DENVER — About seven years before Steven Fabos launched what would become one of the country’s most innovative gourmet dessert providers, Paul Lapadat was just getting his feet wet in the food industry.
The two moved about their businesses for decades on parallel paths thousands of miles apart, not knowing one another or how their careers would impact not only the other’s but also the commercial baking industry.
Today, Lapadat is CEO of St. Paul, MN-based Dessert Holdings, arguably the most influential umbrella of premium dessert brands in North America. It’s the parent company to The Original Cakerie, Lawler’s Foods, Atlanta Cheesecake Company and, most recently, Steven Charles – A Dessert Company, Fabos’ brainchild (with partner Charles Kosmont), now led by the bakery’s president Rebecca O’Hara.
Fabos and Kosmont envisioned building a premier sweet goods company rooted in creativity and innovation. O’Hara spearheaded the charge of bringing that dream to fruition over the past three years, catapulting the bakery’s private label and foodservice businesses as global suppliers of exquisite baked goods, including portable treats for some of the world’s most prevalent QSR operators.
Meanwhile, Lapadat’s dream of building the continent’s leading dessert manufacturing company stemmed from the business acumen he acquired in the CPG and snack spaces; he had worked for heavy hitters like General Mills, Kraft Foods and ConAgra. But he longed for the entrepreneurial life after giving his all to corporate America, and he knew that in snacks, innovation owned the day.
His startup team consisted of a few trusted colleagues from his corporate days, and after some cutting-edge product development for the world’s largest retailers and some supermarket private labels, they scooped up big players with a few hundred million dollars in sales. The result? Organically doubling revenue and tripling the EBITDA in three years.
In the spirit of “buy low, sell high,” Lapadat got out of the snacking game and set his sights on bakery, where he saw the premium deserts trending well in the fragmented bakery sector. For him and his team, the writing was on the wall: Become, through acquisition and innovation, the premier premium dessert company in the industry.
“We loved the tailwinds of premiumization that were driving this category,” Lapadat said. “And we saw that trend being driven by clean ingredients and people wanting to eat real food. That was really a starting point for any brand we were looking to buy.”
Dessert Holdings formed as a team of five in 2015. The group would acquire The Original Cakerie by the end of that year. Seven months after the first acquisition, Lawler’s Desserts was next, followed by Atlanta Cheesecake Company 18 months later.
On many levels, private equity acquisitions are a more intimate affair than public M&A activity, so due diligence can be far more detailed with no stone left unturned. A perfect fit meant the right DNA in terms of culture, values, operational philosophies and, above all, product.
“We always ask ourselves, ‘Are they a leader in what they do? Do they have the products and capabilities we want?’” Lapadat explained. “For us, it always starts with the products.”
The pandemic allowed Dessert Holdings to streamline operations with a focus on people and the highest levels of service to customers across four bakeries operating the three brands — two of The Original Cakerie plants in Canada and the respective Houston and Atlanta facilities for Lawler’s and Atlanta Cheesecake Company.
Lapadat noted some highly reputable consulting firms the team worked with to ensure smooth transitions for all areas, including operations and R&D.
“We built a team of experts and continued to attract top talent,” he added. “We were lucky to have The Original Cakerie as our platform company; it’s a truly special base to build off. We had well defined strategies on how to grow the business over time, and The Original Cakerie was an opportunity to bring some of the best multi-layer bar cakes in the industry and expand it more into the US.”
While The Original Cakerie fulfilled the retail strategy, Lawler’s broke Dessert Holdings into foodservice, allowing the company to expand its core executive team. With outstanding growth happening in cheesecake, Atlanta Cheesecake Company’s retail offerings complemented Lawler’s foodservice products.
Focus is a key strategy in the portfolio, and synergies among the brands have allowed them to ride certain tailwinds. For instance, while the premium dessert category is growing, labor shortages are plaguing foodservice operators and supermarket perimeters. Although the baking industry isn’t exempt from the workforce crisis, providing a product that can help customers solve for labor is a tremendous value-add.
This is an area where Steven Charles has extensive expertise. So, when the opportunity came in 2021 to acquire the bakery and its two facilities, one in Denver and one in Pembroke, NC, the fit was undeniable.
“This has always been a company that we have respected,” Lapadat said of Steven Charles. “We have always felt like our companies were highly complementary. We fundamentally respected their entrepreneurial spirit and innovation, and the marquee customers they had acquired. The company is similar to Dessert Holdings in that they were doing artisan baking at scale. We really felt like this combination would be something very powerful.”
After the Steven Charles acquisition, 3,000 employees across six production facilities throughout the US and Canada comprise the Dessert Holdings portfolio. In a time of heightened M&A activity for bakers and suppliers, this is about more than retailers and foodservice operators getting multiple products from one source.
“Our customers want to do business with suppliers that have scale,” Lapadat said. “They need top-tier bakery manufacturers with world-class food safety. I call it the ‘Fortune 500 CPG discipline’ across those functions.”
This story has been adapted from the April 2022 Q2 issue of Commercial Baking. Read the full story in the digital edition here.
