Breaking the $1-million sales barrier in 2006 was a great accomplishment for Kevin Ceretti, president and owner of Kookie Kutter Bakery Ltd. But no sooner had the small Sackville, N.B.-based bakery hit that milestone, that sales began to drop 12 per cent per year.
Mr. Ceretti traced the sales decline to one of the bakery's biggest chain store customers, which moved its buying operations from the Atlantic to the west. The regional office was more in tune with the regional market and willing to work with local producers, like Kookie Kutter Bakery. Their new setup, on the other hand, was national in scope and aimed to have a consistent policy across the country.
Mr. Ceretti felt that the chain store's new mandate put Kookie Kutter at a disadvantage. The bakery could not scale-up to supply and compete at the national level and was losing precious shelf space as a result. Adding insult to injury, the chain store also increased the price of one of his bakery's signature ginger snap cookies by a dollar, which delivered a further blow to sales.
Faced with a shrinking bottom line, Mr. Ceretti had to find a way to arrest the sales decline. And fast.
One of elevent children, Mr. Ceretti grew up in Port Elgin, N.B. After graduating from the local high school, he realized he enjoyed hands-on work, and soon afterwards started working in a food outlet store which led him to a carrier path in the food service industry.
In 1978, he enrolled in specialized cooks' course at community college and obtained his Red Seal certification. Over the next decade he worked at various food industry related jobs in the in the area. In 1998, when a small local bakery, know for its high-quality products, came up for sale, he bought it.
Mr. Ceretti soon found that one of his main competitions were the chain stores that sold their own breads and bakery products. But recognizing that his local retail market was small, he decided to "work with the competition rather than against them," he said in an interview.
One of the biggest challenging he faced working with wholesale customers was shelf life of his products. Mr. Ceretti soon realized that the best seller among his product range was the ginger snap cookie which was dairy-, nut- and preservative-free and, most importantly, had a shelf life of eight months.
The cookie was hit with customers and soon his wholesale clients were lining up to stock it on their shelves. As a result of the product's popularity, Mr. Ceretti implemented a distribution supply transportation (DST) model which allowed him to furnish his customers, but gave him more control of stocking shelves and rotating stocks.
Sales grew by almost 35 per cent between 2006 and 2007 as he continued to add cities to his list. Soon enough he had wholesale customers across New Brunswick, Nova Scotia, PEI, Newfoundland and Ontario.
In 2005, Mr. Ceretti added a vanilla flax cookie and a cinnamon and honey cookie in 2006 to his offerings.
Expansion into new markets was Mr. Ceretti's answer to tackling his declining sales. Around the same time as he was thinking of expanding into new markets, a food broker who resided in the Boston, Mass. area, was visiting his family in P.E.I.
In an efford to find a snack that would not interfere with his children's food-based allergies, he stumbled upon Kookie Kutter's ginger snap cookie. The conversation with Mr. Ceretti that followed eventually led to the introduction of the ginger snap product into the New England market in the U.S.
The cookie was so well received that it's now sold in over 175 stores across the New England region. Kookie Kutter has now also entered the Quebec market as part of its expansion.
The strategy has worked out well for Mr. Ceretti, with sales increasing steadily. He's in the process of ramping up production by designing a new floor layout, buying efficient new equipment, hiring more staff and exploring adding another shift.
Nauman Farooqi is a professor and head of the department of commerce in the Ron Joyce Centre for Business Studies of Mount Allison University .
This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Report on Small Business website.