Bakery keeps it fresh.

Byline: Diane Dietz The Register-Guard

If United States Bakery was aligned with industry trends, it would see the University of Oregon's desire to put a stadium on its Williams bakery site as an opportunity to close its Eugene operations permanently.

Plant closures have been the rule in the baking industry over the past four years, Josh Sosland, editor of the trade publication Milling & Baking News said. The nation's dominant baking companies have gained efficiency by closing plants and consolidating operations.

But United States Bakery has a philosophy of keeping its bakeries as close as possible to the people who'll eat the bread, Chief Executive Officer Bob Albers said.

If the university deal goes through, the Portland-based firm will build a new roughly $32 million plant somewhere nearby, perhaps at Glenwood or Gateway - adding a negligible number of miles to its bread trucks' rounds.

"The old rule used to be you had a 150-mile radius to maintain some freshness," Albers said. "Some companies stretch that out to 350 miles. We don't. We're at about a 200-mile radius at all our plants."

That philosophy keeps the ovens stoked at the 190-employee Williams bakery in Eugene, and five other United States Bakery plants in Washington and Oregon. And it keeps the privately held company healthy despite some spectacular recent failures in the baking industry.

An immigrant industry

Bread baking always has been a local prospect because of the perishable nature of bread. Without preservatives, it dries and hardens within days.

This limitation meant that in the early 1900s, commercial bread baking was an easy niche that immigrants new to small western towns could readily slip into - making a start on a few sacks of flour, yeast and salt.

You can still see their names on bread packaging: The Franz family from Austria, the Snyders from Germany and the Gais from Italy. Thomas Henry Williams followed the edict to go west - from North Dakota to Hood River to Eugene, baking bread at every stop.

The ambition of these bakers was corralled only by the range of their horses and the longevity of their product, meaning they could distribute inside of 50 miles, Albers said.

These bakeries survived most of the 20th century as family-run affairs, modernizing and slowly expanding their geographic range. But by the 1990s, the jig was up. Market forces favored consolidation. Strong players bought out the weak in neighboring towns.

"Staying as Franz bakery only, we could not survive against the big ones," Albers said. "We had to have a regional presence. Tom Williams realized he couldn't survive unless he was part of something, so he elected to sell out to us. The same with Gai's and Snyder's."

In other parts of the country, baking conglomerates with nationwide reach emerged to fight mitt to mitt for the $20 billion bread/cake marketplace:

Interstate Bakeries Corp., maker of Wonder Bread, with $3.5 billion in sales last year;

Sara Lee Bakery Group, maker of Classic White and Honey White, $3.3 billion;

Bimbo Bakeries USA, maker of Oroweat, $1.1 billion.

United States Bakery, however, stayed relatively small with sales of $250 million and a territory that includes all of Oregon, Washington and Northern California, plus parts of Idaho and Alaska.

The firm is closely held. A dozen people own shares, including top managers and five members of the original Franz family. (The Williams family got out when they sold.)

The firm has repelled several bids to sell to the giants, Albers said. Staying small and regional is an advantage when competing with the likes of Interstate Bakeries and Sara Lee, Albers said.

"It makes us very flexible. Decisions can be fast. That's one advantage we have over large corporations. They'll think and think and think and talk about it and plan it. We can be in and out of it by then," he said.

It also kept United States Bakery closer to its customers, he said.

In the early 1990s, an industry breakthrough in bread formulation - the introduction of certain enzymes - extended the shelf life of bread to more than 10 days.

Customers usually test the freshness of bread in the supermarket by giving the loaves a little squeeze, said Williams plant manager Keith Sammons. The enzyme made the bread feel just as soft six or seven days out as it did at two or three, he said.

The advance allowed the bakery mega firms to gain efficiency by closing plants and shipping their products father, Sosland, the industry analyst, said.

In 2002, Interstate Bakeries - a chief competitor of United States Bakery - opened a new central plant in Kent, Wash., and closed its plants in Seattle, Spokane and Portland.

"You've got to be operating efficiently and the way you operate efficiently is to operate your plants heavily," Sosland said. "If you can close a few plants and operate your remaining ones more heavily then you can be more efficient."

Changing consumer tastes

Then a series of misfortunes struck the bread industry - fickle consumers changed their taste in bread, commodity prices soared and lumbering bakers faltered.

For two decades, white bread - the industry staple - has declined in popularity, meaning that year-to-year sales were flat or declining, Sosland said.

"Consumers, with lots of products, have become more sophisticated, and that's true with baked goods. They're looking for more flavor, more texture - that's what you can get in super-premium bread."

At the same time, costs pressed upward. Bread truck drivers are organized in unions, so the companies were liable for increasing wage and health care costs, which climb three or four percent a year, Albers said. "You have to figure some way to either increase sales, raise prices or have offsetting cost reductions."

The baking industry has the second largest vehicle fleet in the country, Sosland said, so the spike in gasoline prices in recent years has hurt.

United States Bakery has 1,000 trucks on the road each day. Fifty-seven leave the Williams plant in Eugene each day. The cost of operations is $1.50 per truck per mile, Albers said. "And our days of $33-a-barrel oil are gone," he said.

But the biggest crisis of the past two years arrived at the hands of Dr. Atkins - the bread adverse, low-carb diet craze. "It had a profound affect on the industry," Albers said. "Companies lost volume and they were having a hard time making up the yearly (cost) increases. If you were marginal, it just dropped you below the line."

In mid-September, bread behemoth Interstate Bakeries filed for Chapter 11 bankruptcy reorganization.

Months earlier, the company was shrinking its distribution to the population centers of Seattle, Portland and Spokane. In July, it closed the Wonder Bread outlets in Springfield, Roseburg, Klamath Falls, Coos Bay and Medford.

And in competitor Albers' eyes, Interstate Bakeries' decision two years earlier to centralize baking operations in Kent was a mistake.

"They went from this 200 mile radius to a 400-mile radius. They were baking to a transport schedule rather than baking to a consumers demands," he said. "Bread is sold on a freshness program. If the bread's fresh, it tastes better and you're going to sell it."

United States Bakery was positioned to profit from its rival's woes. In August, the company took over distribution of Interstate's Twinkies and Hostess Cakes.

With Wonder Bread gone from large areas of the Northwest, United States Bakery made inroads on the giant's marketshare, selling more loaves of Williams, Franz, Western Family and other private label grocery store breads.

The regional bakery was already making headway with its super premium lines, such as McKenzie Farms, San Juan whole grain and Innkeeper eight-grain, Albers said.

"Wonder Bread traditionally was a white bread company and they never really got into the variety breads," Albers said.

United States Bakery was also early on the market with low-carb breads - Net 4 and 6-4-60 - and that helped the bottom line.

"They're really quite a company," said Sosland, the industry analyst. "For a small player, they've been very innovative with their new product introductions."

Still, Sosland warns against hubris. Interstate Bakeries' new court-appointed Chief Executive Officer Tony Alvarez recently observed that Interstate was losing an unwarranted amount of marketshare to its smaller competitors.

"He said, `You know, that's the first thing we've got to fix,' '' Sosland said. "There's an expression about `A wounded adversary is very dangerous.' There's going to be some truth to that."

But Albers figures it'll be 90 days before Alvarez gets Interstate humming again, allowing the smaller company time to solidify its gains.

In the meantime, United States Bakery has made some forays into national sales. The company widely distributes gingerbread houses made at its McMinnville plant. And it plans to place a seeded cracker bread in 1,600 Safeway stores nationally.

But its bread making will remain close to home, Albers said. If the company is able to work out a deal to sell its Franklin Boulevard sit to the UO, the company will secure land elsewhere in the metro and hopes to break ground on a new factory in January, Albers said.

BAKERY FACTS

Here's the Portland-based United States Bakery by the numbers:

Employees: 2,600, including 190 in Eugene who keep the production going 160 hours per week.

Plant locations: Portland, Eugene, McMinnville, Spokane and two in Seattle.

Growth: Annual sales in 1991 were $120 million; today they're about $250 million (including $30 million from the Williams bakery).

Eugene plant: Williams bakery can produce loaves out of its 120-foot oven at the rate of 140 a minute. It uses 650,000 lbs of white flour a week.

Selected Brands: Franz, Williams, Snyder's, Big Loaf, Seattle International and Bay City Bread, Roman Meal, Country Hearth, Poulsbo and Svenhard's, plus buns for Burger King, Arby's and Wendy's. Plus, a super premium line named for Northwest landmarks, such as San Juan, Columbia River and Crater Lake.

What's on your plate? The chances are 70 percent that the bread any Eugene-Springfield resident eats is from a United States Bakery oven.

Web site: www.usbakery.com

CAPTION(S):

Rick Jones moves dough into a cart. The dough will be moved into a machine that cuts it into loaf-sized pieces at Williams Bakery. Williams Bakery wrapping operator Craig Crane moves loaves toward packaging.