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Last Update: Friday October 30, 2020

Key Idea: Don't Compete On Price

Calise & Sons Bakery demonstrates that small businesses win by charging more.  Doing things right is more important than cutting a price-based deal.

Key Question:

A: 

Get out of the market that is price-driven and look for the market that is service-driven.  

Q:  What did the Calise brothers change?

A:  They shifted from selling retail to selling wholesale.  They achieved this by going after the private label baking needed by a local grocery store chain.  Once they landed that first account, they were off and running.

Think about it

Should you raise your price?  Could you use the Starbucks tactic of making it clear that your people are paid well and that you provide benefits and this is the reason your prices may be higher than others?  (Who would have ever dreamed that anyone would pay $3-$4 for a cup of coffee?)  Can you add value so that price is not even an issue?

Clip from: Calise & Sons Bakery, Providence

Providence, Rhode Island:  Visit an old New England family business. With roots back to 1908,  the Calise & Sons Bakery has been through the good times and the bad.  The founder gave the reins to his four sons and they just about ran that business into the ground. Three grandchildren came to the rescue. They bought the business, and then went to work to retire the debt. They did it, then they built the business beyond anyone's wildest expectation.

Calise & Sons Bakery now serve most of New England, New York and Pennsylvania and increasingly they'll be serving the world. Big chains and grocery stores -- The Olive Garden, Shaws and Albertsons -- depend on them. But, you know, even with such success, it is just not easy. 

The Calise brothers make bread from the same recipes their grandfather brought from Italy.  Yet, it took them nearly 30 years to bring this company back from the brink. The brothers learned on the job. Though there are no MBAs here, their management practices are now case studies in major business textbooks.

The adoption of technology and the acquisition of competitors have fueled growth and prosperity. These owners quickly learned a key big business secret -- grow by acquiring your competition.

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Calise & Sons Bakery

Michael Calise, VP, Sales

Visit our web site: http://calisebakery.com

Business Classification:
Food - Bakery - Bread

Year Founded:

Don't Compete On Price

HATTIE: We all have competitors that --how do I say it? -- go behind us or try to get our customers by undercutting prices, how do we combat that?

JOE: Well, that's a tough one. It really is. You know, you can do a lot of things, but when you start running a company, you say, `Well, I'm gonna do this the right way.' And you gotta put your mind to it and go the straight and narrow. And then you see somebody at their back door and he says, `Well, I'll give you the bread for 20 cents cheaper.' How's he doing it? How's he doing it: -- very easy. Three or four people that work for him -- they're getting paid cash under the table and he doesn't pay them benefits, he doesn't pay taxes. What's it cost for health and welfare for your people?--35 percent, 38 percent?

HATTIE: That's right. So you're going to always say, `My prices are staying here.'

JOE: Yeah, we'll move the price a little bit, depending if the account is worth it. But now I believe in the fact that if they have been my account so long, I am not going to lose it, and if I have to drop the price a little bit, I'll drop it. See, we used to win contracts. Like, if you look at contracts, the state contracts and that, we used to win five, six, seven years ago, we won them at $1.46, $1.48. Last year, we won contracts for the same product, six, seven years later, at $1.16, $1.18. This year, we lost it to $1.14. They can have that business -- the people who outbid me on that -- they can have that business because we're maxed out over here. So I'd rather be selling something that I'm getting $2 a dozen for than something I'm getting $1.16 from the state.

HATTIE: When do you think your persistence--you kept at something, and it really did pay off?

BOB: With the Shaw's account 'cause it took me almost two years to get the private label account. And then...

HATTIE: From the time...

BOB: ...two years prior to that, I was put out of all their supermarkets by the same buyer.

HATTIE: You were put out of them?
BOB: Put out of all of them.

HATTIE: What do you mean, like, thrown out?

BOB: Thrown out.

HATTIE: He says, `I don't want to talk to a Calise ever again.'

BOB: It was Calise and a bunch of other companies that they threw out. And I was doing about $3/4 million of business with them at the time.

HATTIE: Why did he throw you...

BOB: We were put out with a 30-day notice.

HATTIE: Why?

BOB: Someone else paid for the business.

HATTIE: OK. So what did you do? What activities, what actions did you take to win the business back?

BOB: I saw him at a food show about six months later. And I asked him how everything was going, and he said, `Not good.' And I said, `Well, why don't you put me back in your stores?' And so we had a meeting and he started to put me back in some of the stores and then we started talking about the private label and that's how that came about.

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