Food Manufacturer Boosts Production and Sales With Enterprise as Its Partner
A Conversation With Ken McCord, CPA, Chief Financial Officer, Elizabeth’s Food Company
Business Snapshot
Elizabeth’s Food Company is a family-owned contract food manufacturing company with a storied history spanning nearly 40 years. The company bakes all of its products including salad toppings, soup pairings, breadings and snacks.
Business Leader
Peter and Elizabeth Bastasch, Owners
Headquarters
Compton, California
1) What are the biggest challenges you face as a business?
Our biggest challenge is cost escalation. This includes inflation of the costs we incur to manufacture our product, so we have ever-rising costs of raw materials like flour, spices and sunflower oil, and other examples are the cost of labor and government compliance. To combat these increases, our options are to raise prices or become more efficient and manufacture product at a faster rate to spread those costs evenly over our products and maintain our margins.
The next most important challenge for us is to keep up with demand. If we can't meet demand, our customers will go somewhere else, so we have to find ways to produce even more within the product line we have — this requires bigger machines with higher capacity.
One other challenge worth mentioning is the unknowns: what is the total cost of expansion? Of new equipment? These answers can’t be found in a day; it takes months of planning.
2) How did Enterprise help solve these challenges?
In terms of finding ways to increase production capacity, Enterprise has come in and helped us tremendously. In 2022, our previous bank was backing away from loaning more money to Elizabeth’s Food because of prevailing circumstances — we were facing the problems I mentioned, and particularly the rising cost of ingredients like sunflower oil were exacerbated due to global events, as the Ukraine is the world’s largest producer of sunflower oil.
We needed a financial partner to help us grow and finance the new equipment we needed in order to increase our capacity — that's where Enterprise came into the picture. Enterprise stepped up and provided us with a new term loan that we could draw against to buy the equipment. We also refinanced other debt and Enterprise provided additional financing, all under a new term loan. We've been able to draw on that new line to make our payments to have new equipment fabricated and delivered to us.
It was a huge win and we're very grateful that Enterprise was able to do that. As we continue to be profitable and grow our business even while we're working on these other goals, that helps us qualify for additional financing, and Enterprise is receptive to that.
Enterprise was a flexible and impactful partner in helping us navigate another unique situation. We were given short notice to vacate our previous bakery location after 30 years due to new ownership. We had been planning to transition our bread making operation to a new facility but lost seven months with this news. We continued with the project and planning for the new bakery, but now we needed to fill the gap between the time that we had to be out of the other building and before the new equipment would be in place in the new location. We were able to allocate part of our force base for what we called a pilot bakery, bring in some equipment from our old bakery, and Enterprise financed the purchases of other equipment and rehab so we were able to launch an operating pilot bakery.
3) What is the impact on your business?
The impact on our business is significant. We used to bake bread at 1100 loaves per hour, and the new equipment that Enterprise is helping finance doubles that output. This certainly allows us to keep up with demand.
Our sales in the first quarter of 2024 are higher than 2023 by well over 15%, in large part due to becoming more efficient in our operations because we don't have all the new equipment in place. However, with the pilot bakery, we can bake bread within our facility and that has helped to increase our capacity a bit. It was a great temporary solution to bridge the gap between our move, and can continue to be a place for our research and development team to experiment.
Gradually, our sales are increasing and, in turn, our profitability is, too. Having Enterprise working with us has been very impactful. We just didn't have the cash resources to do all of this ourselves, so we’re very much dependent upon Enterprise to support our growth and help us reach our goals.
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