Hollywood testimonials help boost sales
Bob Katz, the fast-talking owner of My Grandma’s Coffee Cake of New England, has his company on the fast track with revenue that has increased 131 percent over the past five years.
By Mark Micheli, Journal Staff, August 18, 2003
At the My Grandma’s Coffee Cake of New England factory in Hyde Park, you can forget about grandma.
There’s a rocking chair and shawl for her in the small lobby of the industrial building, but she isn’t sitting in it. Instead, on the walls and on a small nearby table are autographed photos of celebrities, including one of company owner Bob Katz standing next to Donald Trump. This is Arnold Schwarzenegger’s coffee cake, and Oprah’s, and Madonna’s. Oh, and Bruce Springsteen is reportedly a fan, too.
The celebrity connection with the cakes came about after someone brought one to a party to celebrate the end of filming for the movie “GoodFellas” in 1990, according to Katz, who talks as fast as a used-car salesman. (He has to, because he has so many stories to tell.) He says Warner Bros. Entertainment Inc. then called up asking for a corporate account so it could send the cakes out to actors and clients.
Jamie Lee Curtis and Arnold Schwarzenegger are customers
“Jamie Lee Curtis sent one out to her father, Tony Curtis, and to Arnold Schwarzenegger for Christmas,” Katz says. He adds that Schwarzenegger later called and ordered some to send out as gifts as well.
The real grandma, who’s recipe is still used, isn’t even any relation to Katz. She is the grandmother of Barry Cohen, who sold the business to Katz in 1993 for “less than $100,000,” according to Katz. He says he sold everything he had at the time to raise the needed capital and moved back home with parents in Newton.
At the time, Cohen was reportedly working out of a small, 180-square-foot pantry in a strip mall in Newton where he produced between 60 and 120 cakes per day.
This year, Katz expects to bake more than 600,000 cakes and bring in about $6.2 million in revenue.
Sitting in his cluttered office, which features supermarket circulars advertising his cakes taped to a wall next to an earnings chart that is drawn in colored pencil, Katz says it isn’t the celebrity affiliations or any one thing that has led to his company’s notable growth — an estimated 131 percent over the past five years.
When asked repeatedly how his company managed to grow from $2.8 million in revenue in 2001, to $4.25 million in 2002, to a projected $6.2 million this year, Katz finally shakes his head, holds out his hands and asks, “What makes up the galaxy?”
He quickly answers his own question: “A whole bunch of little stars.” In other words, it’s a lot of little things that fuels his growth.
‘His growth has been phenomenal’
His growth has been phenomenal, especially for the industry he is in, said Deirdre M. Coyle, a spokeswoman for the Initiative for a Competitive Inner City in Boston. Katz made the nonprofit group and Inc. magazine’s national top-100 list of the fastest-growing inner-city companies this year, coming in at 99. Coyle says one reason for his growth has been his ingenuity to take advantage of his inner-city location to make his business grow.
“He has a dependable work force, a majority of whom can walk to work or take the MBTA. And he lives in walking distance and has been involved in the community and can see where the opportunities are,” Coyle says.
The coffee cake — which comes in eight flavors and sells for about $11 for a small, 8-inch cake in supermarkets, $19.95 by mail order, $33 in the Neiman Marcus catalogue and $8 per slice at the tea room at the Plaza Hotel in New York City — is also sold as a sales tool and customer-retention perk for businesses. Some of his corporate accounts include Saturn Corp.’s customer service department, as well as the DreamWorks SKG movie studio and Democratic presidential candidate Howard Dean.
Katz was once a customer of ‘Grandma’
Katz himself was once a corporate account for the company. Before he bought the company in 1993, Katz ran a small cleaning-products company out of his father’s garage in Newton. To get the attention of large accounts — such as Coca Cola Bottling Co., Foxborough Stadium and the Newton Tab — he sent them each a coffee cake.
When he wanted to order several cakes to send out as Thanksgiving and Christmas gifts, Cohen reportedly said he was too busy to fill those orders. So Katz helped him run the place for a few months before deciding to get out of the cleaning-supply business and buy him out.
Besides the mail order business and corporate accounts, Katz also sells his cakes in about 400 supermarkets, mainly in the Northeast and Midwest, including Shaw’s Supermarkets Inc. and Roche Bros. Supermarkets Inc. In March, he entered a few supermarkets in Texas. The cake is also sold by the slice in about 27 Starbucks coffee shops.
Katz says he expects to add about six or seven new large supermarket accounts over the next year. He adds that the company is careful about not selling to two chains that compete directly in the same market.
Shaw’s Supermarkets offers the upscale cake in 50 of its stores, and it sells best in stores in affluent communities, according to Shaw’s spokesman Terry Donilon.
Katz says he has lowered the price of the cakes, which has contributed to the company’s sales boost in the past two years.
“It’s a strategy that’s working, because we always believed people will pay a little more to get a lot more. In the beginning, our customers paid a lot more to get a lot more.” Katz says.
Katz does a lot to get the word out, traveling around the country personally to give tastings at supermarkets. At the tastings, Katz says he often makes references to the celebrities who have bought his cakes.
“I tell them, ‘Before you take that home, I want you to know that this is the same cake that was sent to Arnold Schwarzenegger for Christmas.’ People want you to tell them a story. They’re looking for something to enjoy and share with people,” Katz says. “There’s so much bad news in the world. We try to have some fun.”