The Fall of Tastykake

A small demolition crew is slowly gutting the old Tastykake factory on Hunting Park Avenue for scrap.

The six-inch stainless-steel tubes that piped batter throughout the factory are worth about $1 a pound, and the aluminum pie molds — blackened by the seasoning of innumerable crusts — should fetch a few pennies more per ounce. On this overcast morning in early March, the crew works beneath ceilings where peeling paint hangs like suspended confetti over what remains of the equipment that, for 88 years, baked countless Krimpets and Juniors, Kandy Kakes and Kreamies. Bob Bolduc, a former Tasty Baking maintenance chief now dismantling the machines he once tended, thinks it is the shock of cold that has accelerated the decomposition. The bakery was a 24-hours-a-day, six-days-a-week operation, and with the ovens roaring at 600 degrees, it was always warm inside the Tastykake factory. But this winter, for the first time in nearly nine decades, the cold crept in and blistered the varnish right off the walls. And so the bakery feels as though it was abandoned decades ago, the sense of forsakenness belied only by the faint but unmistakable sweet smell of cake that somehow still lingers in the air.

For a company whose business model is utterly reliant on nostalgia, there was surprisingly little ceremony when Tasty Baking shut down its historic Nicetown plant in June 2010. By then, most of the operation had already moved nine miles due south into the new Tastykake plant at the Navy Yard. Then, last June, the final two Nicetown production lines made the move south as well.

And that was it. Tasty Baking had left the past behind. Charles Pizzi, Tasty’s amiable and politically connected 60-year-old CEO, had finally managed a transition that eluded the company for decades. With the help of $32 million in taxpayer financing, Pizzi had upgraded from an inefficient and obsolete facility to the most modern mass-production bakery in the nation, complete with a mini Tastykake museum for the kids and a glass-enclosed catwalk for tour groups overlooking the bakery floor. Now the company would churn out new products more easily and spend less on labor. Since the new bakery was in a Keystone Opportunity Zone, Tasty Baking would save a bundle on taxes as well. All of which, Pizzi said at the time, would help make the company “as relevant to today’s consumer as we were in 1950.”

Only it hasn’t worked out that way at all. Less than a year after the move to the promised land of the Navy Yard, Tastykake has been sold off — like the scrap metals now being harvested from the Nicetown factory — to a Georgia-based baking conglomerate called Flowers Foods for $34 million. Tasty Baking had no choice in the matter. The only other option was insolvency, a fate the company avoided in January only by the grace of a publicly funded bailout and the patience of its lenders. The good news is that Flowers Foods will pay off Tasty Baking’s many debts, including the bill due taxpayers. Better yet, for Tastykake fans, Flowers promises to continue making Krimpets, many of them no doubt at the gleaming Navy Yard bakery that Pizzi built on hope and $122 million in borrowed money.

But it remains to be seen if the deal is psychically satisfying for Philadelphians, who, predictably, had responded to the possibility of Tastykake’s demise earlier this year with horror completely out of proportion to the company’s economic impact. One woman told Fox 29 that the company going under would be “like life without music.” City chefs began using Tasty products in their cuisine, like the sliders at the foodie hotspot Adsum, which feature ground brisket topped with a sour-cherry sauce, sriracha, fermented black garlic and American cheese, all sandwiched between a pair of peanut butter Kandy Kakes.

Clearly, there was much more than 766 jobs at stake. There was the fear of severing a link to powerful childhood memories. There was the sense that, if Tastykake disappeared, Philadelphia would somehow lose a bit of its own identity. For a town with just a few iconic companies left, Tasty Baking’s failure would be a serious psychic blow. Ed Rendell puts it well when he’s asked why Tastykake seems so important.

“Because it’s ours,” he says. “Because it’s good.”

I feel I should confess something at this point: I do not much like Tastykakes. Having grown up in the Kandy Kake-free zone of the West Coast, I don’t taste childhood when I eat a Butterscotch Krimpet; I taste only sickeningly sweet frosting and mealy cake. To me, Tasty’s products are all but indistinguishable from the Devil Dogs, Zebra Cakes and Twinkies made by the company’s rivals.

But even a heathen like me can appreciate Rendell’s first point. Perhaps more than any other local company, Tasty Baking is evocative of the Philadelphia condition. Just like the city it calls home, the company struggled to stay vital and relevant as manufacturing jobs dried up and the white working class moved out to the suburbs. Less obvious is the fact that Tasty’s leaders and their allies outside the company were uncannily accurate reflections of the business culture they inhabit — and nothing reflects that more than Charlie Pizzi, with myriad friends in the city’s political and business communities, installed as CEO in 2002. The story of Tasty Baking — of its rise, its move to the Navy Yard and now its disappearance as a point of city pride — is a scale model of the way Philadelphia works. Or, more accurately, how it too often does not.

IN THE LIMITED PANTHEON of Philadelphia business icons, Tastykake founders Philip J. Baur and Herbert Morris stand as parochial versions of Ray Kroc and Henry Ford, innovators who not only introduced a new product, but also perfected the means to bake their cakes on a scale few others could match.

Baur was a baker from Pittsburgh, and Morris an egg salesman from Boston. In 1914, they hit up family members for $50,000 on the strength of a simple business plan: They would sell fresh, individually packaged cakes to the city’s myriad corner stores. The company’s waxed-paper-wrapped cakes, which sold for 10 cents apiece, were marketed as the ideal lunch-bucket treat for factory hands and schoolchildren. Baur and Morris did $300,000 in business their first year, a whopping sum for a startup company in the early 1900s.

Although Baur was the baker, it was Morris — the salesman — who was obsessed with freshness. In the company’s early years, he refused to stock stores with more cakes than they could sell in two days. As a marketing strategy, it was genius. Tasty products gained a reputation for quality that the company still trades on today. And if it occasionally meant that stores sold out of Tasty products, well, that just helped prove to consumers how good and fresh the cakes must be.

Tasty grew steadily, surviving the Great Depression and World War II with aplomb. The first signs of trouble didn’t emerge until after the war, with the rise of suburbia and supermarkets and the decline of the corner store and the urban white working class.

EVEN THEN, THOUGH, Tasty Baking was fundamentally sound. There were still plenty of families that ate Tastykakes every day, like the one that raised Charlie Pizzi. The son of a cement mason and a homemaker, Pizzi grew up with four sisters in a two-story rowhome with a gabled roof and a tiny front yard in the Overbrook section of West Philadelphia. His youth has all the markers of the classic white working-class Philadelphia experience: He went to an all-boys parochial school, St. Thomas More, before attending La Salle University and, later, Penn for his master’s. He delivered the Evening Bulletin and worked at the Penn Fruit grocery store. In his lunch, his mom would pack chocolate cupcakes and Coconut Juniors.

Pizzi’s Philadelphia roots — and even more to the point, his Philadelphia connections — would prove crucial in his selection to oversee Tastykake in 2002, despite the fact that he had never run a for-profit company, or worked in the food business or in manufacturing, either. It was as if a quintessential Philly guy would somehow have a better shot at saving such a quintessentially Philly brand.

But Pizzi’s upbringing is a way of life that is increasingly rare in Philadelphia. St. Thomas More closed back in 1975, and Penn Fruit and the Evening Bulletin didn’t last much longer. Pizzi’s faith in Philadelphia never faltered, though, even as the institutions of his youth failed. His family says the suburbs never really called to him, not even in those years when he would make the long commute by bus to the Aronimink country club in Newtown Square, where he shined shoes and mixed martinis for the suburban executive set, getting an early look at the rituals and customs of the business titans he’d eventually consider friends and colleagues. One day after college, he met a nice nurse from Roxborough named Elise at a Halloween party. Ten months later, they were married. The Pizzis had four boys (their oldest, Justin, is a reporter for NBC 10), and raised them in Andorra and Roxborough.

In better days, Charlie Pizzi, usually a willing interviewee, would surely have told me about all this himself. This time, though, leading up to the April 11th sale, Pizzi declined to talk. Through another Tasty Baking executive, he said that given his company’s current crisis, he would be too constrained by Securities and Exchange Commission rules to speak freely. But Pizzi gave friends and colleagues the green light to talk on his behalf, and they didn’t hesitate to tell his story for him.

Pizzi got his chance to become a player as a 26-year-old during Mayor Rizzo’s 1975 reelection campaign, driving hizzoner around town. That led to Pizzi’s first big-time job a few years later, as a marketing executive at the Philadelphia Industrial Development Corporation under Walt D’Alessio, one of the city’s premier power brokers. For Pizzi, it was the beginning of a career spent straddling the fuzzy line between business and politics in Philadelphia.

At PIDC — which itself is a nonprofit created jointly by the city and the Chamber of Commerce to lend public money, mostly to private companies — Pizzi began running with other Rizzocrats who would exert huge influence over the city for decades to come, guys like D’Alessio, Fred DiBona Jr., who ran Independence Blue Cross for 15 years, former PIDC president Joe Egan, and WHYY chief Bill Marrazzo.

Eventually, Pizzi moved on to become commerce director for the city in the Wilson Goode Sr. administration, and then, after a brief stint in the private sector doing development deals for Ron Rubin, he was named president of the Chamber of Commerce, filling a position that DiBona and Nick DiBenedictis, the CEO of Aqua America in Bryn Mawr and another important Pizzi buddy, had held.

By any standard, Pizzi has had an estimable career. And yet when you ask people who know Pizzi to describe him, they tend to come up with descriptors that seem a little lame. You hear “nice” a lot. Also “friendly,” “modest,” “passionate,” “sweet” and “a hard worker.” Councilman Frank Rizzo, who has known Pizzi since his father’s 1975 campaign, says, “Charlie’s a great guy, a really good, solid person. He’s not controversial. I think what he has going for him is that he doesn’t have any real enemies — never did.”

It wasn’t their intention, but I came away from these conversations with the distinct impression that, until Tastykake, Pizzi was more or less a good-natured sidekick to the city’s rich and powerful, a guy who might’ve been in the backrooms where the decisions were made but was rarely the one calling the shots. Perhaps sensitive to that perception of Pizzi, D’Alessio characterizes his friend’s ability to put people at ease as truly special and unusual. “He has a great ability to relate to almost any kind of personality. It’s a pretty interesting skill,” D’Alessio says. “I meet blazingly smart people who can’t channel their smarts. That’s not Charlie. He’s useful-smart. He can channel it and use it in his relationships with other people.”

It’s a skill that has clearly served Pizzi well. As his skill and network grew, he sat on an array of high-profile boards and commissions: Independence Blue Cross, Drexel University, Brandywine Realty Trust and the Independence Seaport Museum (best known as Vince Fumo’s yacht house). More recently, he landed a spot on the board of the Federal Reserve Bank of Philadelphia, which he now chairs. And he helped deliver some real wins for the people of Philadelphia. As commerce director, he was instrumental in keeping Cigna Corporation headquartered here, by coming up with the novel idea of renting out the company’s old headquarters as city offices, a move that saved Cigna up to $100 million on its lease. As chamber president, Pizzi grew the organization’s membership and upped chamber events, tripling revenues. More memorably, he was the public face of the 700-strong “Briefcase Brigade” that marched on City Hall in 2002, demanding a wage-tax cut. That remarkable and un-Pizzi-like spectacle was a smashing success. Council voted for the tax cuts.

But even then, in what was arguably Pizzi’s finest pre-Tastykake moment, he wasn’t calling all the shots. It was Judee von Seldeneck, founder of Diversified Search (a high-level job-placement firm) and then the chamber’s chair, who initiated the tax-cut crusade and convinced Pizzi to buy into it. “She was the power behind the throne,” says tax-cut advocate Brett Mandel. “Charlie got into it, though. It was very out of character to see him dissenting, and it was terrific because the chamber had really epitomized the Philly tendency to drown without making waves. He dissented. In Philadelphia, that passes for boldness.”

Within months, Pizzi was named Tasty Baking’s new CEO. The board that picked him included his good friends DiBona Jr. (since deceased) and von Seldeneck. Also on the board was Ronald J. Kozich, a former Ernst & Young partner who knows Pizzi well. With Pizzi, the board selected a man best known not for his managerial skill, but for the size of his Rolodex and his ability to work a room. When news of his selection spread, analysts howled and Tasty Baking’s stock price began to fall.

Von Seldeneck defended the decision at the time. “We’re all directors of a public company,” she told the Inquirer. “We have a fiduciary responsibility to shareholders. You don’t put your pals in positions like this.”

Of course, that’s exactly what von Seldeneck had just done.

THE COMPANY PIZZI had been given was already in trouble. New snack products were encroaching on stomachs, wallets and shelf space that had once belonged exclusively to Tastykake: breakfast bars, bags of crackers, flavored nuts, an endless array of chips (potato, tortilla, taro, etc.).

Ominously, Tasty Baking had begun losing ground in the Philadelphia market, the company’s golden goose. It will likely surprise no one to learn that this region’s residents eat more snack cakes than those of any other region of the country. By 2002, though, Tastykake’s once-commanding share of the local market — more than 90 percent in some years — had dwindled to about two-thirds.

At the upper end of the market, health-conscious snackers began to shun junk brands like Tastykake. At the lower end of the market, Tasty Baking was losing customers to Little Debbie, a producer of cheaper, if inferior, cakes that give consumers a similar sugar rush.

Tasty Baking had been slow to adapt to the region’s changing demographics, failing to convert immigrants into loyal buyers. Local Asians eat virtually none, according to former Tasty Baking executives.

Pizzi’s predecessor as CEO, Carl Watts (an anti-Pizzi who shunned the political scene and logged 35 years with the company), tried to counter the drop-off in local sales in the 1990s by expanding to states like California, Texas and Arizona. Spoilage wasn’t as much a challenge by then as it once had been. Tasty Baking had improved its shelf life in the mid-1990s with new packaging, and it had also joined its competitors in baking cakes that were packed with preservatives. (Let’s just say that most ingredients in Butterscotch Krimpets aren’t common in home kitchens.) But margins on the out-of-region sales were relatively low, given the higher distribution costs, and faraway snack consumers unfamiliar with Tastykakes often stuck with their favorites, such as Twinkies.

Executives who worked at Tasty Baking say Watts was positioning the company to be sold. He put short-term sales and cost-cutting ahead of long-term investment — moves designed to make the company more attractive to would-be buyers. Even then, a sale would arguably have been the best option for shareholders. The fact is, regional bakeries like Tastykake are a dying breed: Most have already merged with other companies or been bought by larger conglomerates.

But Tasty Baking’s Philadelphia-centric board wanted to keep the company independent. In that context, the selection of Pizzi makes a little more sense.

“We felt that Charlie Pizzi, with his background as head of the Chamber of Commerce, had the connections and the vision to keep Tasty Baking in Philadelphia,” says Philip Baur Jr., son of the Tastykake co-founder and a member of the board that hired Pizzi. Charlie from the block would never move such an iconic company outside the city. He wouldn’t sell it either, unless absolutely forced to.

From the outside, it’s hard to find fault with most of Pizzi’s big management decisions. He cleaned house in the executive ranks, forcing out a lot of old thinking, like the conviction that Tastykake didn’t need to advertise locally. He poured money into marketing and technology, which had been badly neglected under Watts. He experimented with new products. Tasty now sells more than 100 products under its brand name, from brownies to energy bars to chocolate-covered pretzels. And he upgraded both management and the board with experienced food-manufacturing expertise.

His signature accomplishment, of course, was cutting the deal that moved Tastykake out of the Nicetown plant and into the Navy Yard. Consider what was involved: Pizzi secured $90 million in private funding for a company with declining market share and a fusty image. He pried loose another $32 million in low-interest loans from the city and state to buy new baking equipment and fund the move. He convinced Liberty Property Trust to build the factory and lease it to him, thus lowering the amount of cash Tastykake needed to borrow to get the new bakery up and running.

“I couldn’t believe the deals he pulled,” says Nick DiBenedictis. “Only someone who’s been inside the system could have gotten it done.”

And there is perhaps nobody with better connections to the system than Pizzi. When he needed Liberty Property Trust to build the factory, he called on his friend Bill Hankowsky, the LPT head. When he needed public funding, he turned to his old colleagues at PIDC, whose board is chaired by D’Alessio and includes Marrazzo and representatives from the Chamber of Commerce. And when Pizzi phoned Citizens Bank — where Judee von Seldeneck was on the board — looking for cash to fund the move, it wasn’t some guy named Carl Watts that nobody had ever heard of on the line, but the chairman of the Federal Reserve Bank of Philadelphia.

But Pizzi’s ability to move the company on the public’s dime and stave off a sale for a few years only heightens the questions: Were those the right things to do?

IN APRIL OF LAST YEAR, the Chamber of Commerce presented Charlie Pizzi with its William Penn Award, an annual business honor. At a Bellevue ceremony packed with the city’s political and business elite, Walt D’Alessio stood up and said that Pizzi’s business savvy “took a Philadelphia icon and put it back on its feet, and now he’s basically outstripped everybody else in the baking business.”

But even then, months before the full extent of Tasty Baking’s woes were publicly known, D’Alessio’s assessment was wildly off. By all objective financial standards, Pizzi’s tenure as CEO had been a failure.

During Pizzi’s eight years as Tasty’s boss, the company’s stock plummeted 84 percent. And however retrograde the pre-Pizzi Tasty Baking might have been, it was nonetheless profitable, averaging a net income of about $6 million a year over the seven years just before Pizzi took over. Under Pizzi, the company lost $6.8 million in 2008 and another $3.4 million in 2009. The most recent accounting has Tasty a staggering $12.2 million in the red.

If Pizzi — whose total compensation topped $1 million in 2009 — had been talking publicly, he would have almost certainly attributed Tasty Baking’s crisis to an unlucky confluence of events: the crappy economy, a sudden spike in the prices of commodities like sugar and milk, unforeseen production woes at the new plant that cut into the savings he expected to get from a more efficient factory, and the late 2010 bankruptcy of the A&P grocery chain (including Pathmark and Super Fresh), which stuck Tastykake with a big unpaid account at the worst possible time. Not to mention all the broad, long-term challenges that the entire snack-cake industry is confronting, like changing consumer tastes and tougher nutritional guidelines keeping junk food out of a lot of public schools.

Given all these challenges, perhaps no CEO could have managed to both build a new factory and maintain a healthy bottom line. But some former Tasty Baking executives say Pizzi got in over his head. They say he gave up too early on national sales efforts and botched expansions into new markets. They claim he made the company too dependent on data and information systems and — ironically, given Pizzi’s mastery of relationships — devalued the connections the sales force had with clients. They argue that morale at the company, though it surged shortly after Pizzi’s arrival, has been flagging for years. Most remarkably, they contend that workers now view Tastykake as “just another job” and lack the pride they once felt working there.

I THOUGHT ABOUT what the former executives said during the tour I was given of the new bakery, which sits between the Sunoco refinery and I-95 on the western edge of the Navy Yard. The facility is vast and open, with ceilings as tall as an airplane hangar and walls of white cinderblock. Sugar and flour hiss like white noise as they fly through elevated pneumatic tubes that connect supply silos to mixers. The overwhelming impression is of cool efficiency. The only splashes of color in the scene are the cakes themselves and columns painted blue and yellow. It feels like an Ikea warehouse.

But the fact that the new facility lacks the 20th-century charm of the old one is no indictment of Pizzi. In putting together the deal that made the new factory possible, Pizzi accomplished what the board hired him to do. So maybe it’s a mistake to fault the board’s selection of Pizzi as well. After all, Tastykake is a creature of the business world it inhabits, a world where a weak private sector doesn’t typically lead the public sector, but rather depends on it for subsidies and aid.

“In Philadelphia, it’s very much who you know, and not how good your ideas are,” says Stephen Van Dyck, the former CEO of MariTrans Shipping. After 25 years in Philadelphia, Van Dyck grew so frustrated with the city’s business culture — and the stream of public funding he saw going to private enterprise in the form of cash for stadiums, Delaware River dredging and the effort to keep shipbuilding alive at the Navy Yard — that he relocated his firm from Market Street to Tampa in 1999.

It’s like we feel bad for those companies — ones with the right connections, at any rate — unfortunate enough to be headquartered here (Comcast excluded). They are so weak, so fragile, and there are so few of them that, even in dire financial times, virtually no objections were raised when Pizzi asked for a little public assistance. And it is, after all, Tastykake we’re talking about.

Obviously, companies nationwide have their hands out. But I wonder what high-profile CEO positions would have been available for a man with Pizzi’s experience in Silicon Valley, on Wall Street, in North Carolina’s Research Triangle, or in any city with a business culture that stands on its own. As one prominent business observer brutally puts it: “Having the connections Charlie has is very important to any company. But that’s why companies have lobbyists. You don’t need to make the lobbyist the CEO.”

Except, it seems, in Philadelphia.

Still, without Pizzi and his political pull, Tasty Baking would likely not have a state-of-the-art bakery at the Navy Yard. Without the new bakery, a buyer like Flowers Foods would probably opt to make Tastykakes somewhere else altogether. Certainly it is hard to imagine a new owner tolerating the old, inefficient Nicetown plant for long. At minimum, the April sale, as Pizzi put it himself in a statement, “ensures that Tastykakes will continue to be made by Philadelphians in Philadelphia.” The difference, then, is that the big Tastykake business decisions will be made not locally, but at Flowers’s headquarters in Thomasville, Georgia. Perhaps that’s not such a bad thing.