Brea-based Fresh Start Bakeries Inc. has added Santa Ana cookie maker Sweet Life Enterprises Inc. to its goody bag.
Fresh Start, which does more than $500 million a year selling buns and baked goods to McDonald’s Corp. and others, last week bought Sweet Life, another McDonald’s supplier, for an undisclosed amount.
For Fresh Start, the deal boosts its orders with McDonald’s and broadens the company’s business selling dessert items. Fresh Start also sells ice cream cones, fruit pies and cakes.
Sweet Life has estimated yearly sales of nearly $100 million.
For Fresh Start, the acquisition is its second biggest since its $240 million buy a year ago of Illinois-based Chef Solutions Inc.’s Pennant Foods division, which supplies baked goods to Subway, Dunkin’ Donuts and others.
Sweet Life “will add to us significantly,” Fresh Start Chief Executive Craig Olson said. “It has strategic and practical value for us.”
Olson is set to take over as Sweet Life chief executive and continue running Fresh Start.
For Sweet Life founder and departing president Michael Gray, the deal culminates a bid to make his mark outside the shadow of his famous family.
The son of Robert Gray, cofounder of Irvine-based women’s clothier St. John Knits International Inc., Michael Gray left the family business as president in 1990 and set out to build Sweet Life up from a small boutique bakery in Fashion Island.
“I accomplished all I wanted to with it,” Gray said of Sweet Life.
Expanding the Brand
Nancy Kirksey, who started the original Sweet Life Bakeries in Newport Beach with husband Dewayne, is set to stay on as head of Sweet Life’s research and development team.
The Kirkseys held a stake in Sweet Life. Gray was the majority owner.
The Sweet Life deal was in talks for more than a year, according to Gray and Olson.
Sweet Life’s 50,000-square-foot plant is a marvel of automation, churning out 2 million cookies a day and employing about 200 people. The key to the company’s growth, according to Gray, is its ability to consistently mass produce cookies for big customers.
“Anybody can make a good cookie,” he said.
Fresh Start has big plans for its newly acquired cookie-making machine.
“We want to take the concept around the world,” Olson said.
With 29 plants in nine countries, Fresh Start supplies hamburger buns, rolls, English muffins, cakes and pies to fast food restaurants here, in Europe, Latin America and Australia.
Olson, who owns part of Fresh Start along with New York private equity firm Lindsay Goldberg LLC, said he was drawn to Sweet Life’s entrepreneurial-minded management team, which is set to stay in place.
“We want to learn from them,” he said.
Sweet Life should be an easy fit within Fresh Start, he said.
Along with Irvine-based Golden State Foods, Fresh Start and Sweet Life make up a trio of major McDonald’s suppliers that are based in Orange County.
Fresh Start’s business is split between McDonald’s and others. Sweet Life gets the majority of its business from McDonald’s.
“McDonald’s would much rather see it sold to someone in the McDonald’s family,” Gray said.
For the past two years, Sweet Life has grown its sales about 60% annually. Its now in about three-quarters of all McDonald’s restaurants and also sells to Yum Brands Inc., Four Seasons Hotels Inc., Walt Disney Co., Domino’s Pizza Inc. and Tesco PLC’s Fresh & Easy Neighborhood Markets opening here.
“In the food industry you need mass to get mass,” Gray said.
This spring, McDonald’s started selling cinnamon roll-like Cinnamelts from Sweet Life, marking a move beyond cookies for the company.
Sweet Life ships Cinnamelts in McDonald’s boxes to restaurants. Cinnamelts now make up 35% of Sweet Life’s sales.
Fresh Start employs about 25 people at its Brea headquarters with most of its workers at bakeries across the country and the world. More acquisitions could be in the cards, Olson said.
In Ontario, Fresh Start runs what it believes to be the largest hamburger bun factory where 130 workers churn out 120,000 buns an hour at the 180,000-square-foot facility.
Fresh Start’s Roots
Fresh Start’s roots go back to 1961 when McDonald’s pioneer Ray Kroc coaxed a St. Louis baker out of retirement to start up operations in California.
The company took its current name in 1982 when Fresh Start was formed as a division of CFS Continental, now part of Sysco Corp.
Olson, who has been with the company since 1982, led a buyout of the business from Sysco in 1988.
In 1994, Campbell Soup Co. acquired Fresh Start. Olson and a group of private investors bought out the business again in 1999.
He said he plans to keep Sweet Life where it is, despite the challenges of manufacturing in OC. Olson, who grew up in West Covina, said he likes doing business in the county because of its density of food service operators and proximity to restaurants across the region.
Sweet Life already is big on efficiency. The production process, from mixing batter, cutting and baking, is automated.
“We want to take as much labor out of the process as possible,” Gray said.
Product development starts in a kitchen that looks like one in a home. From there, recipes are created and tweaked for production.
Mass Production
Going from upscale women’s clothes at St. John to cookies at Sweet Life isn’t as big a shift as it seems, Gray said. Both involve designing and mass producing products, he said.
He spent more than 15 years at St. John. The Gray family in 1989 sold a majority stake to Germany’s Escada AG, which took St. John public in 1993.
Six years later, the Gray family took the company private in a $520 million deal financed by New York-based Vestar Capital Partners, the company’s majority owner today.
His father Robert Gray built the company based on designs from wife Marie Gray.
“I wanted to get out of dad’s shadow,” Michael Gray said.
The first five years at Sweet Life “were hell,” he said.
He put money into the fledgling business for so long that he said he nearly gave up in 2002.
Gray’s anger and frustration ignited him to up his commitment, he said.
“I said that if it wasn’t profitable in a month I’d be out,” Gray said.
From that month on, Sweet Life was profitable, according to Gray.
So what’s next for Gray?
After taking off just two weeks between St. John and Sweet Life, he said he plans to take the next two months off.
Then he could turn his attention to another passion: building.
Gray’s designed and built some 25 custom homes. He also designed and developed Sweet Life’s headquarters, which he still owns.
There’s the possibility of starting a building company, Gray said.
“To me it’s all about building things,” he said.
