Welcome to Season 9 of the Troubleshooting Innovation podcast. Joanie Spencer, editor-in-chief for Commercial Baking, is spending this season with Darlene Nicosia, CEO of Hearthside Food Solutions. They’re talking about operations, culture and innovation … behind the curtain of co-manufacturing. Sponsored by Reading Bakery Systems.

In the first episode, Spencer and Nicosia walk through Hearthside’s history and explore the career timeline that led Nicosia to the food industry’s largest contract manufacturer.

Learn more about this season here, and listen to Troubleshooting Innovation on Apple, Spotify and Google.

Joanie Spencer: Hi, Darlene. Thanks so much for joining me.

Darlene Nicosia: Joanie, it’s great to be here with you.

Spencer: I am so excited to spend these next five weeks with you and take a deep dive into not only Hearthside, but, more importantly, your role. You play an interesting role in the industry — and with Hearthside —due to your history and philosophies on manufacturing, and contract manufacturing. I am excited to walk this journey and get your take on what innovation looks like through your eyes.

Can you share a brief timeline with me of Hearthside Food Solutions? How did Hearthside go from being the first Wind Point company to being a part of Goldman Sachs?

Nicosia: Well, Joanie, as I said, it’s great to be with you and I look forward to spending the next five weeks together.

As you think about Hearthside and our history, the business was really formed 13 to 14 years ago, in 2009. We started as four bakery plants that the company acquired from Roskam back then. If you think about the growth of the business, while its heart has always been in the baking side of the industry, the company has been through 10 acquisitions in the last 13 years. And it’s been amazing because over these different time periods, the business has bolted on adjacencies to that baking business.

So back in 2013, the company added a packaging capability that’s been significant, especially if you think about where we are today with consumer choice. Everything from single-serve to club packs are so important across many of our customers’ portfolios. But in 2015, we started getting into all types of bars, baked bars, high protein bars, cereal bars, etc. And so, we really bolted on some more acquisitions in 2015, to get into the bar side of the business.

In 2018, an important milestone came together, both Partners Group and Charles Bank came together to acquire Hearthside and create the businesses between Hearthside at the time and Greencore. That really gave us new capabilities in the fresh, refrigerated and frozen side of consumer packaged goods. If you think about that journey that we’ve been on to build the 39 plants in our infrastructure, it’s really been through thoughtful acquisitions and really looking at what categories our customers play in, and how we can best support them to be North America’s largest contract manufacturer of food.

Spencer: I liked that you said, “thoughtful acquisition” because I was thinking of a similar word as you were explaining this. It’s been really cool to watch how Hearthside has matured and entered all these different markets but has done so very intentionally. It wasn’t this Frankenstein operation; you have really splintered out into different markets very thoughtfully.

Nicosia: It is interesting because if you look across our customer spectrum, many of our customers operate in two or more of the categories that we manufacture out of those five key pillars, but you see some customers in three or four of those pillars. So, it’s nice to see that we can offer them both a platform across their businesses, but also as they’re thinking through their own growth and how they want to get into new adjacencies. They already have an existing relationship with us, and we can start to do R&D and innovation for them to get them into those new categories.

Spencer: Okay, so I’m starting my next question with “meanwhile” because as Hearthside was growing and maturing, you were on a path of your own, which is also very interesting. So, while all that was happening, what was happening in your own timeline? How did you get into manufacturing and what was your journey that led you to Hearthside?

Nicosia: I very distinctly remember, when I was in college — I went to Ohio State, Go Buckeyes — I went to hear a speaker from Kimberly Clark talk. She was talking about her career in operations, and the way that she described her work was, “I’m constantly solving problems, but it feels more like I’m really engaged in strategic puzzles.” She described this really interesting side of operations that I now would say is continuous improvement. But this opportunity to constantly look at things and to evolve them intrigued me. In a lot of roles early in your career, you’re solving problems, and I just loved the opportunity that I had from a supply chain standpoint.

I started my first job in the field in a manufacturing environment. I always felt like it was an opportunity to best the prior day and see how many more cases we could get out the door every single day. I love the competitive spirit of it and the opportunity to constantly get better. It was a place for me that I just felt really touched on things that were important to me — This idea of being able to use my mind in a way to be creative and problem-solving, but to also be analytical. The ability to engage with people, so much of what you do in operations is working together in a team-like environment. I have played sports all my life and really love that aspect of coming together with other people to give your best and get a great outcome. For me, it was easy to go through my career, because I was always enjoying what I did. It never really felt like I was working. It felt like I was doing things I was passionate about. I could see improvement and relationships building, and I was able to enjoy it the whole way through it.

Spencer: It is funny because you talk about solving puzzles and being strategic like that. I’m thinking as a journalist, I use a completely different side of my brain. It’s funny to hear you say solving those problems and continuous improvement was so enjoyable for you, because for me, that sounds like a lot of work.

Nicosia: Well, it can be work, but when you find this opportunity to make something better, you start to see things improving and then you have a new idea that can make it even better. There’s no better feeling. Obviously, the opportunity to use that in a business context …  you start delighting the people that you’re working with, the customers you’re serving and then you deliver business results. The opportunity to hit on all those things brings us a huge intrinsic reward. I certainly know that’s what’s fueled me in my past.

Spencer: I like that idea of when done correctly operations can delight your team and delight your customers. That’s a really great way to put it. So then, how did your journey lead you to Hearthside? How did Hearthside get on your radar, because you’ve got big experience with some big brands in food and beverage?

Nicosia: I think there’s this interesting part of my career journey. I spent most of my career in operations in some way, shape or form. I was on account teams for major customers, but when I would work on customer account teams and things like that, although I was interacting with customers, there was always an operational bend to it. Even in my times as a business unit president in really driving the business for Coca-Cola, there was always some element of operations, such as trying to get product to market, how you’re working with retailers, can you find ways to do direct-store delivery differently, or merchandising differently to really help and bring some value to your customers.

As I started going through my own career journey of understanding what I wanted to do next, Hearthside had been on this massive growth path, and they had an opportunity for me to come and lead this great business and really take it from coming right out of the pandemic and into its new phase of growth. I just felt like it was a great opportunity for me to take some of the deep operational experience that I have and help the company grow in new ways with a number of CPG customers. I felt like I had a lot of parallel stories within my past. I was the chief procurement officer for Coca-Cola at one point in time I ran our global supply chain, and there were just a huge number of parallels with how we operated. I just felt like Hearthside was a business that I could bring not only strategic leadership to, but a real operational understanding of the business.

Spencer: Let’s talk about some of those parallels for a second. What was it like going from operations in this huge brand like Coca-Cola to contract manufacturing? Because you essentially went from being the customer to being the vendor, right?

Nicosia: Well, first, maybe I will take a step back. There’s no doubt that after a 30-year career with a company and brand like Coca-Cola, it shaped my leadership style due to the values it stands for and what it was a part of culturally. For me, my career has only been about a number of things. It has been about personal connections, openness and transparency, and quality and trust.

Maybe the most important thing that I took away from my time at Coke, in really reflecting on the brand, was this idea of optimism. You can even think of Coke slogans, “Open happiness.” or “Have a Coke and a smile.” The brand breeds optimism, and I had the benefit of being in that environment for 30 years. Belief is such a powerful thing. I think you can always make a moment better.

As I made a transition to Hearthside, I think the parallels that I carry or the things that I feel lead over into my leadership now, I carry this optimism with me. It’s this continued sense of belief in our teams and our opportunities to continuously improve our business. The opportunity to build even stronger, open, honest and trusting relationships, not only with our employees internally with the company but also from a customer lens and a customer perspective.

To answer the second part of your question, about moving from the customer to the vendor side, I probably sat on both sides of relationships. I was a chief procurement officer, and obviously, I dealt a lot with global suppliers. I was the customer in those circumstances, a lot like I am now with many of our large CPG customers. I worked with the largest suppliers in the world, as well as the smallest ones. I think the most important thing for me that I always tried to impart is those relationships. Coca-Cola had a lot of buying power. You could certainly say that there was an opportunity to squeeze suppliers to a point where maybe they weren’t even profitable. But that will only get you a short period of time of supply or services that you need.

You really need your partners and suppliers to be successful with you. If they’re successful with you, and you’re both able to grow, it frees up money and things to invest in R&D, to invest in the best people to really bring innovation and creative ideas. I carry that with me all the time. I even talk about it in some of the tough conversations with customers and with my own team. I say “Look, we must find ways to build the relationship to build the success together. If this is you take all and we take none, there are other relationships that we can go and invest our time in.” I spend a lot of time thinking about how we win together, and how do I make sure my customers get the absolute best for my team. It allows them to win, and hopefully, we’ll win at the same time.

Spencer: I feel so inspired right now, Darlene. It is one thing to leverage your buying power — and in business that is important — but that was deep to say that only gets you a better price on something. It doesn’t leverage the relationship in the long term. I think that is a key lesson that some learned the hard way, not only during the pandemic but also during supply chain disruption.

Nicosia: That is a good point. I think the relationship between any customer and supplier has evolved since the pandemic. Part of it is because there was scarcity, right? Everybody needed incremental capacity and only a few places had it available at that time. So certainly, the strongest of relationships probably won, big and small. I think people relied on and went back to their best of customers and serviced them well. I think companies did it in their own small ways. They looked at their SKU portfolio, and they said, “These are my most reliable brands or items, and I’m going to keep them on the shelf every single day.”

The things that only a small consumer base really trials or buys infrequently probably got pushed to the end of the queue and didn’t get any shelf space or production time. There are a lot of ways to think about relationships and partnerships. But in the contract manufacturing world, we absolutely value the relationships that we have today. When we’re innovating and looking at the capital we must deploy, we want to do it with our partners.

Spencer: You talked about the optimism that comes with working with the Coca-Cola brand. I’m going to date myself, but hearing you talk about that and then these relationships, all I can see is a bunch of people on top of a mountain, singing I’d like to buy the world a Coke. I think that sentiment from that old ’80s ad really sums up what you’re talking about and the importance of relationships, applying it to your vendor relationships, your team, your operation and how important that is.

Nicosia: You know, Joanie, it’s a great point. It goes a long way to talk about the culture inside of an organization. When you’re winning and feeling like you have great relationships, both internally and externally, it feeds upon itself. There’s a bit of opportunity for it to flow over into everything that you do. I do think that optimism is an important part of leadership, culture and how you deal with your stakeholders. It does allow you to get the best out of all those environments.

Spencer: I agree. I want to go back a little bit and talk about your transition from Coca-Cola to Hearthside. What was it about this opportunity that made you want to engage in it? That is a big jump, to go from one of the world’s biggest brands to North America’s biggest contract manufacturer. At the heart, the operational part is very similar and there are parallels. But when you look at the big picture, it was a leap. What attracted you to come into the world of co-manufacturing?

Nicosia: I think I saw parallels in my own business. As I mentioned, I saw not only Coca-Cola but a lot of other consumer products companies at this point of growth in their own companies, where they were looking to invest more and more in up-and-coming innovative new brands, or they were looking to get closer to consumers with the whole digital movement. A lot of investment was required for CPGs to continue to grow. They had to make choices where they were investing their dollars. I think most CPGs would say that they would prefer to invest their money in either acquiring new brands, building out adjacencies, or creating stronger relationships with their consumers, rather than investing in physical infrastructure. And that’s exactly what Hearthside does. We build physical infrastructure. Infrastructure is a service, if you want to say that, just in the food industry and not the technology industry.

I saw more and more companies making this decision to have strong and reliable outsourced manufacturing partners. It gave us this opportunity to have a strong viable business, where we were able to provide high quality and reliability with innovative flexibility to those opportunities so that our CPGs could go in and invest in their consumer base.

I just saw a significant amount of growth opportunity in this industry. This industry is already very well penetrated in contract manufacturing. If you look across the categories that we operate in, they have been utilizing contract manufacturing for a very long time, the trends just pointed in the right direction for the industry. Then I had the opportunity to look at Hearthside specifically and again, most companies are very narrowly focused on a single category, the fact that we are into pretty much anything snacking made me feel like because of my understanding of CPG, it is a great place for me to lead.

Spencer: We’re going to dive deeper into this as we go along over these five weeks, but I just want to get a flavor for your entry into co-manufacturing and where you are, really, after this first year. What would you say are your biggest learnings over the past year from your transition from Coca-Cola into Hearthside?

Nicosia: I think as a contract manufacturer, you have significantly less control over what you produce and when you produce it. I think the difference in how we plan our production volumes and execute against them is very different. At Coca-Cola, when volumes were soft, we could work with our customers to offer consumer promotions, invest in marketing, etc. There were all kinds of mechanisms that we could control or use to drive consumer demand. We could work with retailers in a different way. And obviously, we could build inventory to smooth out our demand.

I think as a contract manufacturer, some of those levers that you could pull are not necessarily available to you. Your customers more deeply control that, so therefore they’re carrying that flexibility in those decision rights. They can cut back orders or cancel orders with limited notice, but we may have employees and a production line lined up and ready to go.

Once you lose that window of opportunity, you lose it forever. You pay the employees for their time and for showing up. You have that equipment and all the costs associated with it. There’s this very huge dynamic of thinking about how you continually balance the needs of your various customers across all the capital and infrastructure that you have.

When I talked earlier about this idea of problem-solving, putting puzzles together, and the complexity of what we do with so many plants and production lines, that comes even more into play. The ability to understand how to drive in an efficient manner becomes so much more important than in a contract manufacturing environment.

I will tell you that we’re spending a lot of time right now talking with our customers about demand and demand smoothing, and how can we work and be better partners to each other so that we can anticipate what demand is looking like in the future. This way, it helps when scheduling line time and labor and makes sure that it’s efficient for both us and our customers. Because we do want to give them great service, but also take care of our people with consistent work.

Spencer: Yes, and that’s like the ultimate puzzle.

Nicosia: I would tell you data and information also has been helpful. So much more technology is coming forward, that allows you to do S&OP processes in a much more technical way with all kinds of scenario planning and allows us to optimize what we do. But there still is this human element of it, where there’s a lot of scheduling that still happens in a manual way to try and get the most out of our teams.

Spencer: All right, Darlene, that was my last question for this episode. I think we had a really good conversation that lays an awesome foundation for diving into a lot of topics on innovation behind the curtain of co-manufacturing. Thanks so much for this first visit. This was wonderful.

Nicosia: This has been awesome. Thank you. I look forward to being with you next week.

Spencer: Next week, we are going to uncover some of the most critical factors in creating a cohesive operating culture and why that is so important for contract manufacturing. So, I am looking forward to that conversation next week.

Nicosia: Great. Can’t wait to see you then, Joanie.

Welcome to Season 8 of the Troubleshooting Innovation podcast. Joanie Spencer, editor-in-chief for Commercial Baking, is spending this season with Marc and Elana Schulman, the second and third generations of leadership at Chicago-based Eli’s Cheesecake. Their conversation explores innovation, growth and longevity through the eyes of a family-owned bakery. Sponsored by Oakes.

In the last episode of the season, we’re looking at the future — how Eli’s is innovating as a trailblazer in a mature industry and with a classic product.

Learn more about this season here, and listen to Troubleshooting Innovation on Apple, Spotify and Google.

Joanie Spencer: Hi, Marc and Elana. I’m so happy to talk to you both.

Elana Schulman: We’re sad this is the last one.

Spencer: It really has been a lot of fun. I’ve really enjoyed this journey through the past, present, and, now, future of Eli’s. We closed the last episode by talking about the expansions and some of the lessons that you’re going to apply in the future, so I want to cap that off. We spent a lot of time reflecting on the pandemic and having a major project like this impact perspectives. We talked about what would have happened if the bakery had expanded five years ago, before the pandemic. What do your priorities look like now, versus what they would have five years ago?

Marc Schulman: The fundamentals are really the same. We’ve really moved our business, as much as possible, away from being transactional with customers and turned that into long-term relationships. So, you’re thinking ahead, you’re planning, you’re giving the quality, but you’re just more conscious about where we are and where we want to go.

It makes work a lot more exciting because you are planning for the future. But when you’re in any business, certainly a bakery business, you have so many different functions, skill sets, product development, marketing, operations and sales. How are you able to take advantage of that? That’s really the skill set because if you’re not focused as an organization, you’re really leaving a lot of opportunity on the table. I’d say we’re trying to really focus on ourselves in that way.

It’s like building this building. We used bricks; it was more efficient. You can’t build a big business with lots of little bricks. You can have a lot of customers, but you have to say, “Hey, where are we going to be a subject matter expert? Where do we have an opportunity to take that category and develop the product?”

I think we’re a little more thoughtful. Certainly, having Elana here has been extremely beneficial because she brings skill sets that I don’t have. Also, when you have the passion of being Eli’s granddaughter, and you’re really thinking about the future and what we do, we have a lot of people to take on the ride with us. We’ve been successful because of the people to date. We want to grow more team members for the future. I think we’re very optimistic, but those fundamental Eli’s values, such as “Treat the other as you’re the other” and “Charity will never bust you.” Those still drive our business, those haven’t changed. I think that’s important for all of us.

Spencer: How do you apply those fundamentals? Treat the other as if you were the other, and charity will never break you. How do you see those threading through decisions that you make operationally as you plan this expansion?

Marc: I think the expansion is to complement what we do. I’ve been in bakeries after they’ve closed when they failed, sold or got out of business. I have walked around and seen the calendar from six months ago, the coffee cups, but there are no people. So, the lifeblood of the business is the people who make it possible.

We want a better, nicer environment. We want to spread out in our plans as an innovation education center. We really can have our home — expanded locker rooms would be nice for our people. There’s capital spending to do it and it is significant, but we don’t want to work for our facility. That’s one of my father’s other basic values: ”Own our own real estate.” As a restauranteur, he didn’t have that opportunity. The fact that we own the building, we can improve it … We’re going to be a better company and the expanded facility is going to help us do it, but the facility isn’t going to do the heavy lifting.

Spencer: Right. I think that you do have something special in that it’s not that you are investing in this facility, expanding the capabilities and the fundamental values. They’re interwoven together.

Marc: Oh, absolutely. One of the exciting things about Elana joining the business was our associates can see a multigenerational family commitment to the business.

If the goal was suddenly to build this expansion, and it is going to change everything and make things totally different … but we don’t do things that way. We’re proud to make everything in Chicago. This is a great location, we’re 20 minutes east of O’Hare. One nice thing about Chicago being in the middle of the country is we can ship things efficiently to the East and West Coasts or ship things to ports to go overseas.

Years ago, our real estate adviser said, “Don’t fall in love with your real estate,” but we did with this location. It gives us the opportunity to tell our story better. That’s all good, but if we don’t live up to Eli’s values, and to start thinking differently about people, that would be a sad day, so I don’t see that happening.

Spencer: I think that’s a good reminder to people in the industry that investments and values could run parallel, but they should intertwine.

Marc: Businesses take many forms. There’s startups, strategics, global companies and more. The good news for us, and what we think of as our lane of business is, that have exceptional product development skills, great skills in food safety, and quality and commercialization. But it is all very personal. So, if a customer has an issue or opportunity, good or bad, we’re there to deal with it that day. I think that response is something that all our customers, from a small chain to an individual restaurateur to the largest retailers and foodservice chains in the country, they really like that. We feel we’re in a really good space, and I think we just got to really work hard to live up to a reputation.

Spencer: So, let’s talk about that reputation in terms of product development. The Schulman’s are a family of innovators. I think that is probably one of the biggest takeaways from this month. How do you keep coming up with such cool products? Where do these ideas come from? How is that driving the future? What kind of pressure comes with being super innovative? Especially knowing that you’re Eli Schulman’s granddaughter.

Elana: I am just so proud to be Eli’s granddaughter. I never actually got to meet him. He died two years before I was born, but I feel his energy all the time. I really have a passion for hospitality, restaurants and taking care of people. It’s really wonderful that we can apply all of those things to Eli’s and can create this world that is a really wonderful place to innovate in and to work in.

Then in terms of coming up with ideas, we’ve just always been eaters. My grandfather was a total self-taught cook. He would go and eat something and say, “I think I can make this better,” and then he would go back in the kitchen and make it. We just love eating. It has always been such a joyful part of our childhood and growing up in the restaurant. I was always just excited when I was in the kitchen. I was an eight-year-old watching the Food Network and was just obsessed with that world. I think that because we as a family and as a business just have so much fun, literally talking about food, and what we’re excited to eat and flavors we’re excited about, it’s a very natural process.

I am so fortunate that I get to collaborate with our R&D team. Diana Moles, our senior VP of innovation, leads that team and has been Eli’s for 37 years. But we just have a very similar palette. I think when we come together, it’s like creative problem solving, such as let’s try this format or let’s make this tweak. It is just a nice back-and-forth. I’m so grateful for relationships like that because I think that’s when innovation is at its best.

Spencer: When we did the live podcast at ASB BakingTECH, I kept hinting at wanting a dinner invitation to your house. It just seems like fun and product development go hand in hand, like it’s just part of your essence. What does it look like when you are having those official meetings? Do you have scheduled product development meetings? Do you get together once a week or once a month? Or is it just more that you tell each other when you see a really cool thing?

Marc: It’s really all the above. I think a story we take a lot of pride in is that last year, Mayor Lightfoot gave an award, a Medal of Honor, for the city of Chicago. That award was given to a number of individuals and given to Eli’s Cheesecake. It was given because of our work with refugees and donating cakes during COVID. At that ceremony at the Chicago Cultural Center, we were sitting next to Nick Cave and Bob Faust. Nick Cave is a famous artist who was opening this huge show at the Museum of Contemporary Art, and Maureen, my wife and our publicist, said “Hey, Nick and Bob, maybe we can do something together?” And they said, “Yes, sounds good.” Their energy matched our energy. Maureen and Diana developed these amazing custom Cutie [cheesecake bites] with spectacular packaging and symbols from the show representing love and peace. It really was a beautiful product. We did it for mail order with a donation to their foundation. It was so out of the box. We didn’t do it because we were going to sell so many. We did it because it was fun to work with Bob Faust.

Elana: We believed in Nick Cave’s message. That’s when we say that we say cheesecake is the ultimate canvas. You can do anything with it and desserts in general. And so yeah, that’s been a lot of fun.

And then the other thing is, I love it when you can create new things from places that were unexpected or past experiences. This year, I collaborated with a good friend of mine, Natasha Pickowicz, who’s a James Beard nominated pastry chef, and she just came out with her debut cookbook, More Than Cake. We did this amazing cheesecake, olive oil cake hybrid collaboration for mail order.

It is so great because it’s someone that I worked with when I was a video producer in New York. It’s always nice to see where different parts of your life and career can intersect at Eli’s and for anyone. I really do believe that the more diverse your path is and the more variety of experiences you have plays a huge role in innovation.

Spencer: Before I came into this industry 15 years ago, I don’t think that I would have imagined cheesecake as a canvas for creativity. I mean Eli’s is known not only for the quality of your products but also for the role you play in the Chicago community, doing cool fundraisers and having this innovative product development that is specific to an event or a cause.

In fact, I remember when we launched our website, commercialbaking.com, one of Eli’s initiatives was one of the very first stories on our website. I think it was a Valentine’s Day promotion that Eli’s was sharing the love and donating proceeds with online purchases. You have tapped into so many of these opportunities with a lot of cause and reason behind it. Why do you think it’s important for a baking company to innovate in this way?

Marc: Every company must find its own personality and insert a reason to be. We obviously have heritage that goes back to 1940 from my father growing up in Chicago, and the beliefs that Maureen and I have, that Elana and her sisters have, and all the people we work with at Eli’s. Yes, we make delicious desserts, but look at the impact that we can have and the opportunity to do the right thing.

It could be as simple as giving desserts to a charity, groups, advocacy for Chicago High School for Agriculture Sciences or people with disabilities. What an opportunity that we get. The question would always be, “Why not?” If you just come together and the goal is to make a lot of cheesecake and make a lot of money … Of course, we need money or else we won’t be around, but it can’t be the factor. Sometimes you meet people whose goal is to get in, build it up and sell it, and sometimes they’re serial entrepreneurs. There are people in our industry who’ve been very successful in doing that.

But our view is that we have this amazing heritage, and we use all these resources. When anyone goes into business will understand that when you meet individuals who start a food company, you go through the questions, “Do you know your cost structure? Where are you going to make the product? How are you going to distribute it? What’s the distributor margin going to be? Oh, you’re going to sell it to a retailer? What are they going to charge? Oh, you’re selling the retail? Are you going to be SQF certified?” All those things.

When we’re in meetings, and people mention how we have done so great and all the achievements, I always say “Yeah, but this is my parent’s achievement.” It’s what they spent all those years in the restaurant working to achieve. Yes, we took advantage of it, and Elana will certainly take it further, but we had a whole lot going for us. As I say, the exciting thing is Eli was just such a great figure and a great host. When you’re telling the story, you’re always going to somebody, “Hey, you know, do something that’s fun. Do something that’s authentic. Do something where you could work with nice people. Do something where you can make a difference.”

As you and Elana said a few minutes ago, the canvas is cheesecake. It’s just great to work with,but it took a whole lot to get it there and it took a whole lot by a whole lot of people.

We’ve been blessed at Eli’s to work with individuals for 20, 30, 37 years, and in many cases now working with their children. We have many third-generation individuals in the business. The food and baking world is a great place to do it, and it’s a great place to do it in Chicago.

Spencer: Absolutely. I am backtracking a little bit when you said you got that advice from your realtor who said, “Don’t fall in love with your location.” That realtor didn’t know that there was going to be supply chain disruption, and you are going to have access to ports.

Marc: Well, interestingly, he did agree. I think you’re correct because of what he said up until maybe two or three years ago, he said “I can get you a building in the suburbs. I can get you this rent.” I can do it. What I think happened is nationally — in large part because the logistics — industrial buildings have been the best part of the market. Suddenly the building is so valuable, he goes “You have to add on here.” So, he came around. And we love Chicago and the location.

When we opened this facility, we had Mayor Daley, Governor Edgar, President Stroger. We’re looking forward to recreating it with Mayor Johnson, Governor Pritzker, Lieutenant Governor Stratton and President Preckwinkle. So, hopefully, as they say and see Eli’s Cheesecake is Chicago’s most famous dessert and a symbol of the city. And it is with all their support that we have been able to grow to this point, and that we’re going to make this addition and the other work, we’re going to do that much better for Chicago.

Spencer: I want to ask you one thing as far as growth and creating growth opportunities. What about partnerships or relationships with your suppliers? This is a people-driven company. What are your expectations in how you choose suppliers, in terms of the relationship? How much weight do you put on the relationship? How much do you lean on your suppliers for product development? Or Elana when you’re coming up with a new variety, and figuring out if it is viable, how do you look at your supplier partners, not just your ingredients supplier partners, but the equipment and the machinability of a new idea?

Elana: If I’ve learned one thing in my time at Eli’s, it’s that relationships are everything. I think there were times when we would not have made it through without those relationships. I think especially with equipment suppliers, there were also times when we had a line of equipment that was busy for a while and was a platform that was doing well. Then maybe it died down for a little bit, but then it came back. But when it came back, we needed to refurbish the equipment, or we needed to add on parts to get what we needed. And without having those relationships, we wouldn’t be able to do it.

When you think about relationships that date back 30 years, one thing that I am very passionate about is our archive. My family has always been photographers and scrapbook makers, capturing things that date back to the early 1900s. But I’ve been looking at a lot of photos from the original Daikon Street facility, and when we first moved in here. The pictures are from 40 years ago, and you can see the same equipment suppliers. There are people at those businesses that we’ve been working with since that time. Having that historical knowledge and working relationship between both parties is just invaluable.

Spencer: I agree. I think it’s a hallmark of this industry. I’ve been doing baking industry media for about 15 years, and I started on the retail side. I remember when I came over to the commercial side of the baking industry, I had the same stereotype in my mind that the typical consumer has of big food, that it’s going to be a bunch of big companies and no one really knows each other. And it’s cold and impersonal … and it’s the opposite. Relationships really are everything in this industry.

Elana: Absolutely. I think even with customer relationships people move on to different places. I think that’s been valuable to us, too. An opportunity might come up with one customer and then that person then leaves to go to another business and then a new opportunity pops up. It’s interesting to track the development of products and product lines and then track certain people in relationships and how those evolve over time.

Spencer: That is an interesting way to describe it.

Marc: What has happened with the supply chain disruptions is that we had a lot of commodities where you could always get it, and there was no issue. But we had more instances where suppliers said, “I’m getting out of the business. I can’t supply you.”

I had a call with the CEO of a big chocolate brand discussing that we placed an order, they accepted it, and then they rejected it. He said, “Well you know we’re having problems maintaining our equipment and people don’t want to work for us.”

If I said that to our customers, they wouldn’t buy from us again. So, we found another supplier. I think what goes around comes around. We’ve had a lot of other suppliers stand up within shelf-life and starches. All these very important components go into a dessert. You really learn who’s there to help. In the food industry, there are some exceptional partners and then there are companies that if they have the capacity, they’ll sell it to you, but they’re not going to do anything to help you.

Spencer: Yeah. It’s important to be able to make those distinctions and relationships are the best tools for that.

Okay, we’re nearing the end of our time. I have a couple of questions left. So, we’re looking at a family of innovators. One of the closing thoughts would be, what does the future look like? Marc, you’ve beautifully carried on your father’s legacy. As you look at the path ahead, what would you say are your hopes and dreams for the future now that Elana is here, and she’s carrying the torch?

Marc: I think that she has a good experience. You should do it because you want to do it, not because it’s your name or someone else. The questions should be “Are you having a great experience? Do like the people you work with?” Clearly, we’re at a point in our career where we’ve had individuals retire. That’s something that’s hard to deal with. But are we developing new leaders? How are we taking advantage of always re-energizing our business? I got the benefits from my parents, and I hope Elana gets the benefit of all the work that’s gone into it … stability and opportunity

But the fact is that many years from now, we will still be telling the story of Eli, and what was done in the first cake. Soon it’ll be Chicago’s 200th birthday, or whatever the events are that we’re continuing to do. But as Eli said, “On the menu, we’ll serve good food always.” I think we have got to keep our values very focused and basic.

Spencer: Elana, what’s your vision for the future? After these five weeks together, when I look at your role in this and I think of the company, I have this vision of a family homestead, an historic home that has had families living in it for generations. You give that house updates, you paint it, you buy new furniture, but you always want to keep the foundational, historical features. If you look at it through that lens, how do you see taking this family bakery into the future?

Elana: That’s a beautiful way of putting it. I really like that. For me, it is about making sure that the people are always number one and that we’re always investing in people and giving back to the community, while at the same time making these amazing desserts. It is what we’re doing now. I think there are obviously all different ways to approach that, but what drives me in business is that I have the ability to craft this world that I think is an ideal place to work in. It is not always perfect, and we can always do better. But I think that you don’t always have control of what’s going on around you in the world, but we have control of what’s going on at Eli’s.

I think a lot about sustainability, but not just from an environmental side of things. Sustainability in the sense of how can you create a work culture that is an environment that’s good for people and their mental health, that people feel like they can bring their best selves to work, that they can be creative, and that they are in a safe space to take risks? Those are just things that I think about all the time.

Do I have the answers now of necessarily how you do all of that? No, but I think that I’m really focused now on just taking in as much as I can, learning as much as I can about the business and really thinking about developing that next generation of leaders. That is why we’ve been so successful, because my dad has just done such a great job of developing people, really getting them on Team Eli’s, making them see the vision and getting people excited. He energizes people, and that’s something that I am really in awe of every day and something that I want to make sure that I bring into my chapter of the business.

Spencer: I absolutely love that. One parting thought that I want to share … we talked about it at IBIE last year and then during BakingTECH’s live podcast, I said Elana I just have to say “I love your dad.” And you said, “I love him, too.” I think that is the essence of Marc Schulman and the legacy that is Eli’s. There is just a lot of love and cheesecake with this family bakery.

Marc: We agree.

Spencer: Well, I cannot wait to see what the future holds for Eli’s. I also can’t wait to see what the next gigantic cheesecake is going to be and how you celebrate, and just how the industry is impacted by the good work that you do through your cheesecake business.

Elana: Thank you so much, Joanie. This has been an incredible five weeks, and we’re so honored that you would take this time to get to know our story. We learned so much from you.

Spencer: Well, thank you.

Marc: We look forward to you visiting us and right after we cut the ribbon or maybe for the ribbon cutting. Thank you so much.

Spencer: Yes. And thank you for allowing me the privilege of sharing your story with our industry. It’s a wonderful story, and you are a wonderful family. I appreciate your time, your thoughtfulness and everything that you do for your company and the industry. So, thank you, guys.

Welcome to Season 8 of the Troubleshooting Innovation podcast. Joanie Spencer, editor-in-chief for Commercial Baking, is spending this season with Marc and Elana Schulman, the second and third generations of leadership at Chicago-based Eli’s Cheesecake. Their conversation explores innovation, growth and longevity through the eyes of a family-owned bakery. Sponsored by Oakes.

This episode reflects on the pandemic years and how the bakery is coming back stronger than ever.

Learn more about this season here, and listen to Troubleshooting Innovation on Apple, Spotify and Google.

Joanie Spencer: Hi, Marc and Elana. Thanks so much for joining me again this week.  

Marc Schulman: Happy to be back.

Elana Schulman: We’re so happy to be here.

Spencer: This episode is going to be an interesting exercise. We’re not far enough out of the pandemic that we don’t talk about it anymore, but I do want to take a little stroll back in time to those early days when COVID-19 hit the US.

Marc, I know you and I chatted several times in those in those early days. I will never forget you painting this super eerie picture of what Chicago looked like in the spring and summer of 2020. Will you revisit that with me, and then talk about what it was like inside the plant?

Marc: It’s amazing to think back because it was so awful. We live just off Michigan Avenue, and it is crazy to imagine a time when you couldn’t find an open Starbucks, businesses were closed and there was no traffic. Clearly, as a company that was essential, we always were doing business. But clearly, as cases began to grow, we had fewer people coming in. We were still fulfilling orders, but we saw a point in time when business literally stopped, either cancellation of orders or just orders not coming in.

So, a few things happened. One, I got COVID early in April, and Elana and Maureen were taking care of me. I was on calls every day with our people, but I wasn’t in. We really furloughed 95% of our staff for the month. We went from 200 people to six. I was really worried as to what was going to happen.

Suddenly, things began to happen. We’re fortunate within the division of our business between foodservice, retail and airlines. Airlines, foodservice, hotels and restaurants also stopped, but that retail business grew and continued to grow. The consumer-direct business, which is an important part of our business and gives everyone the opportunity to order Eli’s wherever, really grow. People felt they could take advantage of a single-serve pre-packaged and that suddenly began to grow.

The spring and summer were tough, but as essential workers, our office staff was back by the end of May, and we kept on growing our employment. By the end of 2020, we were probably at 95% of the level we were before. As 2021 rolled around, other categories came back, and the retail category didn’t go down. We got past that 2019 level by the end of 2021. We feel very fortunate. We know businesses that depended on pure tourism or restaurants/downtown areas that were dependent upon five-day office people really suffered. It was tough, but I think resiliency and diversification of customers and channels really made a critical difference.

Spencer: So, you were able to make those shifts relatively easily. I’m not going to say it was easy because nothing at that time was easy, but relative to what other bakeries were going through and your ability to shift from foodservice into retail and focus on the business, you were able to do that well.

What were some of the biggest implications? A lot of things that I have heard from bakeries that shifted from foodservice into retail, especially in the bread space, was packaging was the biggest problem or challenge that they had to overcome. What were some of the things operationally that you had to do? And then also, what was it like from a business perspective making those shifts?

Marc: I think we were fortunate to the extent that with single-serve cheesecakes being sold in domes, we were able to do it. A big chunk of it was existing customers and people during COVID wanted a treat home. We did get new customers because of companies that went out of business, other customers may not have been able to have the same service levels. We were able to make that transition.

Historically, we do have a somewhat substantial seasonal focus on items that we do, like pumpkin or cranberry. We knew that if we got through the summer, we would be in a lot better shape by the end of the year. Also, we had put off our expansion, so fortunately weren’t in the middle of being under construction and then opening right in the middle of COVID.

I really feel very fortunate because again, we see businesses where, structurally, things are not as they were before. If you’re a restaurant in an area where you were open for dinner, and now you’re not, your business is down 50%. Those are tough things to overcome. I think we just had to be smart. But most of all, we had to be hard workers, selling products, getting new customers and retaining those customers.

I think one of the great things that Elana and I have from my father is telling a story, selling all the time and building your brand all the time. COVID created some urgency, but we were fortunate that mail orders came back a little bit, retail continues to grow and foodservice is back. It makes us appreciate the diversification that we have. Eli’s Cheesecake is our name, but we do sell several other items across a number of channels.

Spencer: You said as a family, you’re constantly thinking, coming up with ideas, always working, and thinking about your product and customers. So, when this disaster happened, your muscles in that area were pretty strong, because that’s how you were. You really had the ability to think on your feet and come up with new ideas when this happened.

Marc: Yes, that’s the way we’ve been taught. One of the flip sides of COVID was there was nowhere to go. You couldn’t go out to dinner. You just went to work and came home. So, we were here. You just double down. Hard work is hard work. If you’re going to be in business, and the goal is sell a lot of product to one customer for a limited amount of time … our goal in our business is to build our brand, tell our story and have more people engage with us. It all went together. I think that’s the strategy we really pursue every day.

Spencer: If you think in retrospect, the situation that we as consumers were in, and you have a product that is indulgent, comfort food, that’s packaged individually, that’s what I need during that time.

Elana: But it’s interesting because, in the earliest days of the pandemic, people were stocking up on all of the necessities. And in the beginning, it wasn’t necessarily dessert, it was just those core items. I remember we were sitting in a meeting talking about what are we going to do, and I said, “I think we’re going to get to a point where people are going to need foods that bring them comfort, and dessert is in that category.” At some point, it did shift and then people really went all in on sweets.

Spencer: For sure. I remember being at the store in March 2020, and walking up to the entrance of the grocery store and seeing people coming out with shopping carts full of bottled water and toilet paper. We joke about it now, but I remember thinking “Wait, what’s about to happen?” I wasn’t getting bottled water and toilet paper, and when I saw everyone doing that it scared me. I like that you had that foresight, that they’re going to go past a need for essentials, and they are going out of the need stage and into the want stage.

Marc: I think we were opportunistic coming out of that stage because there was consumer-direct, grocery stores, packaged desserts for restaurants, pre-packaged products, and ultimately new products for the airlines.

We knew we made these great desserts; it was figuring out what we could do to really leverage it. So, when you go to our bakery today, compared to five years ago, you’re going to see a number of high-speed individually wrapped dessert machines for pre-packed items. You will see a new, single-serve line that is much bigger. We stepped up, and the good news is food delivery continues to be a huge business. We have fun each day saying, “Hey, how can we market these products a little differently?”

Spencer: You mentioned you have these high-speed individually package lines. What was the point where you knew this was something that’s going to have staying power and you needed to focus your operation on individually packaged, single-serving pieces of cheesecake? How do you have that presence of thought, to say, “This is the direction that we’re going to go. I can see that this trend will stick around.”

Marc: Well, if you’ve been doing business for over 40 years, you have bought a lot of assets over time in terms of equipment. Our engineering staff are wonders in terms of saying, “Hey, you have an issue. What’s the solution?” A lot of times, it’s bringing lines together in different ways.

When the investment comes, sometimes it’s because of a key customer that says, “I really want a single-serve cheesecake or a packaged dessert.” Then we’ll probably go forward and say they want X amount. But really, we want to be prepared to do 2x, so let’s get a bigger line, or let’s buy two of these machines, then there’s a lot of flexibility.

As you mentioned, packaging is the biggest issue. The good news is the equipment we bought gave us a lot of flexibility, from how to make it, how to cut it, how to pack it, so that we’re not just locked into one thing. I think one quality we really take pride in is nimbleness, that, “Hey, we’ll figure this out.” It’s always a challenge as you develop a product, “What’s the ingredient cost? What’s this going to cost us to package?”, but we’ve work with some smart people who figured out ways. Then again, we got involved in making mini pies 12 years ago, and that business evolved in so many ways. Single-serve cheesecake is probably over 35 years, but again, lots of opportunities.

It is always about looking at the glass half full. We’re not trying to bet the business on one product. I think that’s probably where a very big brand would think that if they can’t get this to be a $100 million SKU, they wouldn’t be interested. So, I think when we take a similar product and say it has a foodservice application, a deli bakery application or a c-store application, then we come back to figure out the packaging and what we’re going to do. But the key is always to make great desserts.

Spencer: Where were you in the process of the expansion when COVID hit? Had you invested in equipment, or did you have equipment on order already, and the expansion was put on hold?

Marc: We had two things. One, we had been working on the expansion for several years. It just happened that we were getting ready to get the builders in and then put it off. We had been buying equipment along the way and made significant investments, with the belief that we could make it work in the space we had, but we could realign it later.

Now, there are some other bigger pieces of equipment we’re looking at that are dependent upon it being finished. But I think when we’re going to do this expansion seven years ago, it was really going to be driven by a building and an oven. The big new oven was the key. In the interim, we invested in a lot of rack ovens, and we really found the ability to form lines. An associate of mine who I saw in two different areas in about 20 minutes, said “Remember when we were part of the SWAT team?” That was a group that we had 10 years ago, that was able to address a lot of specialty products, decorating and production, and we are really back to that.

I think the key is our customers demand a lot of flexibility regarding some of their needs. They’re demanding quality and hand work. I think the whole design of the addition and the equipment on our wish list is really maximizing our people’s productivity in giving us the ability to expand in a number of channels that we think we could be doing more in.

Spencer: And Elana, when you joined the business, it had just been a year, right? Did you come in 2019?

Elana: Yes, I started in 2019. I came to Eli’s and worked for four months in different departments. Then I actually went to Ireland to go to culinary school for three months. And when I came back in September, COVID hit quickly after. I feel so fortunate for when I started and watching my dad respond in the decisions he made and staying as calm as possible throughout it. He obviously mentioned that we had to furlough most of the bakery, and I remember when he said, “We’re bringing everyone back. The business isn’t back where it needs to be to do that, but we’re doing it because that’s what we need to do.” I think because of that drive and vision to get people back in the building, there was a lot of energy created. We really were able to respond to what consumers wanted at that time and that was really helpful in our recovery.

Spencer: You mentioned consumer behavior and consumption. Elana, because of your perspective having just come into the business so soon before the pandemic hit, I feel like you had a unique perspective. When you were in this situation, did opportunities illuminate to you because you had this fresh perspective? Were you able to go, “We can do this.” Or, “We should change how we’re doing this in order to keep our heads above water?”

Elana: Speaking to what my dad talked about earlier in the diversification, it was a huge lesson for me. If we had just been in foodservice, we most likely would have been out of business. So, seeing the importance of having a diversified mix of channels and platforms is essential. Suddenly, everyone wanted packaged items. We’ve been making single-serve cheesecake since the ’90s. But other than that, we really weren’t doing a lot of wrapped packaged goods.

An opportunity came up for this product I developed called ‘Pie in the Sky’ for United Airlines, which was basically when all food went away and they brought back food. It was a dessert on domestic first class. That was a learning curve for us. We had never made product on that scale and in that way.

I think my approach to life, in general, is: It’s not always going to go your way, but what is the silver lining? And I think through the pandemic, in those dark days, it was all about getting everyone together and recognizing there’s a huge opportunity. We have this idea that we believe in, how can we do it? We have all these resources and we might have to change the way we’ve done things historically, but it’s ultimately going to make us stronger and better in the future. Those opportunities and lessons that came up during the pandemic have changed my outlook and perspective on business in general. But also, I think we’ve come out a lot stronger because of it.

Spencer: I think the dynamic between you and Marc was the perfect combination. It was a perfect chemistry during that time because, in that moment of complete turmoil and upheaval, there was a balance of a fresh perspective. There was someone to make suggestions, coupled with someone who knew how far of a risk you could take. I think to have the familial bond created and this unconditional respect that you both could really just go through that fire together in a way that perhaps other people in a business relationship wouldn’t necessarily be able to do.

Elana: It was a very interesting time. The beginning of the pandemic was obviously so hard for so many people in this country. And we were so lucky to come out of that and say, “What can we do to make sure that we’re creating opportunities for our people and that we can get people back here safely?” Obviously, we always prioritize people and safety first. But there was a different thing going on in the pandemic, people are putting themselves at risk coming here, and so, we had to think of things we can do to make sure that they knew that we cared about them and that their safety was the number one thing. But you really learn just how important people are in those times. They’re always important, but in those times, wow. It’s amazing.

Marc: And then coming out of COVID, no one was working and there were lots of products. Coming into 2021, there are no people and there are supply chain shortages as demand picks up. You go from one perfect storm to another perfect storm. And then you must adjust again.

I think the great thing for the food industry and the baking industry is that people eat. My dad was a host, an owner of a restaurant and a personality. We have seen it go to the celebrity chefs and now you see the growers and you go to Green City Market in Chicago and those individuals. When we think about our makers, it’s all the people in the bakery and their stories. And then how we develop and respond. I think that’s really the exciting part about the industry and that ability to innovate and find some really great niches to grow the business.

Spencer: You had to furlough most of your staff, and then you made the decision to bring them all back. We just talked last week about how important your workforce is to this family business. They are an integral part of this business, and dare I say the Schulman family. What was it like for them? Were they excited to come back to work or were they hesitant? What percentage of the workforce did in fact return?

Marc: I think probably 90%. It was a benefit of the law at that point in time that it really was advantageous. Rather than saying “We have demand to work one or two days a week, or you can get pretty much your whole salary,” people were really motivated.

I think people also like the fact that they were with their families in those dark early days, and we didn’t really know what to expect or how we came out of it, but each week you’d see progress. You’d see things that happened. I mean it took a few months, and you never want to go through anything like that again. It’s very hard to plan in any way.

But when you talk about resiliency, it certainly forces us to really think through how quickly we can make decisions. I think clearly what COVID caused was that you had to be on top of things. But the exciting thing was our offices, cafe and everything are all in the same building and it was like “Okay, let’s get back to work. Let’s figure out what is possible and let’s grow.” We’re proud in those days coming out that we had grown the business and employment well past 2019 levels. It’s probably given us a little more knowledge. My dad lived through the Great Depression, and we haven’t lived through anything like that, but this helped us become little more conservative and sometimes take more chances. But overall, understand to not take anything for granted.

Spencer: The theme of this entire season is innovation, growth, longevity and resilience. The fact that you have taken hits to the business, had to furlough almost your entire staff, brought back 90% and now here you are. The day I got the news announcing that you’re breaking ground on the expansion, I did a happy dance. This to me is one of the greatest comeback stories in our industry. Not that you not only made it through the pandemic, but you’re breaking ground on an expansion that is bigger than what you had even anticipated.

I just think that it is such a testament to everything that we’re talking about innovation, growth, longevity, resilience. How do you get from there to here, with all the added pressure that has followed the pandemic, such as supply chain issues, inflation and workforce challenges? I’m saying that, although I think Eli’s already has it solved. But how do you get from there to here?

Marc: We have great customers; we work with great people and there are opportunities. Being an entrepreneur, you have to have a lot of heart and soul and the ability to take tough times. People say to us, “Why do you make things? Why don’t you hire someone to make it for you?” It is because our customers like it because we do it.

It is fun and exciting. There’s this range of things that we do. It dates back to Eli. As you asked in an earlier episode, did he envision this? And I said, “Yes. He saw the potential for what Eli’s Cheesecake brand could be.” People say “Why do you do it? Do you do it because you want to make a difference or you want to create jobs? Do you want to create economic opportunity or promote Chicago?” If it wasn’t fun anymore, maybe you would think differently. But, we did come back. The good news is once you survive those challenges you get to be a little smarter next time.

I know people who built facilities opening right after 9/11, and the business could never survive. I think don’t bet the farm on one item. I was in meetings where I said, “Hey, we got to do this,” and I got talked down and, “No, it isn’t the right time.” The issue is it’s a long-term play. If it takes another six months or a year, there’s nothing wrong with that. It’s not worth betting the company because we need to build a new facility. We did it at the right time, and we look forward to the growth coming along. The great news of the facility expansion is that we have lots of opportunities to invest where we see those opportunities available.

Spencer: Talking about timing is everything. Can you imagine if you had done this major expansion the year before the pandemic, and then lost the foodservice business, as opposed to getting through it, pivoting, rebuilding the business and launching Elana’s ‘Pie in the Sky’ product and having all this innovation and then growing that need to execute the expansion bigger than you ever imagined.

Elana: I think one thing when my dad first envisioned the expansion, it was at another time in our history. Plans were made, but they didn’t go forward. Then after coming out of the pandemic, it was, “Let’s do it. Let’s move.” I think that’s a nice lesson that the timing doesn’t always align, but look at all the great work that was done , then that could be used later on. Just like my dad said, sometimes you wait six months, you wait a year, you wait five years, but don’t ever do it if it isn’t the right time.

Spencer: Okay, so next week, we’re really going to dive into the expansion. I just want to close out this week by teasing that a little bit and applying everything that we’ve talked about this week to looking forward to the future. Do you have any pandemic-related lessons that you’ve applied to the expansion project? Such as new processes or understanding the need to have a plan A, B, C, D and Z? What are some of the biggest lessons that you took out of the pandemic that you’re applying to the expansion?

Marc: I think we’re very fortunate. We’re using the same development team, our architect, Mike Aragona, and our construction manager, Joel Friedland, they helped us build this facility, which opened in 1996. So, you have a lot of continuity on that side. I think the key was flexibility. When you take a tour of our bakery now, it is very crowded, with the idea of reallocating and then that opportunity to add, if it’s ovens, if it’s mixers. I think the key is that ability it gives us because we have the space, we could do things in six months that would have been three to five years maybe to do.

Now we have a lot more ability to respond to an opportunity. We learned a lot because as I said before, it was really building an oven when we said, “Well, the oven just is not that priority in the same way, but our building’s ready for growth.” We see a lot of exciting things in both our product lines and our outreach to the community expanding with that expansion.

Spencer: Amazing. That is what we are going to dive into next week. So, I think that is a great stopping point for this week. I can’t wait to talk to you both about what the future looks like for Eli’s Cheesecake. Thanks so much for taking this reflective look at the past few years with me.

Marc: Thank you.

Elana: Thank you so much.

Welcome to Season 8 of the Troubleshooting Innovation podcast. Joanie Spencer, editor-in-chief for Commercial Baking, is spending this season with Marc and Elana Schulman, the second and third generations of leadership at Chicago-based Eli’s Cheesecake. Their conversation explores innovation, growth and longevity through the eyes of a family-owned bakery. Sponsored by Oakes.

This episode features Eli’s unique workforce development strategies and reveals best practices that any bakery can emulate.

Learn more about this season here, and listen to Troubleshooting Innovation on Apple, Spotify and Google.

Joanie Spencer: Hi, Marc and Elana. Thanks for joining me again this week. 

Elana Schulman: Thank you. Great to be back.  

Marc Schulman: Yes. 

Spencer: I’ve had so much fun talking about how Eli’s was built and talking about what makes a Chicago-style cheesecake and how Eli set that standard. But this week, I want to talk about the people in your bakery who make the cheesecakes because you do some special things. I’m very excited to get into this with you. I’m just going to make the first question really short and sweet. You treat your workforce well. Why?  

Marc: If you’re in the restaurant business, who’s the most important person? The dishwasher and the bus boy. Eli had these core values that he used to pass out to his customers that drive us, “Treat the other as if you were the other, and charity will never bust you.” Your mind must be in the right place. 

In the workforce, there are times when there are not a lot of people to hire, and then businesses suddenly are very focused on recruitment and retention. Years ago, when we were expanding and working with the city, we were trying to get other food companies interested in some of our educational initiatives, and the attitude by some was, “Hey, we’d rather keep our people stupid.” But we’re not going back there again. Minimum wage rules and immigration law have changed dramatically, and we don’t hire temporary workers. We hire permanent associates, and we will go through some of the ways that we do it. We have people who have been here for a long time. If you want to keep people, treat them like you want to be treated.  

Coming out of COVID, we feed every associate a hot lunch every day. We give everybody cheesecakes to go home every week. We try to do those things, but I think where we’ve really worked hard is on educational initiatives and taking steps that help expand the diversity and skill sets of our people.  

I think that over the years we were fortunate to partner with several institutions. One is Wright College, which is our neighboring community college in Chicago. Also, the Chicago High School for Agricultural Sciences, one of the few public high schools in the country dedicated to producing leaders in food and agriculture. So, they’ve been great partners, and then we’ve really worked to bring education in the workplace.  

In 1991, we partnered with Wright College for Eli’s U, which is our on-site GED-ESL program. Then interestingly, it was that program that created the visit by Bill and Hillary Clinton in March of 1992. But bringing education into the workplace and being able to continue that over the years as we moved into this facility … One of our next phases of plans for growth is building out the space we’ve dedicated for an education and innovation center so we can do even more for our people and then more for the community as well. 

Spencer: I think this is interesting because you’re touching on something that doesn’t get talked about a lot. When you talk about education, it’s twofold. You are educating your workforce on how to do their jobs, but you’re also enabling them to have a high school diploma. Not a lot of bakeries talk about how they’re educating their workforce just to be productive members of society in general and giving them a general education. How is doing that benefiting your workforce and benefiting the business? Because there really has to be a business case for everything, even if that’s not the primary reason for it. 

Marc: Well in January of this year, we were fortunate that Secretary of State Antony Blinken came to Eli’s, and that was because of our long success and partnership with hiring refugees. In his remarks, Secretary Blinken took what I had said to him, because everybody’s going “Oh, God, you’re so great,” well then, I’m going, “But if this individual is going to school at Eli’s, then going on to get a four-year degree or technical training, it’s really their investment and their commitment.” 

Whatever bakery or food company you’re talking about, we all need more trained people. I’m saying it’s a good thing to do, but it’s good business as well. If you want long-term associates … the skill sets and flexibility are just so much better when you have people who have been with you 10, 20, 30 years in terms of what they do.  

I think education is something that we have a history of doing, but we really want to be able to do more. Over the last few years, there has been a greater expansion of refugees coming to the US. In our employment, we have the ability to work to help them have ongoing training, make them better associates and better for their own lives. They go together, but I think you need respect. You need to respect all our cultures. We have several associates from Afghanistan; we have several associates now coming from Ukraine. Our vice president of procurement, Elias Kasongo, came from the Congo 29 years ago. He has been in the dish room, he got his GED, his associate degree and then received his college degree from Northeastern. He went from the dish room to the c-suite, because of his work. But I think that the ability to create an environment for success and giving people those opportunities has just been critical to what we do. And with the great partnership of Wright College and the other work that we’re doing with students with disabilities, we’re creating better career paths for people to pursue careers in food and also at Eli’s. 

Spencer: Okay, so let’s talk about that. Because that’s a program that I’m less familiar with, as opposed to Eli’s U and the work with Refugee One. So, let’s talk about this initiative with students with disabilities.  

Elana: One thing I just generally want to say about these long-term partnerships and different hiring strategies is these go back 30 years. My dad has really dedicated his life to this work, and it is meaningful for me to come in and to see that. It’s not just something that is a recent development, and it’s not for optics. I have really appreciated his long-term commitment.  

We’ve been hiring individuals with cognitive and developmental disabilities for a long time. But more recently, we started this program in partnership with Wright College and the Chicago High School for Ag Sciences, and it’s a state-funded program called Project Wright Access. We just finished our third cohort. Basically, the idea is that students with cognitive and developmental disabilities who are in this transitioning year, where they’re going to be leaving their schools where they have access to all this support, have this big moment where they can join the workforce and develop all these really amazing workforce skills. But you must have the right partner to do that and the right people behind the scenes to help with that. We’ve just been lucky to work with so many amazing educators and administrators on this program. And we’ve hired two students from this program, who are working in various roles in the bakery.  

The idea is that you should have the same access to jobs and life experiences, regardless of ability. It has been an amazing project for me to work on, and I have formed incredible relationships with all the people that are working on it. Seeing the joy and happiness of these new associates that came from this program, they’re so proud to be in the workforce and to work at Eli’s, they literally are skipping into the building. We hope through this program more companies will take part in it and provide more opportunities. It has been something that we’ve done for a long time, but then more formally through this program. 

Spencer: When Marc answered the first question, as he was describing these philosophies from a historical perspective, I was thinking there are a lot of companies who recognize the labor crisis in the industry and they’re trying to come up with new initiatives, whereas Eli’s has always been doing this. And while that is just another thing that makes this company special, I think that this episode is important because companies can learn new practices for solving workforce and labor issues by learning from what you’ve been doing since the bakery started. 

Marc: Absolutely. I think that whether it is a community college, Refugee One or partnering with high schools, the goal is to help those associates because one of the other points of hiring people for the long term is not where they start, it’s where they finish. You want to give them the opportunities to be successful. It creates a more rounded company. I think we have associates here from 20 to 30 countries, many different languages, and we do a lot of things to honor holidays and traditions. I think if everyone shares that passion for quality and customer service and growth it makes our job much more possible to be successful. So again, we’re doing it because it’s the right thing to do, but it’s also the best thing to do for business. It is what makes our product stand out and someone understands why it’s special.  

Spencer: That totally makes sense. So logistically, or organizationally, how do you manage so many different programs and initiatives? Do you have a specific team that’s dedicated to it? Elana, is this all your charge? Or is there one person in charge of each specific initiative? Just from an organizational standpoint, what does that look like? 

Elana: My dad is looking at me. It’s an all-hands-on-deck situation. I think we would love to be like, “Oh, it’s all very planned out, and this group of people is responsible for this.” It’s really a collaboration between me and my dad. We have an amazing human resources team, and it’s kind of a labor of love coming together and figuring out the best way we can support our associates. 

Marc: If we’re hosting a job shadow for the Chicago High School of Ag Sciences or … We just finished a five-week summer program for eight of their students with Wright College where we bring in speakers and they get college credit. Our food safety and decorating teams are involved because they have a competition in decorating cakes. I think that the goal must be to create a welcoming environment. If you’re hiring an individual with a disability, or it’s an individual’s first job in the US, or you’re hiring someone who’s never worked in a bakery and manufacturing before, the fact that everyone is creating a welcoming environment and being supportive is just critical. I think they go hand in hand. We’ve just have had these great partnerships.  

One thing that gets hard sometimes is, I have spent time with other companies trying to convince them that they should do these things, and you really learn that there are some companies who see the benefits and other companies think, “Hey, today we’ll do the minimum possible.” They might move their facility because the minimum wage is a little cheaper across the border. But we’ve found that this strategy works well for us. And again, quoting Eli, “Treat the other as though you’re the other, and charity will never bust you,” doing the right thing has really allowed us to succeed and grow, and the skills and dedication of our workforce are an important part of that. 

Spencer: You mentioned that there probably are still manufacturing companies out there that are going to focus more on the bottom line first. Those are the ones who are much more reactive in terms of the current labor situation. I think you would agree that this labor situation is not going away. I think that this is a new reality that’s going to be a baseline for normal moving forward. I do think the ones who are not on board need to get on board, or they’re going to eventually pay a heavier price. Would you agree with that? 

Marc: Oh, absolutely. The few other parts of it are that wages are up dramatically. So, you need a more productive associate. Within the SQF audit now, there is a section on having a culture of food safety … quality. I think it’s moving in that direction. And again, we’re one company, one plant. Elana and I hear people say, “Well, where are your headquarters? What’s in the bakery?” You are there with your people and it’s worked well, but you can’t live in the past. If we’re talking about how we got this award 10 or 20 years ago, that’s irrelevant to the discussion.

The question is, how do we expand? This summer, we’ve had an associate working as a consultant on expanding educational opportunities for all associates because we really do want to give every person — if they want it — a personal development plan where they can take classes at Wright, pursue a four-year degree or a graduate degree and say, “Just because you started in the workforce, don’t think that your opportunities for education have ended.” 

I always remember the day before my father died, and I was with him. We were at Governor Thompson’s birthday party and we’re on the way back and I’m reading my father this prospectus and we’re going over this company, opportunities and challenges. Eli was always thinking. For me, I always say, “Readers are leaders.” So, I read a lot and share that knowledge. Obviously, I read Commercial Baking, the newsletters and everything else, but the more that Eli’s is a learning environment, and that knowledge is not only at the top levels but really throughout the organization, is a much better chance that we’ll have the long-term success we envision. 

Spencer: You are sort of answering my next question already. I was sitting here and thinking about professional development in more general terms and training across the board for everyone. And while you have these incredible programs, to enable access for anyone to have a job, regardless of their background, once an employee is in the door, what do your programs look like for not only onboarding but also training up so that employees have opportunities to advance in the company and create that longevity that you’re talking about? 

Marc: It’s really where they add focus. I know in a future episode, we’ll talk about COVID and the impact it had. Obviously, a lot of our activities had to be curtailed, but I think we always know we need to do better. There is certain training that is essential for the job. There are certain tests that individuals need to take every year in training within their job. I would say where we see the highest priority for our workforce today is additional work-related training on the floor and the ability to get the training or educational experiences.  

It’s a work in process; we’re a little tight on space. Sometimes, like when we did our ESL program, we would lose our conference room for four days a week, for half the day. That’s why we want to be able to add the other space to do it. Then the other part is, if we can encourage people and give them the incentive to go to Wright College or you go take classes online, and then we’re doing more short courses because again, as we talk about equipment, the biggest issue of quality is, is the equipment set up right? Is it giving the right readings? What are we doing so that in the end that operator can have the appropriate skills to operate that piece of equipment safely and with quality? I think we have more work to do. And that’s good because it’s not the awards you get. It is about what the plans are for the future. We’re proud when people take tours of our facility to see that people are smiling, people are engaged, people are acknowledging other people, and that’s the type of environment that we want to be. 

Spencer: Absolutely. I think you do have that reputation. You said something that sparked a thought for me in talking about the equipment and especially as things are more automated and more technologically advanced, I’ve seen a couple of conversations lately, that got me thinking. Automation is really helping in terms of creating a more equitable work environment in some respects, such as manual tasks that women or people with disabilities weren’t previously able to do that they are now. But at the same time, as you said, these are highly advanced pieces of equipment that need some level of education to learn how to use them. So, are you seeing that trade-off? How are you all creating opportunities, but also navigating the challenges that come with those opportunities? 

Marc: I think at a certain point in time, you update your equipment when you’re working on your standards. The challenge is that we can start a lineup or a product, and it’s extremely manual because that’s what you must do. Then you have a plan because in the long term, the cost of associates is just too high. However, when you can show an individual maybe the size of the mixer, the type of depositor we’re using, or individually wrapped packaging equipment, that there is no way you’d be able to do without sophisticated equipment, how important it is to have the right people who have the skill sets to set up the equipment and clean that equipment.  

I know from your work with touring bakeries, seeing when someone takes a depositor apart and then puts it back together again, that they are taking pieces of equipment that there could be hundreds of pieces, and you had people doing it every day. So, it also comes back to a long-term associate learning this job. You just can’t have a temp walk in off the street to this job. I think if you have a more dedicated and talented workforce that allows there to be long-term continued wage growth, other benefits, profit sharing and other things that come along with being successful. If you tried to do it on the backs of your people by just sharing how much you made without any concern for investment to go with it, you wouldn’t be around very long.  

Elana: Something I was going to say is, I was recently talking to our chief engineer who’s been at Eli’s for a long time, and we were talking about this next generation of people on our maintenance team. As far as the skills need to be developed and how technologically advanced equipment has become. He said that he was going to start having a couple of people on his team learn programming because they would make great programmers. These are probably conversations that did not happen 15 to 20 years ago. I think it’s really thinking ahead, thinking about what skills are necessary to be successful and really thinking differently than before. Everything is changing so quickly; we need to have those skill sets in-house to be successful. 

Spencer: It got me thinking, like you said, in the past, it was to go get an engineering degree, learn how to be an engineer and then you can apply those skills to operating this equipment. Now it seems like, especially in this environment of learning at Eli’s, you can be on this equipment, and you have access to learn those skills. That feeds into that engineering type of education so that they’re getting the opportunity to learn the skills without having to go out and earn the degree where they might not have that opportunity out in the real world. 

Elana: Absolutely. My dad mentioned Eli’s U, which is this GED-ESL program. Right now, a big project I’m working on is building that program out. Part of that is doing more check-ins with managers and everyone on the floor to say, “What can we do to make you more successful at your job? Or are there things that you want to do that you’re not doing? Or something a skill you feel like could develop and it will have a huge impact on your work?” I think it’s finding those gaps, especially with more technologically advanced equipment, and all these things where maybe someone just didn’t have access to that before or they’re in a new line of work. And they have an interest or think they would be good at something, but don’t necessarily know how to get to that point. We can fill in that gap. But we’re working on that now. There’s not necessarily a very formal process for that. I want to formalize it to make sure we’re consistently having those conversations all the time.  

Spencer: That seems like white space. 

Marc: The one thing I’ll add on that, we’ve always had a summer intern program. Sometimes the interns are children of associates, mostly from the outside. But this year in engineering, we’ve had a lot more young people, children of associates finishing high school or college coming in. I think that’s something that having them do the job and realize this is something they are really interested in. I think working in an environment like this is intimidating. But working in a plant environment and the bakery, people are curious about. So, I think by starting younger … Elana is a third generation … we have other associates who are second or third generation and if we’re able to develop those young people we’ll just be that much more successful. 

Spencer: You don’t hear about that very often anymore, multiple generations outside of the company’s ownership or leadership. So that’s impressive.  

Elana: We like to keep it in the family. 

Spencer: Okay, I just have one more question for this episode. We talked a lot about some of the partner programs that you have, like Refugee One and some of the learning institutions. Are you collaborating with any other baking companies? I was thinking about the last time I saw you both at ASB’s BakingTECH in Chicago, and there happened to be several baking companies attending. I moderated a panel on DEI and the inclusion side of DEI, so this was a big topic of discussion. There were a lot of people who were there engaging in these kinds of practices. I didn’t know whether Eli’s is collaborating with any other baking companies to share their ideas or to get new ideas. What does that look like? 

Marc: We work with the Chicago Food and Beverage Network on educational initiatives in our work, which is with High School for Ag Sciences. We’ve had Bimbo Bakeries out to the school. We are certainly happy to call and talk about it. Our goal is to promote Chicago as a city that is great for startups and headquarters, but our space is the city where things are made.  

The city funded our plan for an innovation center, at least to contribute $1 million to our plan, and the goal is to continue to do that outreach. I think we’ve mentored and worked with other bakers in terms of doing it. Over the years, I think we’ve learned the best way to contribute is by setting up the programs. The Chicago Food and Beverage Network does have an educational program that can be adapted and then work with other companies. But I think we’re going to have the most impact by being on your podcast today, telling our story and doing things in the community. When we were recently at the restaurant show, the retired CEO of Panera was really interested in our program with people with disabilities. I think our impact will probably be more across the broader food spectrum of food and agriculture companies, but clearly very happy to work with bakeries in the process. 

Spencer: I was sitting here thinking, I hope that people who are listening to this episode will be inspired to reach out to you to learn more. I also have to say, it’s funny when I asked if you’re collaborating with other baking companies, you’re telling me that I was thinking too small. You have this opportunity to collaborate with the food industry at large. That’s incredible. 

Marc: Absolutely. Moments after this call, we have a call with the Food and Beverage Network at the University of Illinois on programs that we have. Then we have discovery partners with the university. So again, Chicago and Illinois are places where it’s great to make things, where people are valued and where education is important. I think the great thing about our business is we’re successful when people come here with backgrounds in food. Baking might be a little too limited. If they know how to bake and mix, that’s certainly an advantage. But a lot of times, it’s someone who’s coming out of a foodservice background, who’s able to adapt to what we do. But again, with education the more we do it and not talk about it, the better will be. 

Spencer: Those are all my questions and as you mentioned, you have a very important call along these lines, so I want to make sure that you can get back to putting good out in the industry. So, thank you again for taking the time to talk to me today.  

Next week is going to be interesting because we’re not only going to reflect on the impact of COVID and what that looked like in Chicago and for Eli’s but also the comeback that you were able to stage and talk about the expansion at your plant. I’m looking forward to that. But for today, thank you so much for your time and your incredible insight.  

Marc: Thank you.  

Elana: Thank you.  

Welcome to Season 8 of the Troubleshooting Innovation podcast. Joanie Spencer, editor-in-chief for Commercial Baking, is spending this season with Marc and Elana Schulman, the second and third generations of leadership at Chicago-based Eli’s Cheesecake. Their conversation explores innovation, growth and longevity through the eyes of a family-owned bakery. Sponsored by Oakes.

In this episode, discover how setting a standard of distinction can impact a bakery’s identity and product development strategies.

Learn more about this season here, and listen to Troubleshooting Innovation on Apple, Spotify and Google.

Joanie Spencer: Hi, Marc and Elana. Thanks for joining me again this week.

Marc Schulman: Thank you, very happy to be back.

Spencer: Last week, we talked about the point when the cheesecake became its own entity beyond a dessert in the restaurant. What was it about the product? When did you know that Eli had something special with this cheesecake?

Marc: I think that first Taste of Chicago, in the lines of excitement, interest and goodwill, I’d say we hit an interesting time in the mid-80s, where supermarkets for the first time were really interested in premium quality foods. There was really a vacuum in the market for super-premium as it applied to cheesecake. I think between the goodwill that Eli had in restaurants, fellow restaurant operators in Chicago, national restaurant chains and then in retail, it really gave us some opportunities to grow the business. I think the great thing about cheesecake and desserts, and this has expanded over that long history, but there are a lot of places where desserts are sold where maybe weren’t sold when we started, consumer direct or other ways.

The number one thing you have to make great product. We are in an industry where every once and a while people become diet-conscious, and no one wants to waste calories today. Everyone has to say, “That cake, that dessert was phenomenal.” We started with the philosophy of always make it great and then really followed our customers, and people came to us. It has been exciting ever since and along the way, we got many more resources, such as product development, commercialization and training, but we never lost the focus on the quality of the product and the importance of each slice.

Spencer: There is a point in the history of how consumers use grocery stores and the onset of the trend of an in-store bakery. An item in a supermarket bakery isn’t less than. There’s no reason why you can’t have a good high-quality product that’s accessible. I feel like Eli’s, coming out of the restaurant and being widely available to consumers, probably played a big role in that.

Marc: Absolutely. We see the term “authenticity” used a lot today, and you see a lot of brands that are made up or maybe it is someone’s grandmother’s recipe, and there’s nothing wrong with that; I think we were very fortunate to have the continuity. We were on a call today talking about Taste of Chicago, which usually is around July 4, but this year is in September. We’ve been at every Taste of Chicago since 1980. You look at the big cakes we’ve made dating back to 1987. It’s just such an amazing history, both in the product side and the range of the products, but also about who and what Eli’s is. I think the fact that Chicago is our home, and we have such a great history of involvement here, has just given us even more scale and support to grow the business.

Elana Schulman: I also think about when my grandfather developed this recipe, he was a real rule-breaker. And it’s a recipe that’s unique to him and to our business, and it is Chicago-style. I feel like that’s important. That wasn’t necessarily a style cheesecake that people were making at home.

Spencer: That is a good segue Elana, because that was my next question. This has a distinction. It has become the Chicago-style of cheesecake, as opposed to say, a New York-style of cheesecake. There are certain products … In fact, in the last issue of Commercial Baking, we featured a bun bakery that is known for the Chicago-style hot dog bun. A person can look at a Chicago-style pizza or a Chicago dog and recognize it as distinctly Chicago. What are the traits of a Chicago-style cheesecake, and specifically Eli’s Cheesecake, that set it apart?

Elana: Chicago-style cheesecake has a few key unique features. First, I would say that traditionally cheesecake is baked in a water bath, and my grandfather did a dry hot bake. So, the batter and crust are going right in the oven. There’s no water, and it is heated at a really high temperature, so you get this beautiful caramelization on the exterior, and then it souffles and you get a rich and creamy texture on the interior.

The other thing that he did was with the crust. Traditionally, you might see more of a graham cracker crust being used, whereas Eli did an all-butter shortbread cookie crust. So, at night at Eli’s, we have an amazing team of cookie bakers that are sheeting shortbread, baking it off and cooling it. Then the batter is deposited in the morning, and the cakes are baked. That product on its own is like its own dessert. It’s just a classic shortbread cookie.

The ingredients are simple in a cheesecake, so it really comes down to the quality of those ingredients. We use slow-cultured cream cheese, slow-cultured sour cream. We use Nielsen-Massey Madagascar Vanilla. That’s another family-owned business from Illinois, and a high-quality vanilla. We call it “liquid gold.” All those elements really create a unique flavor profile. I think our desserts, in general, are very balanced in terms of sweetness. So, the first thing that you get on your palate is not sugar, you’re really tasting all those different elements, the vanilla, the slow-cultured dairy, and obviously sweetness as well, but I would say it’s more of a balanced eating experience.

Spencer: I was thinking when you were talking about the slow-cultured dairy, I imagine that really creates a depth of flavor.

Elana: Yes. I would say texturally Chicago-style cheesecake is very different than other styles of cheesecake. It’s rich and creamy, almost like eating ice cream. Whereas other styles are a little heavier, a little denser, a little grittier, and ours is very different in that way.

Spencer: Okay. Marc, when you were talking about hearing from people who remember the first time they tried Eli’s Cheesecake … I think this is a good point to interject and say that I, too, remember the first time I experienced Eli’s Cheesecake, and it truly ruined cheesecake for me. I can’t accept anything else. It’s a very memorable experience to have an Eli’s Cheesecake for the first time.

Marc: We thank you. That is why we have a lot to live up to every day. As we say to our people, the most important cake is the dessert you bake today. It’s a premium product. Our goal is not to make the cheapest. Our goal is to make the best. I think that as the cheesecake has evolved into many flavors, but also so many other desserts, we want to be held to the same standard of quality.

Spencer: Yeah. This is another good segue. Let’s talk about setting standards and being authentic and still innovating. So, Eli’s is known as the standard setter. You defined the Chicago style. But also, as Elana mentioned, Eli was a rule breaker. You have this reputation of doing amazing things and different things with a classic dessert. How have you been able to be so innovative for so many years?

Marc: I think one great thing that we all got from my father is, as foodservice operators, just learn and become as much of a subject matter expert, travel, see opportunities and just give great service. I think the great thing about being a family business is there’s really no limits. People ask, “What’s the goal?” If you’re a publicly traded company or privately equity-owned, sometimes it’s easier.

Our goal is really to be the best at what we do and to use all our resources and all the skills that our long-term associates have. After all that time, you just see the good that we create working together. Our industry was an industry in which at one point, I’d say there was ease of entry. If you had an oven and a pan, you could make cheesecake and desserts. It doesn’t work that way anymore, with all the regulations at the federal level or SQF. We are held to a high standard, but we’ve always wanted to create a culture of quality and food safety.

I think when you have that going for you, it has caused us to innovate the flavors of cheesecake, but also over those years, it has caused us to go into many other categories of desserts, serving the needs of a specific channel, like the airline business. You used your development and your core skill sets, but it was a different shape or a different product that would work for that customer.

Spencer: What is the sweet spot … innovating and coming up with cool new products, a variety of different flavors and getting inventive, while also holding on to your authenticity. What’s the secret?

Marc: I think they really go hand in hand. There have been opportunities where the volume was high, but we didn’t feel it really fit within what we were able to do. Years ago, when we started to sell it at Borders, a book chain, in their cafes. So, suddenly, there were accessory products to the cheesecake they needed. That was a big step along the way.

Cream cheese is clearly a major ingredient, but we work with so many other ingredients and ways to do things. Moreover, sometimes some desserts can be consumed at breakfast. I know we’d like to eat cheesecake around the clock. But I think that the skill sets there are when other brands come to us. Culvers came along and said, “We’d like you to make bite-sized cheesecake pieces.” We had never done it before, but you go, “Hey, that could be good.”

So, you got to listen. I think sometimes a businesses and maybe in the world today, you could say, “We only want to make two things, and we want to have this plant, and we want 10 people working in it. It’s all going to be automated, and every dessert will look the same.” Maybe you change the flavor, but that’s it. That’s not what we’re about. If you come to our bakery, everything other than the tunnel oven is pretty much on wheels. And it’s all about flexibility for the future and for our customers. I think that’s been another defining characteristic.

Elana: I’ve watched this with both of my parents, but they always say yes to everything. They’re very optimistic. They’re big thinkers, very positive. I think that has a huge impact on the culture and the culture of innovation here. So, when an opportunity comes up to maybe think differently about a product line or introduce something new, people get excited by it. We have such a good team of people that we feel like this could be pushing us and our capabilities, but because we have this great team of people, we feel like we can tackle it together. That makes a big difference.

Spencer: Do you think that the fact that you are Eli’s lineage, it enables you to say “yes”, a little bit easier and try different things because you inherently know what authenticity is supposed to be? So, you have that ability to get outside of the box without straying too far from your core?

Marc: I think the fact that we can do what we want to do, when we want to do it, and still believe in who we are, is very important. I’ve been in meetings, or you can talk to people in the investment community, and it’s like, “What’s that big thing that’s going to make your brand huge?”

A lot of times, for capital, people think you need to raise a lot of money, but you need to give these huge estimates of the potential. So, we’re more conservative that way, but it also depends on who the customer is. We’ve found over the years that our business has gone from being very transactional to having a much more relationship. And so, if you’re working with longtime customer partners, you’re much more willing to say, “Okay, we’ll take that step out, because they know us for our quality and it’s going to be worthwhile to make the investment.” Then if we do make the investment in that new product, then we have an opportunity to sell it in another different form to other customers. So, they kind of go together.

You also must be careful on a timely basis. Sometimes you are working on 10 major projects, and you might have to say, the 11th and the 12th might have to wait a little while because you could overload the people in your system. So, you must be reasonable as well.

Elana: I think the other interesting thing is, I’ve heard this term come up recently a lot, “neo-nostalgia.” I feel like that is that sweet spot for us, where we have this product that we’ve made for a long time and it’s part of the heritage of our brand, but also, we really think about innovation a lot, but innovation in an accessible way. I think that it’s a lot of fun to play around with a format that maybe someone knows, but a new and exciting flavor or a flavor that they’re familiar with but presented in a new way. That’s where I get excited, and I feel like we have a lot of people in the building that are interested in pushing and trying different formats, but maybe using some of the elements of products we’ve been doing for 43 years. It’s a great combination.

Spencer: So that’s like the cuties.

Elana: Yes. We also launched a product called Pie in the Sky, which launched on United. That was a mini chocolate chip cookie pie filled with chocolate ganache warmed on board. We had made mini pies, but more traditional pie fillings, and then that came around and kind of went away. Then it was like, “Hey, why don’t we try a new take on a chocolate chip cookie.” That’s everyone’s favorite classic dessert, but it’s presented in this new format that someone maybe hasn’t had.

That’s where I feel like, you can be so creative when you have multiple restrictions or you have this piece of equipment, what can you do with it? Someone might think that there’s not a lot you can do, but when you get people around the table to really think about, is there another application that we’re not thinking of? Is there a new dessert format? So many ideas come from that process.

Spencer: I completely hear what you’re saying, because I do have this belief that if you understand what the rules are, and you understand the parameters, that gives you so much freedom to bend the rules or get creative inside of those parameters. Because you know where you’re supposed to be going.

Elana: Exactly.

Spencer: I want to talk about quality for a minute. It’s something that you both have mentioned several times, and it’s Eli’s heritage. I’ve heard stories of Eli back in the day walking through the plant and doing a literal white glove test. Is that true?

Elana: Diana Moles, our senior VP of innovation, started at Eli’s when she was 18. She always tells me this story that she was at the bakery, and they were doing Turtle that day, and Eli showed up. He was coming from the restaurant, and he said, “What’s the weight of pecans you’re putting on that cake?” She said a number, and then the person next to her said, “That’s not right.” Eli knew exactly what the bottom line should be. He had his eye on every part of the operation. You can tell a good restauranteur by that. They see everything that’s going on at every time.

Marc: One of Elana’s favorite movies is Casino … Eli was like Sam Rothstein. Growing up in the restaurant business and watching Eli who did it all … the meat, the quality of the liver, his produce. Actually, cheesecake came around, because he couldn’t find a dessert that he was proud to serve at his restaurant.

I think our menu at Eli’s the Place for Steak said, “Always good food.” I think that really has been drilled in our heads for a long time. If you stand for quality and don’t cut corners … We’ve seen things where other brands in the industry are saying, “Now using real cream cheese or real vanilla!” Well, what were they using before?”Then the other thing is, we’re not going to be the cheapest. I think one of the challenges of cheesecake and desserts is that they’re expensive. Chocolate, sour cream, cream cheese and butter are items that certainly are costly. The amazing thing is you see inflation across the board.

At the first Taste of Chicago, we probably sold a slice of cheesecake for $2 or $2.50. Today, you see desserts for $10 or $12 a slice. You see single-serve prices have gone up, but what are the costs? What’s the cost of labor? What’s the cost of cream cheese, or the other things that go with it? I think the good news is customers want quality. Today, individuals will either pay more to get a better product, or they won’t consume the product. We’re going to lose out to someone saying, “I just want it to be the cheapest, most automated way to make the dessert.” That’s just not what we do.

Spencer: If you think about it from our side, there are the labor costs and the impact of inflation on ingredient costs; there is supply chain disruption that’s impacting the cost of the equipment. There’s so much more that goes into it, but the consumer doesn’t see that. A lot of them don’t care. They don’t need to hear the whole backstory. They want to know, “If I’m paying this much for it, I want it to be worth it.”

Marc: Absolutely. Quality always wins. I think the benefit that we have is doing it for the number of years, having the expertise, having the drive for the future. We see it as being an exciting time. Clearly today, the channels that we sell to all are growing. Some didn’t grow during COVID; others have come back, but we see a lot of demand. Then that inspires us to continue to invest in our people and in our facility.

Spencer: And Eli’s Cheesecake at retail is not cheap, but it’s worth it.

Marc: Thank you. You take it one customer at a time. That’s really the exciting part of having an online presence. When we started, there really was no such thing as overnight shipping or second day. Clearly, over the years people’s comfort in ordering foods direct is just growing. The great news is you can hear us on the air today and get an Eli’s Cheesecake the next day anywhere in the country. If you look at Goldbelly, which is a customer of ours, it takes great regional foods and makes it available across multiple categories. I think consumers are much more demanding and also restaurant operators, they say, “I don’t want a private-label cheesecake, I want Eli’s.”

Spencer: Wow. That’s a good point that sparks a thought for me, and that is your marketing efforts, especially hearing that Goldbelly is a customer. This product really speaks for itself. I mean we opened with the fact that you set the standard for a Chicago style, but how have your marketing efforts helped put Eli’s on the map so that someone can get on Goldbelly’s website and order an Eli’s Cheesecake to be sent to them? I specifically want to call out Maureen’s incredible efforts, because she has done a fantastic job with your publicity. How do those two concepts go hand in hand: the notoriety of the product and your marketing efforts?

Marc: I would say I’m very fortunate to be Eli’s son and to be married to Maureen, our publicist, writer and storyteller, and to have Elana as a daughter. Because this summer, we’ve had an archivist at Eli’s going through our old photos, all these big cakes and celebrities. Eli was just such a character and a host, and that goes back to the ’40s. You think about the photo of Eli with Frank Sinatra and Sammy Davis, Jr. at Eli’s. The Cartier watch that Frank and Barbara Sinatra gave my father that I wear now. Bill Clinton visiting our bakery in 1992, and those inaugural cakes. There are just so many things that have gone on, but the exciting thing is, what Elana said earlier, we probably have never said no. I know we talked earlier about something we did over the summer when NASCAR came to Chicago for the first time, and it was welcomed with this 500-lb. Eli’s Cheesecake.

I think they all add up. Part of it is doing the right thing; part of it is being out there. Then out of it, you get your own style of cheesecake. We’re in an industry where there are some great companies. We have a lot of respect for Junior’s, it’s a great New York-style cheesecake, and the Rosen family has done a great job, and they have their history. And we go ahead and have built on our history. I think the important thing is through all our activities, both in the bakery, community and big cakes, we’re creating history every day. It’s building a far better future.

I don’t think we want to be in a situation where we see big brands say, “We want to do something next month. What can we do?” Then they only do it for a limited amount of time. We talked about Eli’s history, and what we’ve done with events, big cakes and partnerships. It’s just what we do. I don’t think we would ever run our company any differently than we do. So, Eli’s comes off as a great place and that makes our work more fun because we are telling a story, we’re making a difference in the community and we’re working to do the right thing for our people. I think out of it all, you have a path to success for the future.

Spencer: I love that. I do think that you balance that so well. Because it’s one thing to be doing great things, but at the same time, people need to know that you’re doing great things. And I think that you carry that balance quite successfully. So, these are all my questions for this episode.

Next week, though, I want to look a little bit into the day-to-day of how Eli’s Cheesecakes are made in terms of who’s making them. Eli’s is known for some unique and foundational workforce development practices. I’m very excited to dive into these because I think that you and your team have put together something special with how you treat your workforce and how you develop your workers and I think it’s something that our industry could greatly benefit from learning about. So, I can’t wait for next week but for today, thank you so much for joining me.

Elana: Thank you.

Marc: Thank you.