It’s been a busy few years at Mile Hi Bakery, Denver. As its bun business bloomed with new accounts and its geographical reach blossomed, bakers found themselves running out of capacity. The business needed to take a big step up in production capacity … and quickly.

About the same time, the family-owned business transitioned to the fourth generation of Taddonios to lead the foodservice distribution and food manufacturing company. The bakery, too, was moving from a management contract operation into running things itself.

Click for a slideshow of Mile Hi Bakery.

Mile Hi has aggressive plans for the bakery: new products and additional territorial expansion. “Our vision is to be a long-term supplier of quality bakery items and to develop long-term, successful business partnerships by providing a modern approach to customized business solutions,” said Kristy Taddonio Mullins, who succeeded her father, Tony Taddonio, as president of Mile Hi Foods last year.

What happened next involved not only lots of change but also well-managed change.

Writing the next chapter

Mile Hi plans to mark an important first with its new bakery. “We aim to be the first McDonald’s bakery to achieve Leadership in Energy and Environmental Design (LEED) Gold certified status in the US,” said Mr. Taddonio, now the company’s CEO. But that’s not the only first the company has achieved. The original 1984 plant was the first fully computerized bakery in the US. It was also a pioneer in the seminal Single Source program launched by McDonald’s, its major customer.

Having long supplied the restaurant chain’s needs with food and paper goods, Mile Hi signed onto McDonald’s plan that its bun suppliers should be exclusive and housed on the same site as its distribution centers. Mile Hi’s bakery thrived, but its business model changed about a decade ago when McDonald’s freed its Single Source suppliers to add

other clients.

Product styles proliferated as new customers came onboard, and lately, Mile Hi’s efficient, 3,200-doz-per-hour line strained to keep the pipeline filled. Bakery managers puzzled over how to handle even more demand they knew was coming. They’d done well to shoehorn in additional products in recent years, but by 2012, the facility had reached its limits: 19.5 million doz buns annually.

“We were approaching 160 hours of required production,” explained Bakery Director Paul Chan, “and that became an impossibility for the existing bakery.”

The company faced two options: Either expand the existing bakery, or create an entirely new one. Mr. Taddonio and the two bakery directors, Mr. Chan and Bryan Sanchez, quickly recognized that expansion would only be a short-term solution.

An empty building across the street from the distribution center began to look very attractive. The site, a shuttered beer distribution facility, offered a good layout with a two-story section of offices that looked out over a large room with 26-ft-high ceilings. Its existing keg cooler could easily transform into a holding freezer. Wanting to expand Mile Hi’s sustainability program, the bakery managers noticed the building’s existing 21 skylights that let in natural light. And one wing of offices could house fitness and learning centers to serve the entire company, thus matching management’s commitment to support the quality of life and work for its staff. Best of all, Mile Hi already owned the building, purchased five years earlier.

“All told, this building came very close to what we could have achieved with a greenfield site,” Mr. Chan said.

Mr. Taddonio added, “It made perfect sense to come over here. The capacity of the new bakery puts Kristy in position to really grow the business.”

Starting up anew

On Jan. 28, Mile Hi celebrated the grand opening of the new bakery, a 128,000-sq-ft facility on the company’s 5-acre campus of warehouse and distribution facilities. It houses a single computer-integrated bun line that boosts capacity by 80% over the previous bakery. It runs 5,400 doz hamburger buns an hour, and the business expects to produce more than 28 million doz buns annually.

As now set up, Mile Hi Bakery makes plain and ­seeded buns, double-cut seeded buns, whole-grain buns, yellow pub buns, hoagie buns and burger bundles. Bun diameters range from 35/8 to 4½ in. Mile Hi ships these products frozen to the big names in the QSR world: the bakery’s original client, McDonald’s, as well as Wendy’s, Red Robin, Good Times, Artic Circle and more.

“We have a core set of customers,” Mr. Chan explained. “And we needed to be prepared to grow with them to serve their needs. Do that, and you’ll set up both them and us for the future.”

To hit the goals set by the Taddonio family, the new bakery had to be efficient, flexible and productive in terms of product quality and output, and it had to offer a workplace supportive of its human staff. Essential to the project was setting the site up for LEED Gold certification, and that choice affected all aspects of the project from construction materials to equipment selection.

Plus, there’s still plenty of room to add two more processing lines. “We’re going wherever our customers drive us,” Mr. Taddonio said. “We want to be a complete supplier, not just limited to the bun styles made at the older plant. And with all the extra space, we could add English muffins and an artisan roll line.”

With the new bakery now up and running, Mile Hi is transferring staff from the old bakery to the new one. Some of its equipment has already been moved to the new site, and more will follow. The old plant will soon be converted into additional warehouse space, something Mile Hi also needs.

Researching, implementing, financing

Mile Hi’s original bakery started up with the nation’s first fully computer-integrated bun line, and its new operation expands on that approach. Because the company maintained a strong working relationship over all those years with the lead vendor for the original bakery — Stewart Systems — the project team pretty much knew how to equip the new plant. Still, managers researched choices carefully, tapping internal resources as well as those among the McDonald’s supply chain.

The veteran crew has extensive experience in starting up and operating bakeries. For example, Mr. Chan figured he’s been involved in roughly two dozen new plants around the world, from the smallest to the biggest, from Pakistan to Japan and throughout Europe. “Also, we were able to call up people at Turano Baking, Aryzta and others,” Mr. Taddonio noted. “There is a great deal of cooperation among the McDonald’s family of bakers.”

The new plant team — Mr. Taddonio, Mr. Chan, Mr. Sanchez and Cal Nugent, an independent consultant who served as project manager — visited three of the newest bakeries in the McDonald’s system. They saw Turano’s Orlando, FL, bakery; Fresh Start’s facility at Ontario, CA; and Baldinger’s new plant in St. Paul, MN.

By opting for an existing building, Mile Hi shortened its timetable considerably. The go-ahead decision was made in June 2012. Then it initiated the bidding process with a deadline of Feb. 1, 2013. Construction and renovation got underway a month before that. “We had a clear plan to start operations one year later in January 2014,” Mr. Taddonio said. “And we achieved it.

“This is a neat story,” he continued, “because it brings us full circle from the initial investment in Stewart Systems technology in the first bakery to the same company’s involvement in the new bakery.”

The company’s commitment to sustainability gave it an opening with the local electric utility, Xcel Energy. The Denver utility has an interruptible service option credit (ISOC) program. “The ISOC pays you for running your own generator,” Mr. Taddonio explained. “The Denver area can experience power supply problems in the summer. Our 4-megawatt generator gets us off the grid during such periods, and the credit paid for the generator.”

The utility also arranged for an energy consultation, paid for by another credit. “Our ratings came in at the highest level of achievement,” Mr. Chan noted.

Mr. Taddonio added, “That audit and the LEED Gold certification process taught us a lot.”

Because the Mile Hi campus is located within a City of Denver enterprise zone, the company qualified for ­assistance from the Denver Economic Development Corp. “We earned a variety of property tax credits, employment credits and credits for rehabilitating an existing vacant building,” Mr. Taddonio said.

There were also payroll tax credits for new job creation. John Borowski, vice-president, corporate services and bakery, Mile Hi Foods, summarized these incentives: “For every added job, we received an employee credit and health and medical credits. And we get a credit for being an agricultural/food processing operation. It all adds up to about $1,200 in credits for every new job. And that really helps with the ROI.”

Preparing the staff

There’s plenty of expertise to go around at Mile Hi — an estimated total of 400 years of bakery experience among the staff, according to Mr. Borowski’s count. And through a company program that sends one person a year to the AIB International 16-week residence course, it currently employs eight AIB-trained bakers. Still, managers developed a comprehensive training plan to ease the transition into the new facility.

Several factors weighed in Mile Hi’s favor, according to Mr. Chan. First, there was the long experience with the first bakery’s lead vendor, Stewart Systems. “Our people understood the process flow in this equipment very well,” Mr. Chan said. “And we started the training for the new bakery early as it related to maintenance and operation.”

During the year of renovation and installation, Bakery General Manager Dave Bauman periodically brought staff members into the new building to give them a firsthand look at activities there. For more in-depth training, Mile Hi managers approached Turano Baking Co. to let Denver’s production, sanitation and maintenance teams train at the company’s Orlando bakery because it has a recent installation of the Stewart Systems technology then being put into Denver. “That way, our people could acclimate themselves to the new equipment,” Mr. Bauman said. “Now, those teams are training the next set of employees being transferred to our new bakery.”

With installation completed, Mile Hi did dry runs for 30 days on the new line. “Our operators knew the basics of its system and controls long before we started processing actual doughs,” Mr. Chan said. He also credited Mr. Bauman; Rick Taylor, safety and sanitation manager; Alan Kildahl, director of engineering; and Gary Pogue, chief engineer, for the extra effort they gave to the new plant project.

“And we had excellent buy-in from employees right down to the operator level, who offered plenty of input on how to build a better bakery,” Mr. Taddonio said.