Milling & Baking News - January 30, 2007 - 13

B U S I N E S S

With broader portfolio, Fresh Start
Bakeries excited about future
WHEELING, ILL. - The combination of
a "great management team" and "compatible cultural fit" prompted Fresh Start
Bakeries to acquire the Pennant Foods
division of Chef Solutions late last year,
setting the stage for a diversification
strategy that has the Brea, Calif.-based
company excited about its future.
A portfolio company of the private equity firm Lindsay Goldberg & Bessemer
with significant management ownership,
Fresh Start Bakeries is a major supplier of
bakery products to McDonald's restaurants. But the acquisition of the Pennant
Foods business signals a broadening portfolio at Fresh Start, which was founded
in the early 1960s and now encompasses

eight U.S.-based facilities and 14 bakeries
outside the United States. In June 2006,
the company said it would move its largest baking facility to Ontario, Calif., from
the City of Industry, Calif., by the first half
of 2007. The move is expected to help the
company expand and modernize its operations in southern California.
Pennant Foods, which is based in
Northlake, Ill., supplies bakery products
to restaurant chains, in-store bakeries in
supermarkets and other retailers, as well
as to food service companies. Among its
customers are Subway, Dunkin' Donuts,
Ahold, Kroger, Supervalu, Sysco and
Starbucks. Pennant was a division of Chef
Solutions, which is owned by Questor
Partners Fund II, a private equity firm.
In a recent interview with Milling &
Baking News, Craig W. Olson, president
and chief executive officer of Fresh Start,
elaborated on the recent acquisition and
the company's long-term direction.
"We embarked several years ago on
14 / Milling & Baking News, January 30, 2007

a long-term strategy to diversify our
business, and we've been working on
that over time with some success, albeit
relatively slow going," Mr. Olson said.
"When the Pennant opportunity came
about, the more we looked into it the
more apparent it became that it was really too good of a fit to pass up.
"This acquisition really moves us
along our diversification strategy pretty
rapidly. At the end of the day, as these
markets mature, diversification is the
best opportunity for the long-term
growth of our business."
Mr. Olson noted that while the timing
of the acquisition was "inconvenient" because of Fresh Start's involvement in other activities, the transaction proved "too
strong of a compatible
cultural fit to pass up."
"Acquisitions of this
size don't come along
every day," he said.
"We felt compelled to
pursue this opportunity aggressively."
Mr. Olson was effusive in his praise
of the Pennant Foods
management
team,
which he described as
a major factor in the
decision to acquire
Pennant Foods.
"Dan Scales (president) and his management team are very effective," Mr. Olson said.
"They have grown the business, and we
want to support them to continue to grow.
I can't overstate their importance in the decision and future of our company."
Steve Silk, president and c.e.o. of Chef
Solutions, echoed Mr. Olson's comments
on the value of adding Mr. Scales and
team to the Fresh Start fold.
"They have successfully leveraged
Pennant's strengths in its core product
categories to significantly expand its customer base over the past two years, while
implementing a number of very successful profit improvement initiatives," Mr.
Silk said. "Pennant will be a strong addition to Fresh Start's business."
While Fresh Start has been one of the
primary global suppliers of fresh baked
buns and other products such as ice
cream cones and fruit pies to McDonald's Corp. for many years, the addition
of Pennant will bring something a little
different to the business, Mr. Olson said.
Pennant Foods bakes a wide range of

high quality baked foods for breakfast,
dessert and snacks, including frozen
puff pastry and sweet doughs, cookies,
croissants, cinnamon rolls, muffins,
and Danish pastries. The company also
offers a complete line of baking ingredients, including bakery mixes, fillings,
icings and glazes.
It is this broad portfolio of products
that Mr. Olson said will aid Fresh Start's
focus on artisan bread and on a category he called "coffee accompaniments,"
products that typically may be eaten
while drinking a cup of coffee or that
may be marketed in coffee shops.
"Coffee is in a whole different place
with consumers than 10 years ago," Mr.
Olson said. "It is more normal than not to
have a small snack with a cup of coffee."
Mr. Olson said he believes Fresh Start
has an excellent opportunity to expand
Pennant Foods beyond the United States,
an optimism that stems from Fresh Start's
own successes in the international market.
"We have a fair presence outside of the
United States in coffee accompaniments
by virtue of our capabilities in Brazil,
Australia and Guatemala," Mr. Olson
said. "We have a frozen pie line in Brazil, and pie lines in Guatemala and Australia. We also do cake muffins in Brazil
and Australia. Brazil is our most product
diverse business."
For Chef Solutions, the Pennant Foods
sale made sense for several reasons.
Questor acquired Chef Solutions in
June 2004 from Lufthansa, the German
airline. Questor specializes in purchasing
underperforming businesses and non-core
operations of large corporations. Chef Solutions had been Lufthansa's non-airline
prepared foods business in the United
States and Canada, and its performance
under Lufthansa had been deteriorating.
"After Questor acquired Chef Solutions,
we restructured the business along its
legacy Pennant, Orval Kent, and I&K Distribution business lines, established a new
management team, and successfully implemented a comprehensive performance improvement agenda," said Dean Anderson,
the Questor managing director who led the
acquisition of Chef Solutions and the sale of
Pennant. "Following a period of substantial
financial improvement at Chef Solutions
under our ownership, the sale of Pennant
marks the first stage in the successful realization of Questor's overall Chef Solutions investment. Meanwhile, we continue
to strengthen the operations of the Orval
Kent division. Late last year, we acquired
the Fish House Foods specialty salad operation as a key element of our growth
strategy for Orval Kent. Management will
now focus its energy on accelerating our
growth and value creation initiatives at the
expanded Orval Kent business." MBN
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Milling & Baking News - January 30, 2007

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