On a roll | Jim Amaral built Borealis Breads from scratch. But with rising costs and a tough retail market, can his company keep making dough?
Last spring, Jim Amaral, owner of Borealis Breads, received some disappointing news. Hannaford Supermarkets was booting his artisanal bakery from the prime retail location it occupied in Hannaford's Forest Avenue store in Portland. Since 2001, the bakery had called a large corner of the store home, complete with its own staff, bread oven and trademark sign sporting the Borealis Breads name superimposed over red and green geometric shapes.
A shopper would have to walk through the baked goods section of the store and by countless loaves of other breads and baguettes to make it to Borealis' counter, but once there, customers would find fresh loaves of French peasant bread made by hand, and some, like the Aroostook Wheat, made with Maine-grown wheat.
Borealis has bakeries in Waldoboro and Wells, but the Hannaford space was the only retail presence Borealis had left in Portland. (Borealis left its spot at the Portland Public Market in 2004 after six years.) Borealis' presence in Portland over the years has helped it grow a crop of loyal customers willing to pay a premium for its bread. Hannaford still carried Borealis' bread, but Amaral says the loss of the prominent space has hurt Borealis' retail sales. Amaral also worried losing the strong presence in the store meant losing touch with his customers and ceding a piece of the competitive bread market to his competitors. Amaral says Hannaford wanted him out to make way for a meals-to-go and café area with a few tables to compete with the Whole Foods Market, which opened in Portland in February 2007. Hannaford did not return calls seeking comment.
In the midst of the expansion, however, Amaral is also dealing with serious challenges facing the baking world. Prices for flour have risen sky high over the past couple years due to a "perfect storm of conditions," according to Abe Faber, owner of Clear Flour Bakery in Brookline, Mass., and vice chair of The Bread Bakers Guild of America, an educational organization based in Pittsburgh. And increased fuel prices also are cutting into Borealis' bottom line since its delivery drivers cover 200 miles a night, and its ovens, which run on propane, are on 24/7. The increasing cost of raw materials will have a "pretty significant" impact on the business, Amaral says. "The reality is, all we can do is pass it on to the consumers."
Amaral hopes his customers, who already pay a premium for bread they know is handmade with Maine-grown wheat, will not be turned off by what he says are inevitable price increases. Amaral says the average price for a loaf of French peasant bread, for example, will soon increase to more than $5, a sharp increase from the $3.25 it was a year ago.
Good bread also becomes part of customers' daily routine. "People like that particular slice of bread as toast in the morning," Amaral says. "That kind of customer loyalty is great."
Amaral looks every bit the baker. On a recent afternoon, Amaral, wearing his signature black beret, walks into his bakery in Wells. The sour smell that gives sourdough its name permeates the room. The large bakery space is a study in white. The walls are white, the floors are dusted with white flour. White buckets holding the bread dough are stacked in groups, and the bakers kneading dough on a flour-covered table wear white t-shirts with the Borealis logo. Amaral, with his graying goatee, modest handlebar moustache and black-rimmed glasses, stands out in jeans and a dark fleece vest over a flannel shirt.
Amaral, who left Massachusetts to attend Bates College in Lewiston, first began baking bread by hand in the basement of a friend's restaurant in Waldoboro in 1993. People said his plan to run a profitable artisan bakery would never work. After all, he planned to sell his hand-made bread to retailers for the price retailers were already charging customers. With the compulsory markup, people would never pay so much for a loaf of bread, critics said.
Before returning to Maine, Amaral had worked at a few artisanal bakeries in Seattle, where he learned the art of sourdough, and saw a potential market in midcoast Maine for the high-quality loaves he planned to produce. At the time, there were only a few artisanal bakeries in Maine, including Black Crow Bakery in Litchfield, which started in 1992, and Little Notch Bakery in Southwest Harbor, which launched in 1991. "But that was it," Amaral says. "There wasn't much going on."
Using $10,000 borrowed from friends and family and the basement of the Pine Cone Restaurant, which was already outfitted with baking equipment, though the ovens hadn't seen any bread rise in their jaws for more than six years, Amaral launched Bodacious Breads. (The name was changed to Borealis in 1996 after a bakery in Los Angeles claimed trademark infringement.)
Amaral began with 12 wholesale accounts and baked about 125 loaves a day. Today, Borealis has 50 employees; more than 400 wholesale accounts, 300 of which are active on a weekly basis; and its bakeries in Wells and Waldoboro churn out, depending on the day, anywhere from 1,600 to 5,500 loaves a day, Amaral says. Sales have increased about 5% to 15% annually. Last year, Borealis sold its 10 millionth loaf of bread and posted revenue between $2 million and $3 million, he says.
Borealis Breads' success has grown along with consumer interest in artisanal breads, as well as locally-made foods. In Maine, the artisanal bread market has become crowded. Since the early 1990s, breads from a number of Maine-based bakeries can be found throughout the state, including Standard Baking Co. in Portland, York-based When Pigs Fly and Mother Oven Bakery in Bowdoinham.
But while these bakeries are competing with Borealis Breads for that customer with a discerning taste for real artisanal bread, Amaral says the more producers there are, the easier it is to get the word out about the beauty of "good bread." "When you're trying to get customers and consumers to try a new product, it helps to have a lot of good producers out there," he says. "You're all helping to educate consumers about what good bread is."
Lately, Amaral has had to contend with higher costs that have pinched his bottom line. In late February, Borealis Breads was paying $39 for a 50-pound bag of white flour from King Arthur. (Borealis goes through about 150 of these bags a week at its two bakeries.) That price represents a nearly four-fold increase from 2005, when Borealis was buying the same 50-pound bag for $8. Consider that rate of increase in flour, one of the building blocks of bread, is similar to gas prices increasing tomorrow from $3.19 a gallon to $15.55 a gallon.
The price increases are most often blamed on the transition of farmland from growing wheat to growing corn for ethanol production, causing less supply in the wheat market. What's more, the weak U.S. dollar has sparked a more robust exporting market for domestic flour, resulting in higher demand.
Amaral says increasing prices for his product is inevitable, but the company is also looking at everything from its telephone bills to its insurance plans to "shave pennies off here and pennies off there." Operationally, Borealis is evaluating its delivery routes, looking for ways to make them more efficient.
The rising costs faced by Borealis also play into Amaral's strategy looking forward, and is one of the reasons for his foray into the Portland retail market. The overall retail market doesn't suffer from the same factors — the price of fuel, for example — the wholesale business does, he says. "The challenge for us is balancing," Amaral says. "One of reasons we're doing the bakery/café is to get an appropriate mix [of wholesale and retail sales] and not be too dependent on one or the other."
But wholesale still constitutes 60% of Borealis' business, so Amaral still must compete in grocery stores, which are competitive retail environments. One way Amaral differentiates himself from the rest is by using as many Maine-made ingredients as he can. His organic whole wheat flour is grown by Maine farmers and milled at Aurora Mills and Farm in Linneus, a small town near Houlton in Aroostook County. (For more on Aurora Mills' long-time business relationship with Borealis Breads, see "Flour power," this page.)
He also tries to support the small Maine stores that carry his bread. While big grocery stores like Hannaford and Shaw's Supermarkets are a big part of Amaral's business, he doesn't give them a competitive advantage in the form of deals on bulk purchases. Helping Maine businesses is part of his business philosophy, but he says protecting these small Maine stores is also important for the industry because they offer a venue for small bakeries to get their products in front of consumers. "The big guys are there, they'll be customers, but we don't want the little guys to go away," Amaral says.
That high-quality loaf of bread, as well as bread's role as a staple of meals from breakfast to late-night snacks, is what Amaral is banking on to help Borealis weather the storm ahead. "Bread is this elemental thing. It's not a croissant. It's not a pastry. It's a basic, basic foodstuff that people really love," he says. "If you can make a good product, people will come back and back and back for more."
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