lot of upstart wholesale distribution companies, some of which are based in L.A., a lot more in San Francisco, that are sort of taking the Uber approach and outsourcing their drivers or having a dedicated pool of drivers who work with a variety of different accounts as opposed to one-to-one. so that one of the major issues with our business is the fluctuating repair and maintenance numbers for our vans. If we can offload that to someone else, that is something that we have certainly looked into.

14:44But when we get into the mix with these conversations, we always end in the same place where, yes, we are not a consumer-facing company, but our business relies on that single interaction between the chefs and our drivers. They are our point of contact with our customers. And if that is not an authentic connection, if that is not something our employees are connecting with our customers, there's a potential for things to go wrong and a potential for that relationship to be soured. So we've ultimately stuck with our own employees and our own vans for now. Tracy, I'm just thinking about how crazy it must be to have an interest in bread such as yourself.

15:25And then suddenly you're in the brake pad. Become a mechanic. No, you're in the break and repair business, too, and you got to take that into account. No, I was thinking the same thing. And it's something that I guess when people envision a bakery, you don't necessarily think about the transportation and delivery aspect of it. But, Andy, you mentioned 2.30 a.m. just then and the narrow window for delivery. And I have to ask, what's it like getting actual workers in the door who want to, I guess, wake up at like 1 a.m. in the morning and go bake bread? Yeah, it's tricky. First of all, you have to love it.

16:01You have to love the process. And I mean, the 2.30 aspect is very, very early and a very, very different lifestyle in a literal way. You are falling asleep at 5.30 p.m., and that means that your connection with your family or connection with your friends, you're operating on a completely different time zone than they are. And it makes things complicated if folks are not operating on the same schedule as you. But that was the last baking shift that I did was the Sunday morning, 2.30 a.m. bake for the Hollywood Farmer's Market. I would, you know, get up at two, roll down to the bakery. It would be just me in the dark.

16:47A lot of people returning from their various parties on Saturday night, which made driving there a little bit sketchy, but always, you know, being careful. And then, you know, finish the bake, pack it up, put it in my truck and go to the farmer's market and sell it. And then the day would wrap up around 2.30. So it would be this 12 hour kind of sprint and then sail and then come back. and you know at a certain point it was the only bake shift that i was doing because i had to manage the business during the other days of the week that i was not doing that and when you just bake one day a week at 2 30 in the morning it scrambles your mind so wildly and your sleep schedule that i had to eventually abandon it just because i needed more time to manage the businesses but you really have to subscribe to the lifestyle if you try and push the edge you know especially when I was baking and managing five days, baking five days a week and still trying to manage the business.

17:44I was getting sick a lot. It was very difficult to stay healthy when you're operating across two time zones, really. You're living in this kind of, oh, my wife and my friends are all living in this time zone and my business is living in this time zone. And I need to be there for both. Those were far more complicated times for my own health. But we're on the other side of that now. We mentioned in the beginning, we like this topic because it's sort of a lens into everything. But what are you seeing today in terms of, if you compare now to when you started, how do you think, or versus the peak of the inflation, whatever it was, how do things look today when it comes to both hiring availability and also raw commodity cost, ingredient costs?

18:34Hiring availability is unique for us. Obviously, we are looking for a very specialized group of people. So the skills that they hopefully already have are in rare supply in Los Angeles. And that makes hiring complicated far more so for the wholesale bakery than for the restaurant. The restaurant has a lot of over the pool is much wider and we have very little trouble hiring at the restaurant um the bakery would you have said the same thing in 2022 or 2023 or does it feel easier today than it would have back then at the at the retail level because that's where that's where like all the complaints were right everyone all the restaurants and service entities were complaining about how impossible it was i i think that it's i think that it's impossible if you don't already have a name that people know.

19:24And I think for us, we've spent a lot of our efforts making sure that our employees are well taken care of and supported and treated like the human beings that they are. And I think that when we opened the restaurant after the bakery, that was already somewhat established in the public eye. So that helps us to kind of make this place. I mean, this is the point of it all is we want to make this a desirable place for people to work so that when they come here, they have a good time, they're well supported, they get fed, they get treated well, they have health care. And, you know, we really built this thing on that.

20:03It's becoming harder and harder to have a functional business, including all of those things, which is, you know, the real issue at hand here is that the expenses are enumerating and the, you know, sales remain the same. So when we talk about raw materials, we're actually in a much better place than we were, say, a year ago or even a year before that. The bakery goes by one ingredient. It's flour. Flour is wheat. And wheat is a global commodity that has a lot of fluctuations. It's usually, compared to others, fairly steady. But for example, when the Russia-Ukraine war broke out, Russia was not allowing Ukraine's wheat to leave the country.

20:51Ukraine is the sort of breadbasket provider of wheat for Europe. And when that happens, there's much more demand coming from the United States. Prices go up. And the American users of American wheat are the ones who end up paying more so that those products end up in Europe to cover for the loss of supply. So we saw maybe a 10 % increase in flour pricing. It caused us to have to drive our prices up for the first time in a long time bread-wise. Now it has settled back down, but in the meantime, everything else has gotten more expensive. And there's a massive wave of restaurant closures in Los Angeles right now, including yesterday, Cole's 117-year-old restaurant announced that it's closing.

21:37The Pantry, which has been around for 100 years, closed. It's a very, very, very, very difficult time for restaurants to thrive, you know, survive, let alone thrive in this town. So interesting times for sure.

21:57For enterprise organizations, managing all your food needs is a tall order. But with EasyCater, you get a single workplace food vendor with the tools and resources to make it easy. Giving teams across your organization an easy way to order from a huge variety of restaurants, all on one platform. All while consolidating your corporate food spend so you can control costs, streamline billing and payment, and simplify reporting. EasyCater, your business tool for food. To learn more, visit easycater.com slash podcast. Running small and medium-sized businesses is hard work. Business owners need to be sure that their ads are working just as hard as they do.

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23:51Learn more at chase.com forward slash business card. Chase for business. Make more of what's yours. Accounts subject to credit approval. Restrictions and limitations apply. Cards are issued by JPMorgan Chase Bank and a member FDIC. Just on the commodities front, how does it work in terms of actually sourcing things like flour? Do you sign forward agreements with suppliers at a certain price? And I guess how long term are those prices set? Yeah, it depends very much on volume. And we are in this very unique sort of middle ground where we are not a giant 25 ,000 square foot bakery and we are not one of the sort of more retail oriented 2 ,000 square feet bakeries.

24:36we are in the middle looking to make this leap to where we can buy directly from our purveyors. And when we can like purveyors as in non-distributors directly from King Arthur, directly from Camas Country Mill, directly from a variety of other flower purveyors. And when we can do those types of things and buy at scale, say 17 to 20 pallets of flower at a time, we can lock in forward pricing with King Arthur with some of the other ones. But in the moment now where we're operating through distributors, we are subject to their markup and they they are fluctuating what they're doing based on whatever algorithms they're they're using to calculate proper pricing not only just from what they're getting charged from the you know the actual producer but also um however their business is doing and whatever you know markup they need to to include so what we do in that circumstance and what most restaurants do is regularly pit distributors against each other for our business especially because we have a lot of leverage with our flower orders it's it's a fairly significant regular order so even if they're making a very small amount on that uh on each bag there there's a large volume and a large frequency that has those purveyors kind of jockeying for the lower price and that's there's no service there's no anything else that that really matters in that relationship it's just if you can get us the price we will order from you this week and they know that and they fight.

26:01And it's a weekly price. It's more frequent than weekly at the moment. There's a little bit of flux. June, you know, and I just have regular conversations with King Arthur, who's our main bread flour supplier, who are one of the most wonderful businesses in the country, and just good people and always, you know, driven to help their clients. They always are monitoring the commodity futures and how things are looking going forward. And I will sometimes reach out to them to find out how they are pricing things relative to who they're selling to the distributors so that I can see if the increases in price are coming via the distributor or via King Arthur.

26:48And then I'll know whether I have some leverage to kind of push down a little further to try and fight for cheaper prices. But there was a big spike. Things have been trending downward in price. The embargo opened up or whatever it was that opened up and allowed the wheat to leave Ukraine. So prices in the state settled back down because there's less exports. And it's something that if you're constantly monitoring it, is changing very often in minor increments. But if you do that across an entire batch of milled wheat, that's hundreds of thousands of dollars. So how does that actually feed into your prices for bread?