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.
