Cole's Quality Foods, Inc.

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Cole's Quality Foods, Inc.

5043 Cascade Road SE
Grand Rapids, Michigan 49546
U.S.A.
Telephone: (616) 975-0081
Fax: (616) 975-0267
Web site: http://www.coles.com

Private Company
Incorporated: 1943
Employees: 150
Sales: $50 million (2004 est.)
NAIC: 311812 Commercial Bakeries

Cole's Quality Foods, Inc. is one of America's leading manufacturers of frozen garlic bread and toast. The Michigan-based firm's products are distributed throughout the eastern half of the United States, as well as to selected markets in the Southwest and West. Cole's other products include bread sticks and low-carbohydrate garlic bread; the company also produces some items for private label and foodservice accounts. CEO Scott Devon owns a controlling interest in the firm.

Beginnings

The roots of Cole's Quality Foods date to 1943, when L. Carroll Cole purchased the Cruikshank Bakery in Muskegon, Michigan. Shortly after assuming control, Cole recruited his brother to open a bakery outlet inside a downtown department store. When World War II ended in 1945, government-imposed sugar rationing ceased, and the bakery was able to expand its offerings to include doughnuts, cakes, and cookies.

Cole's business grew steadily over the next two decades, and he opened additional retail outlets as well as recruiting new grocery store accounts. By the 1970s, the firm was selling more than 100 different varieties of fresh baked goods through its own stores and in 70 Michigan supermarkets.

In 1972, the company hired Wes Devon to serve as vice-president of marketing. To help the firm stand out from its competition, Devon suggested that it create a frozen version of Italian garlic bread. Cole's bakers came up with a one-pound loaf that could be thawed for several hours and then baked to serve hot from the oven. When the firm's retail outlets and a number of grocery stores around Michigan began to stock the product, it caught on with the public and orders for it increased.

At this time large, supermarkets had begun to build in-house bakeries, which took customers away from independent ones, causing many to fold. Cole's frozen garlic bread, a product which no other firms were making, helped to keep it afloat, and in 1978 the company took the gamble of dropping its other products to concentrate on this one item. The firm's Muskegon baking plant was reconfigured to boost production of the bread, and over the next year its remaining retail outlets were closed. Wes Devon, who had for several years been buying out the Cole family, was now the sole owner of the firm.

Growth in the 1980s–90s

The early 1980s saw distribution expand to much of the midwestern and southeastern United States. Between 1984 and 1989, the company's sales tripled, and Cole's Frozen Garlic Bread became the third best-selling frozen bread product in the United States, behind Sara Lee croissants and Lender's bagels.

In 1989, Cole's introduced its first new product offerings in more than a decade. The Home Style bread line consisted of garlic, onion, oregano, cheese garlic, and wheat and honey varieties. After test-marketing the breads in cities such as New York and Chicago, where sales exceeded initial expectations, the line was rolled out throughout the company's sales territory. During 1989, Cole's also spent $5 million to add an 800,000 cubic-foot computerized freezer (the largest at the time in the Midwest) and 20,000 cubic feet of dry storage to its Muskegon plant. The firm was now also considering making baked goods for foodservice customers such as restaurants and hospitals.

During the early 1990s, several competitors began marketing their own frozen garlic bread, and Cole's responded by making changes to its packaging and introducing new items such as frozen bread sticks. New garlic bread varieties like Multi-Grain, Zesty Italiano, and Romano Cheese were also created. In 1994, the company introduced several types of low-fat, low-cholesterol frozen Focaccia Italian Pan Breads, which could be heated in ten minutes after being thawed. The round, pizza-like breads were distributed to Cole's customers in the Midwest, Southeast, and mid-Atlantic states. During this period, the firm was seeing sales growth of as much as 25 percent per year as more Americans discovered its products.

In 1995, Wes Devon's son, Wesley Scott Devon, Jr. (known as Scott), was made president of the firm, and he hired several other new executives after taking the job. Though the elder Devon continued to hold the posts of CEO and chairman, his health was declining as he entered the early stages of Alzheimer's disease.

French Bakery Restaurant Opened in 1995

In December 1995, Cole's unveiled a new business venture in downtown Grand Rapids, Michigan, about a half-hour from Muskegon. The Saint-Honoré French Bakery and Tea Room was a restaurant which served tea, coffee, authentic French pastries, and French breads, as well as offering educational programs like cooking classes. It was open for breakfast, lunch, and dinner. Located on the first floor of a 1920s bank building, the interior was carefully designed to make use of original architectural features such as brass and mahogany trim, as well as the bank's vault. Executive pastry chef Jean Luc Saint and baker Françoise Sardi had been recruited from Paris, while a second artisan baker was brought in from Seattle. The restaurant was created in part to help Cole's test new products and to identify a wholesale market for others.

In 1996, the company moved Scott Devon's office and its executive sales offices to a new building in Grand Rapids. The firm's official headquarters and all other operations remained in Muskegon.

In January 1997, just over a year after it had opened, the restaurant was closed. Business had not reached the hoped-for levels, and in the face of rising losses it was shuttered. Despite this setback, the company had begun marketing a line of specialty breads under the Saint-Honoré name. Sales of the new products began in western Michigan, with plans to distribute to other areas. The Saint-Honoré baking operation, originally located in Muskegon, later moved to the Detroit suburb of Livonia.

After introducing several varieties of frozen garlic toast in 1997, the following year saw the company's thick-sliced frozen "Texas Toast" line debut. The toast, which was modeled after a competitor's popular product, would go on to become a huge success. Unlike the firm's garlic bread, it could be baked in an oven without thawing and required minimal forethought or preparation time. With the success of Texas Toast, the firm's staff was expanded from 90 to 150.

By 2000, Cole's annual sales stood at $48 million. The company's business was now split evenly between garlic bread and toast. With bread sales about to be eclipsed by the quicker-to-prepare toast, the firm began looking for ways to address the problem. In time, a solution was found: a new method of flash-freezing garlic bread so that it could be prepared in ten minutes, with no pre-thawing required.

Plant Reconfigured in 2001

To prepare for full-scale production of the improved garlic bread, which required different baking equipment, the firm's Muskegon plant was shut down for two weeks in August 2001, gutted, and completely rebuilt. Afterwards, to call attention to the product's changes, the packaging was redesigned. The company had recently won a Gold Taste Award from the American Tasting Institute, and this was touted on the packaging and on the company's Web site. A new slogan, "Cole's Quality Foods: The Clear Choice," was also introduced, based on a quote from the Tasting Institute, which had called Cole's the "clear choice" in taste for its product category. Cole's garlic bread was now priced at $2.29 for a one-pound loaf.

Customer response to the new garlic bread was positive, and sales increased as a result. Consequently, the firm began to expand to new markets, including Phoenix, Salt Lake City, and Buffalo. Its strongest market remained close to home, however—Detroit, Michigan, where some six million loaves of garlic bread were consumed each year. The firm had a loyal customer base, with a repeat purchase rate of 61 percent.

Cole's had seen annual sales increases for a number of years running, which were consistent with the growth in the frozen bread category. Total supermarket sales of frozen bread had risen from $50 million in 1996 to $200 million in 1999 and were approaching $400 million in 2002, according to industry analysts Information Resources, Inc. With this growth had also come the inevitable introduction of supermarket "private label" lines, which accounted for about one-fifth of total sales. For 2002, Cole's had estimated sales of more than $51 million.

Key Dates:

1943:: L. Carroll Cole buys Cruikshank Bakery in Muskegon, Michigan.
1940s–50s:: Cole expands his product line and opens several more retail outlets.
1972:: The firm introduces frozen garlic bread.
1979:: The company's retail shops are closed to focus on garlic bread; Wes Devon buys out Cole.
1980s:: Distribution is expanded to the Midwest, East Coast, and South.
1989:: The Muskegon baking plant is given a $5 million upgrade.
1995:: Wes Devon's son Scott is named president of the company.
1998:: Texas Toast is introduced and soon comprises 50 percent of sales.
2001:: A Muskegon plant is reequipped to make new flash-frozen garlic bread.
2004:: John Sommavilla is named president.

The low-carbohydrate diet craze of the early 2000s cut into the sales of many bread products, but, rather than viewing it as a threat, Cole's took up the challenge to create a new product line which could enhance overall revenues. In early 2004, the company introduced Ultra Garlic Bread, which had five grams of carbohydrate per one-ounce slice, less than half of the regular variety. The bread was made by substituting oat fiber and wheat gluten for refined white flour, with no added sugars and a pure butter spread on top. A twelve-ounce loaf was priced at between $2.59 and $3.29, slightly more than a one-pound loaf of the original variety. To produce it, Cole's hired twenty more employees and added a weekend shift at its plant. A few months later, a low-carb Texas Toast was introduced as well. By now, Cole's garlic bread and toast could be found in close to 60 percent of the grocery stores in the United States.

In June 2004, Cole's named a new president. John Sommavilla, age 45, had nearly twenty years in the grocery business, most recently as an executive vice-president at Spartan Stores. Scott Devon would retain the positions of CEO and board chairman.

In August 2004, Betsy Devon, the second wife of ailing company patriarch Wes Devon, filed a $30 million lawsuit against the company, Scott Devon, and the firm's chief financial officer, Cynthia Havard. It alleged that they had unfairly deprived her of the financial resources and companionship of her 65-year-old husband, who had in 2003 been placed in a 24-hour care facility by his son. Betsy Devon also sought to invalidate a prenuptial agreement she had signed. The company's attorneys characterized her suit as being motivated by a desire for money.

After more than sixty years in business, Cole's Quality Foods, Inc. had grown into one of the leading manufacturers of frozen garlic bread and toast in the United States. Having originated the product category, the firm continued to lead with innovations like its new flash-frozen and low-carb varieties.