Doubling a bakery’s business in four years — despite an economic recession and a category experiencing flat to declining sales every year — requires work. This feat becomes even more remarkable when that bakery specializes in organic products. However, Rudi’s Organic Bakery, Boulder, CO, has done just that. Not only has this organic bakery turbocharged its sales, but part of the company’s strategy also hinged upon the success of its gluten-free product line, a premium-priced segment even more niche than its organic core market. 

In late 2008, when Jane Miller came onboard as the new CEO of Rudi’s, Charter Baking Co., Rudi’s parent company, believed Rudi’s to be a brand with the legs to be a national force in the natural channel. To do that, Ms. Miller and Doug Radi, senior vice-president of marketing and conventional sales, developed a plan to rebrand the company and organize the business to facilitate growth. “There was a lot of work to do to streamline the operations and get much more marketing focused,” Ms. Miller said.

Click for a slideshow about Rudi's Organic Bakery.

She also stressed the importance of focusing on diversifying Rudi’s product portfolio if the company hoped to meet its internal goals. “In my experience in the food business, it’s all about innovation if you want to really keep business going,” she noted. While Rudi’s main focus continues to be organic bread products, in order to expand, the company decided it needed to not rely completely on organic. Gluten-free, an emerging trend, seemed like a natural step for a leading company in the natural channel. 

Reinventing the brand

To facilitate growth, Rudi’s took steps to redefine itself, starting with extensive research to understand its target consumers. The company wanted to know who they were, why they buy organic bread and what is important to them.

Specifically, Mr. Radi said, the bakery conducted the research to discover how to best differentiate its brand from the competition while remaining true to its roots. Rudi’s, founded in 1976, is firmly grounded in producing “a better bread” that is nutritious and chemical-free.

Since the late 1990s, he noted, Rudi’s “different and unique” place in the market slowly became diluted as conventional bakers began rolling out whole grain breads in a big way, packaged in designs colored with earth tones and picturing wheat sheaves. “The problem was the rest of the industry caught up with us or made themselves look more like our packaging,” he recalled. “We wanted to change the look and feel of the brand to reflect what consumers really thought of us.”

From its findings, Rudi’s developed a new tagline, Baked on the Bright Side, and a logo and look that Ms. Miller described as “young, not childish, energetic and a brand that you can trust — a brand that has personality.”

Mr. Radi called the rebranding overwhelmingly positive and hopeful. “Organic consumers are very optimistic,” he explained. “That’s one of the key reasons why they choose organic. They think it’s a better way for their future, and we share that optimism with them.”

Going gluten-free

Along with the rebranding effort, the company in 2010 launched its gluten-free line. “Actually, it worked well because at the time we were reinventing the look of organic, we also needed a platform for introducing gluten-free,” Ms. Miller noted. “The company developed two logos from the same template — one for organic and the other for gluten-free.”

These products, including its Original, Multigrain and Cinnamon Raisin breads; pizza crust; hamburger buns and hot dog rolls; and tortillas are certified gluten-free and carry the highly recognizable Gluten-Free Certification Organization’s (GFCO) GF symbol.

Rudi’s organic and gluten-free businesses operate apart from each other for several reasons. Organic products are frozen, distributed and then thawed before being sold on supermarket shelves. Because of its short shelf life, the gluten-free line, with the exception of tortillas, is sold frozen to the end consumer, making the business a different animal from the organic side.

Consumer research also revealed that target shoppers for organic and gluten-free were separate with distinct needs. While the consumers may seem similar on the surface, their hierarchy of needs differ. Both sets of consumers are much more aware of the foods they eat, but that is where most similarities seem to end. Organic consumers are educated about GMO and interested in the farm-to-fork movement. Gluten-free shoppers’ main priority is finding foods they are not allergic to. After that, these shoppers search for baked goods that taste more like traditional ones. Moreover, gluten-free breads need a fluffy and soft mouthfeel that mimics conventional counterparts. “We found organic was not that important to [gluten-free consumers] because they needed products to be allergen-free, good-tasting and reasonably priced,” Ms. Miller said. “We actually made the decision that our gluten-free products would be all-natural, not all-organic, so we would have a price point that would be acceptable.”

However, organic and gluten-free shoppers do share several common values. “It’s this notion of an optimistic, healthy view of life, and the journey they are on is the same,” Mr. Radi noted. “Whether it’s an organic mom purchasing chemical-free bread and baked goods for her kids because she knows they’re better for them or a gluten-free consumer looking for great-tasting, ­nutrition-packed tortillas that have 5 g of fiber per serving and 51% whole grains — the mission is the same. They want to eat healthy. They want to eat the best nutritional product they can find.”

Invading conventional space

Another aspect of Rudi’s expansion has been its push into the conventional market. Long a leader in the natural channel, Rudi’s built a sales team to not only secure its base in the natural channel but also drive the sales of Rudi’s products into conventional supermarkets, where the company has huge potential for growth.

To bolster the presence in natural stores, Ms. Miller and Mr. Radi — who both worked for some of the nation’s largest baking and snack companies — recruited seasoned sales representatives with experience in category management. With a sales team possessing expertise in ­category management, Rudi’s could offer natural stores assistance in growing their entire bakery category and not just sales for the company.

In addition to revamping its existing sales team, Rudi’s assembled a separate group for conventional venues by seeking people with specific experience in frozen sales through conventional and mass channels to bring the gluten-free product line to new customers. “They have done an amazing job over the past couple of years getting us in [national retailer chains],” Ms. Miller said. “We have an entire portfolio that we didn’t have four years ago.”

Innovating without gluten

Rudi’s approaches innovation differently these days. At one time, developing new products was very much a game of follow-the-leader. A leading baking company would launch a new bread, and Rudi’s would respond with its own version. Now the company is moving away from playing catch-up.

“We’ve evolved from that to say we really want to be broader than just a bread business,” Ms. Miller said. “We want Rudi’s to be a brand that means all-things-baked to the consumer.” Tackling the gluten-­sensitive market seemed like the obvious first step in pursuing that goal.

The gluten-free arena offers companies opportunity for growth because of its root in a medical condition. Celiac disease, wheat allergy and wheat intolerance continue to see more and more diagnoses. “That group of people is ever-expanding, and that’s one of the reasons we don’t believe gluten-free is a fad,” Ms. Miller said. “This is a real medical condition that impacts people.”

Not only do these medical conditions affect the patient, but they also affect the entire family. Previously, people with celiac disease would often eat their own separate meal with their own loaf of gluten-free bread, while the rest of the family enjoyed conventional products. Today, with gluten-free products that taste like the real deal, the entire family can enjoy gluten-free breads. In fact, as Rudi’s began pursuing gluten-free bread, the company brought in groups of people suffering from celiac disease and asked them what they wanted from their bread.

Their unilateral answer is what inspired the company to persevere in the development of a tasty gluten-free loaf of bread.

Overcoming operation issues

The company’s bakers hadn’t experienced such a major technological challenge as finding a way to develop and automate gluten-free breads. When producing a 20- or 24-oz loaf of gluten-free bread, the bakers need to ask even the most fundamental questions, including what kind of equipment are they going to use simply to get the dough pieces into the pan?

“The product we run in this facility is extremely sticky, to the point that you can’t machine it,” said Hanno Holm, COO. “You can’t even handle it. It’s probably a mix between a batter and a dough — it’s a little soupier than an English muffin dough.”

When it comes to automating production of gluten-free products, Rudi’s needed to match the equipment to the dough. Specifically, ­dividing it posed a major challenge. The bakery tried at least a half-dozen dividers before it had a hint of success.

Mr. Holm indicated that he knows of no such turnkey systems for handling Rudi’s gluten-free dough. Because it’s still a niche market compared with conventional breads and rolls, few equipment companies have invested significantly in developing technology specifically for producing gluten-free products.

“There are a couple of companies that have made strides,” he said. “The ones we work with have exclusivity with us, and we have protected IP [intellectual property], so I don’t think there is a lot out there.”

Mr. Holm noted that the challenge is even bigger for Rudi’s, which wanted all-natural products for its gluten-free line. This need eliminated the use of many ingredients that could help with machineability and producing consistent doughs. The process for Rudi’s breads, to say the least, is unpredictable, but he said it is manageable with a semi-automated process and a skilled workforce.

“We get variations from day to day and morning to night, and we can’t measure where they come from, but because we control and finish every step by hand, we can adjust immediately,” Mr. Holm said. “If it’s not ready to come out of the proofer yet, we’ll leave it in for five minutes extra. If you have a fully automated proofing system, you can’t do that because you have 5,000 loaves in there because the process is too automated. You don’t have the flexibility to change mid-stream. It’s the same thing with the baking. Everything’s batch-baked so that our bakers can just look at it and say, ‘Is it ready yet?’ The process is designed around the product.”

Cooling is another concern with gluten-free products. They cool slowly, taking four to five hours on racks to reach an internal temperature of 83°F instead of the 100°F typical of conventional bread. Slicing gluten-free bread when too hot will rip out the inside crumb — or guts — and leave just the crust behind for the bagger.

Rudi’s does have an advantage in that it went from an organic baked foods operation to gluten-free. As a certified-organic bakery, ingredient purchasing and handling involved segregation of ingredients, thus a higher level of traceability and quality assurance has been ingrained into its culture. That’s why the bakery decided to do something different with its operating approach to ensure that its products were safe and gluten-free.

Bakery within a bakery

When Rudi’s started making gluten-free bread three years ago, the company did it on new and existing equipment in its 65,000-sq-ft plant.

With gluten, or any allergens for that matter, sanitation can take its toll, according to Mr. Holm. After producing its organic breads and rolls, the bakery needed up to two days to clean the facility from top to bottom and ensure it was gluten-free.

By 2012, the sanitation challenge and subsequent downtime became a scheduling nightmare as volume for Rudi’s gluten-free and organic products blossomed. That’s when the company decided to pull out an old freezer and build a separate, self-contained operation for its gluten-free products. “It’s actually a bakery within a bakery,” Mr. Holm said.

Opened earlier this year, the 12,000-sq-ft operation provides two significant benefits and return on its $1 million investment. First, the ­gluten-free bakery eliminates any risk of cross contamination. Second, the bakery’s capacity doubled overnight. “Basically, we restored up to three days of running time for organic products,” Mr. Holm said.

Today, gluten-free production runs four to five days a week with two 12-hour shifts. Of the 165 people employed at Rudi’s, 35 work in the gluten-free operation and wear yellow hairnets to indicate they’re properly trained in gluten-free production and sanitation. The bakery is working toward certification from the Safe Quality Food Institute in 2014. Currently, all ingredients for gluten-free products come in bags that are brought in daily from an off-site warehouse. “The biggest issue we had was securing ingredients,” Mr. Holm observed. “There are still just a few ingredient suppliers for our natural products.”

After one of two 250-lb-capacity spiral mixers prepare the dough, its bowl is elevated to the hopper of the Reiser Vemag single-pocket divider. “The Vemag is very accurate,” Mr. Holm said. “We have only about 0.5% deviation in a month. It’s almost like dispensing a liquid dough. You have to do almost everything you can to adjust to the process.”

That adjustment includes operators sliding a five-strap pan back and forth so that the dough piece lies in the center of each pan. Unlike conventional yeast dough pieces, ­gluten-free ones don’t flow to the sides of the pan after they’re deposited. “We have to slide it in,” he noted. “If you drop it in, you’ll just get a splotch instead of a loaf of bread.”

Racks of pans are rolled into a four-door, 16-rack proof box that the company built. Five Revent double-rack ovens bake the gluten-free bread. After cooling, the loaves are manually fed into a band slicer/bagger. A Kwik Lok tab closure is applied, and the product passes through a Safeline metal detector before manual casepacking. A Videojet printer adds production information and logos to the cases. Black “popcorn” spacers (sheets of black plastic with bubbles) are placed between each level of cases as the pallets are built. The spacers allow the products to freeze quickly and evenly. Every four hours, two shuttles take the pallets to an off-site holding freezer.

“Our learning curve was gradual, just like we did with organic,” Mr. Holm said. “We started out pretty manual then figured out the best way to automate production without compromising on the quality.”

In the gluten-free bakery, that means automation started in the packaging area and is working its way back to the divider. “Dividing will be the last thing we automate because it’s so hard to do, and it’s so critical to the quality of the final product,” he noted. “We don’t want to lose control of the process.”

Automating will double the bakery’s capacity. Rudi’s plans to add five double-rack ovens as demand warrants.  Mr. Holm estimated the gluten-free operation has three years of capacity before it needs to be expanded. “We’re a slow-growth-curve organization,” he said. “We want to make sure we get an ROI before we invest more.”

What’s next for Rudi’s?

In four years, Ms. Miller said she expects Rudi’s will double the size of its current business again. Why so bullish? Three strategic initiatives drive sales. First, Rudi’s plans to work closely with its natural food customers — its core business — to custom design products and develop marketing programs that have big growth potential.

The second plank involves broadening its reach in conventional supermarket channels. Third, Rudi’s wants to be a product leader in the natural, gluten-free and organic arenas with more tortillas, soft pretzels, sweet goods and even snacks. Today, bread comprises 85% of Rudi’s revenues. “My guess is that in four years, bread may account for 25% of our business,” she said.

Recently, the company added seeded and sprouted breads. “Based on some extensive consumer research, we know that the Rudi’s name is such a great platform for expanding into other products,” Ms. Miller added.

That’s thinking on the bright side.