When Jason Brass became president of Terra Cotta Foods Ltd. in 2012, the Georgetown, Ont. company was selling cookies to 2,000 Ontario schools, which used them for fundraisers. Two years later, the bakery got its first contract making private-label cookies for a grocery store chain and, thanks to updated technology, has seen explosive growth ever since.
To make it happen, Terra Cotta leased a bigger plant and invested heavily in new baking equipment, including mixing, depositing and packaging machines and a more automated ice-cream sandwich production line.
The company now makes more than 25 different private-label cookies for more than 10 Canadian grocery companies, work that comprises about 80 per cent of the rapidly growing business. While the products they make for each grocer are confidential, Mr. Brass says Terra Cotta’s chocolate chip ice-cream sandwich, shortbread cookies and one client’s chocolate chip cookies are among the most popular items they make.
“As we grow, the demand for larger batch sizes grows,” Mr. Brass says. “You want to be able to do more of one thing for a while without changing over.”
Mark Uncao, chief executive officer of EM Bakery Equipment, says the only way for bakeries to grow, beyond adding a second shift, is through technology.
“The whole baking industry is based on equipment,” says Mr. Uncao, whose Vancouver-based company sells commercial-scale bakery products including various ovens and mixers. “[Technology is] the backbone of the industry… For a bakery to grow, it has to invest.”
At Terra Cotta, that has meant a new 400-pound mixer, a depositor that puts out 75 to 80 rows of cookies a minute and a vertical packaging machine that puts the cookies into sealed containers. While the mixer and depositor allow for bigger batches, the packager allows Terra Cotta to make shelf-stable cookies in addition to bakery-style cookies that arrive at stores frozen and are finished there.
“It opens new markets for us,” Mr. Brass says. “We still have markets and customers, on the national retail level, that take cookies that are frozen and thaw them, but it opens a different opportunity. Instead of being in the bakery section, you’re on the shelf.”
Terra Cotta created its customized ice-cream sandwich production line with equipment from three different manufacturers. Mr. Brass is hesitant to describe it in detail for fear it could be copied.
“What we look to do is continuously improve our process,” Mr. Brass says. “We look inward to see where we can find efficiencies or better quality. When the time comes to upgrade again, we won’t hesitate to do it.”
The Globe and Mail’s Report on Business Magazine ranked Terra Cotta at spot 395 in its list of Canada’s top growing companies, published in Sept. 2020. The magazine noted the company’s three-year revenue growth of 67 per cent and 2019 revenue between $2-million and $5-million. Mr. Brass declined to be more specific about the company’s sales.
EM’s Mr. Uncao, who grew up in the bakery business after his father started the company in 1982, says high-tech equipment was once only affordable to very large operations, but that time has passed.
“Production lines have become micro [and] ovens compact and more efficient,” he says. “Growth in output for the same production footprint had increased.”
He used the example of a small bakery weighing whether to purchase a depositor costing about $40,000. That company could pay multiple employees to cut cookies by hand or pay one person to operate the machine and have the cookies done in the same amount of time.
“You can see that investment in the depositor pay off,” he says. “You can quickly see that if one person can do all that work, it doesn’t make sense to put a second shift on.”
He says that with European-made baking equipment, which he sees as the best quality, “the value offering is tremendous… You can spend $40,000 on a cookie depositor that could deposit 1,500 cookies an hour, with a production life of 15 to 17 years.”
One downside to automation, however, is the potential loss of quality. “In order to make the product machinable, you can lose that artisan edge,” Mr. Uncao says.
Terra Cotta’s moves to expand its private-label offerings are well-timed, says Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University. He says the COVID-19 pandemic has led to strong sales for the grocery industry, but also added cleaning and e-commerce-related costs. Driving up sales of store-brand foods is one way grocers can try to ensure profitability.
“There’s a bright future for private labels,” he says, noting 16 to 18 per cent of all food sold in Canada currently is privately labelled. He said the average grocery store carries between 35,000 and 39,000 different food products, but he expects those numbers to shrink in the coming years.
“We believe [grocers will] start to favour privately-labelled products, for which they control the brand, the [shelf] space, and the quality, and can increase margins as well.”