What an LA Bakery Says About the Economy Right Now

Summary

Podcast Summary: Odd Lots - "What an LA Bakery Says About the Economy Right Now"

Release Date: August 1, 2025 | Host/Authors: Joe Weisenthal and Tracy Alloway | Guest: Andy Kaden, Owner of Bub and Grandma's Bakery

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Introduction

In this enlightening episode of Bloomberg's Odd Lots, hosts Joe Weisenthal and Tracy Alloway delve into the intricate world of industrial-scale baking through the lens of Andy Kaden, the owner of Bub and Grandma's, a prominent bakery in Los Angeles. By exploring the operational challenges and economic factors influencing his business, the discussion offers a microcosmic view of the broader economy.

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Andy Kaden's Journey from Advertising to Baking

Andy Kaden shares his unconventional transition from a decade-long career in advertising and television to the world of baking.

• From Advertising to Baking: "I grew up in New Jersey, kind of in Italian Jewish sandwich Mecca... decided to start writing some business plans and figure out how to open a sandwich shop here." ([05:06])

Following a personal dissatisfaction with the advertising culture, Andy's passion for cooking led him to experiment with baking, eventually receiving his first wholesale order from a local restaurant.

• Early Baking Experiments: "I started baking daily at home and got into that pseudo Covid rhythm of daily baking... And it found its way to a friend of mine who worked at a local restaurant." ([06:51])

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Scaling the Bakery Business

Andy discusses the rapid growth of his bakery from home operations to a thriving wholesale enterprise.

• Initial Scaling Challenges: "I started as just for me, just as an experiment, but very quickly... the demand grew very quickly, I quickly had to figure out how to run a business." ([07:57])

Today, Bub and Grandma's operates a 6,500 square foot facility with 50 employees, supplying bread to approximately 180 restaurants across Los Angeles.

• Current Operations: "The wholesale bakery is now a 50 person business... producing bread for about 180 restaurants in Los Angeles." ([07:57])

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Operational Challenges: Production and Distribution

Operating at an industrial scale, Andy highlights the complexities of maintaining production and efficient distribution.

• Production Constraints: "We are wall to wall in that space and need to move in the next two years... we have no more oven space per hour available for new loaves of bread." ([11:16])

• Distribution Logistics: "We have six vans... building out this whole network is a major, major part of what we do... our ops team at the bakery are true geniuses in building out these routes." ([11:39])

Andy emphasizes the delicate balance required to ensure timely deliveries within narrow windows, especially amidst Los Angeles traffic.

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Labor and Commodity Costs

The discussion delves into how labor dynamics and raw material costs impact the bakery's operations and pricing strategies.

• Hiring Availability: "Hiring availability is unique for us... the skills that they hopefully already have are in rare supply in Los Angeles." ([17:29])

• Commodity Price Fluctuations: "We saw maybe a 10% increase in flour pricing... prices have settled back down, but in the meantime, everything else has gotten more expensive." ([17:57])

Andy explains the ripple effect of global events, such as the Russia-Ukraine war, on commodity prices and, consequently, on their pricing models.

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Strategic Expansion: Opening a Pizzeria

Andy shares insights into expanding his business by opening a pizzeria, highlighting the regulatory hurdles faced in Los Angeles.

• Regulatory Challenges: "It took us three years to open... very difficult process with bureaucratic red tape." ([31:05])

• Impact on Business Operations: "When you open the restaurant, they walk in on the last day and demand changes... it's excruciatingly frustrating." ([33:20])

The conversation underscores the significant time and financial investment required to navigate Los Angeles' complex regulatory landscape.

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Economic Insights: A Microcosm of the Larger Economy

Andy and the hosts explore how his bakery serves as a reflection of broader economic trends, particularly in terms of supply chain disruptions and labor market dynamics.

• Supply Chain Dependencies: "We are subject to their markup and they are fluctuating based on their algorithms... we have to stay on top of it." ([22:10])

• Labor Costs vs. Cost of Goods Sold (COGS): "We have labor at 42% compared to traditional models at 30%... COGS are in the 12% range." ([25:25])

These insights reveal the delicate balance businesses must maintain between labor expenses and material costs, especially in volatile economic climates.

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Maintaining Authentic Relationships Amidst Growth

Andy emphasizes the importance of sustaining genuine connections with customers and the challenges posed by scalable distribution models.

• Distribution Choices: "If you outsource distribution, you lose the personal connection with chefs... potential for relationships to sour." ([22:10])

• Price Adjustment Strategies: "We've raised prices maybe twice in the last four years... it's crucial for us to protect the business." ([27:36])

Andy advocates for maintaining in-house distribution to preserve authentic relationships, which are vital for long-term business sustainability.

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The Future of Los Angeles' Restaurant Industry

The episode concludes with a candid discussion on the state of Los Angeles' restaurant scene, highlighting both its resilience and the formidable challenges it faces.

• Market Dynamics: "There's an endless list of factors that make Los Angeles complicated... expansion and contraction in this wide city." ([42:56])

• Longevity vs. Trend-Driven Success: "Trends are a business killer... authentic relationships are essential for long-term success." ([38:47])

Andy reflects on the dichotomy of operating in a vibrant yet unpredictable market, emphasizing the need for authenticity and adaptability.

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Notable Quotes

• Andy Kaden on Distribution: "We have to do our job. Not only just the baking job, but the distribution job before anybody else from our accounts show up to work." ([11:39])

• Andy on Labor and COGS: "In the wholesale universe, labor is 42% and COGS is 12%, compared to traditional models where COGS are 25-30%." ([25:25])

• On Regulatory Frustrations: "It's excruciatingly frustrating to be put in this position where nothing is logical... decisions are based on mood or whether they like you." ([33:20])

• Authenticity Over Trends: "We are going to have our regular return customers who have a relationship at the restaurant. Trends are a business killer." ([38:47])

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Conclusion

This episode of Odd Lots offers a compelling exploration of how an LA-based bakery navigates the complexities of scaling operations amidst economic fluctuations and stringent regulatory environments. Through Andy Kaden's experiences, listeners gain valuable insights into the interplay between labor, supply chain dynamics, and the importance of maintaining authentic business relationships. The discussion serves as a poignant reflection on the broader economic landscape, illustrating how micro-level business strategies can mirror and respond to macroeconomic trends.

Transcript

[Karen Moscow]

Bloomberg Daybreak is your best way to get informed first thing in the morning, right in your podcast feed. Hi, I'm Karen Moscow.

[Nathan Hager]

And I'm Nathan Hager. Each morning we're up early putting together the latest episode of Bloomberg Daybreak US Edition. It's your daily 15 minute podcast on the latest in global news, politics and international relations.

[Karen Moscow]

What's special about Bloomberg Daybreak is the immediacy of the news we bring you each day in your podcast feed by 6am Eastern Time.

[Nathan Hager]

This isn't a deep dive on yesterday's news. Instead, you get the latest stories with.

[Karen Moscow]

Context, and that's something you don't get from other news podcasts. So join us for the best from Bloomberg's 3,000 journalists and analysts around the world, with reporting backed by data and journalists at the center of the stories we cover.

[Nathan Hager]

Listen to the Bloomberg Daybreak US Edition podcast each morning for the stories that matter with the context you need.

[Karen Moscow]

Find us on Apple, Spotify or anywhere you listen.

[Tracy Alloway]

Bloomberg Audio Studios Podcasts Radio news.

[Joe Weisenthal]

Hello, and welcome to another episode of the All Thoughts podcast. I'm Tracy Alloway.

[Tracy Alloway]

And I'm Jill Wiesenthal.

[Joe Weisenthal]

Joe, I have a very personal question to ask you.

[Tracy Alloway]

Well, we've known each other for a very long time, so there's not much left that we don't know, but go for it.

[Joe Weisenthal]

Well, I actually don't know the answer to this question. Have you ever baked anything?

[Tracy Alloway]

Not that much. I went through this. I'm just gonna. The answer is basically no.

[Joe Weisenthal]

Okay. No, wait, you were gonna say something. You went through a phase?

[Tracy Alloway]

One time in high school, I got in this weird, like, experimental baking obsession with a friend of mine where we just sort of tried to relearn baking by first principles and see what worked.

[Joe Weisenthal]

Oh, my God. What does that mean?

[Tracy Alloway]

Just, like, not reading any recipe? I don't think so. Not reading any recipes and just start.

[Joe Weisenthal]

Experimenting, just figuring it out yourself and.

[Tracy Alloway]

Then seeing, like, what caused things to rise and what tasted good without any starting principles or anything. We knew a few basic ingredients. It's fun. I should get back into baking.

[Joe Weisenthal]

You should. It's really fun.

[Tracy Alloway]

What do you. Tracy, we know this is just a setup because you want to talk about your baking. So why don't you just. Why don't you just tell us what you like to make?

[Joe Weisenthal]

Hey, look, I don't bake that much actually in my household, my husband bakes everything. So he does a really good Basque cheesecake, really good chocolate chip cookies, things like that. But if you were doing first principle Baking, I imagine, you know how difficult it is and all the things that are involved in just making like a.

[Tracy Alloway]

Simple loaf of bread, I am aware. And the other thing is not only I understand that it's very complex, but beyond that, I. I'm always flabbergasted at the idea of doing it at industrial scale or semi industrial scale and how that even works, I have no idea, to be honest. Honestly, industrial scale food preparation at all seems crazy to me. Like steaks and everything. Like, how do you do it over and over and over again and get a repeatable process is like a fascinating question to me.

[Joe Weisenthal]

Right. So that's really interesting in and of itself. But the other interesting thing about the baking business at industrial scale, as you just pointed out, is it's kind of a microcosm for the economy. You have all these commodity inputs which obviously move around along with inflation. You have labor issues. You have to get bakers who want to get into work really, really early in the morning. And obviously you also have consumer demand. So it's really an interesting lens to kind of look through.

[Tracy Alloway]

Well, one of our. One of our. The favorite episodes that we've ever done, which I think was 2022 or maybe 2021, long time ago, we talked to a commercial baker in Chicago, and I've always wanted to do more. That was such a pivotal episod. And I was like, well, you know, we learned a lot about what was going on with commodity costs. We learned a lot. What was going on with pricing, power, etc. Well, it's 2025 now. I would like to learn more about what's going on.

[Joe Weisenthal]

All right, so we're going to dive back into baking. Possibly not on a first principle basis, but we have the perfect guest. We're going to be speaking with Andy Kaden.

[Tracy Alloway]

He's baking. Baking from first principles. Be a really good. That would be. That would be like a good name for a cookbook. All right, sorry, keep going.

[Joe Weisenthal]

Good name for a baking podcast, perhaps. Okay, we're going to be speaking with Andy Caden. He is the owner of a bakery in LA that's called Bub and Grandma's. They do wholesale orders for a bunch of different LA restaurants. So industrial scale, as you mentioned, Joe, but they also have a retail restaurant that does sandwiches and they're in the process of opening a pizzeria.

[Andy Kaden]

So amazing.

[Joe Weisenthal]

All the baked goods and the. Welcome to the show.

[Andy Kaden]

Really good to be here. Thanks for having me.

[Joe Weisenthal]

Shall we start out with. Where did your interest in bread actually come from? Was this like A Covid trope where everyone started doing their own sourdough and got really into carbohydrates.

[Andy Kaden]

Maybe I'm a little proto Covid in my obsession. I was a writer in advertising and TV for about a decade after school and learned fairly quickly after I got to Los Angeles about 16 years ago that I hated it and hated myself for contributing to sort of the advertising culture, so to speak. And I needed to escape and always had an obsession with cooking and eating and decided to focus on something that I saw missing from the Los Angeles landscape. After I moved here from the East Coast. I grew up in New Jersey, kind of in Italian Jewish sandwich Mecca, and saw that there was sort of a glaring absence of those style of kind of walk into it and have a great sandwich kind of experience. In Los Angeles, there are a few notable spots, but they aren't everywhere like they are in New York and New Jersey. So I decided to start writing some business plans and figure out how to open a sandwich shop here. And, you know, started working at sandwich shop in Hollywood called Potato Chips for free on the weekends, staging at a variety of bakeries just to try and figure out how bread worked. And in that process of trying to figure out how bread works, simply just to talk to bakers about what I wanted, I started baking daily at home and got into that pseudo Covid rhythm of daily baking and the obsession of that that comes from falling into its, you know, into its grasp and started giving away all the bread I was making. And it found its way to a friend of mine who worked at a local restaurant. And the owner called me out of the blue and asked if I could make bread for him daily. And I said yes. And it hasn't stopped for 10 years.

[Joe Weisenthal]

Wait, so initially, were you just baking bread at scale in your kitchen?

[Andy Kaden]

I started as just for me, just as an experiment, but very quickly, kind of. Once I had that first account, which was maybe six months after I started baking, six months to a year, the attention came quickly and I started needing to level up over and over and over again. So the first place that I would mix the bread in my house and ferment it there and then shape it and take it to a pizza place around the corner and bake it in their pizza oven. It was a variety of these hacked together, baking in other bakeries off hours to get. To get things done. And as the demand grew very quickly, I quickly had to figure out how to run a business, not just bake a few loaves of bread out of my house and moved into a semi, semi legitimate space at about a year and a half.

[Tracy Alloway]

Flash forward to today. Zooming out. Why don't you tell us about the size and scope of your businesses? What do you have right now just in terms of volume and number of employees, stuff like that.

[Andy Kaden]

The wholesale bakery, which is what that story evolved into, is now a 50 person business. We have a 6,500 square foot facility that produces bread, just bread, not pastry, for about 180 restaurants in Los Angeles. It's a pretty wide distribution and we are still trying to grow. We're kind of wall to wall in that space and need to move in the next two years. So we're starting to investigate what that would look like. We also opened a retail restaurant almost three years ago, which is insane. How quickly that three years has passed in our weird time vortex that we live within now. And that is another almost 50 person business in the Glassell park neighborhood of Los Angeles. We are in the process of opening a pizza place in Highland Park, a neighboring neighborhood, that will be open hopefully in the next four to five weeks. So that'll be another 30 employees growing to 50 over time.

[Joe Weisenthal]

Why did you decide to do the retail sandwich shop? Because I imagine wholesale actually sounds kind of nice because you're still making a product but you're divorced from face to face interactions with customers, which sounds nice to me, but obviously you have a different opinion.

[Andy Kaden]

No, I don't. I mean, we started with wholesale. We started in this less sexy, less customer facing environment for the first, say five years of the business before we changed gears to open the retail restaurant. The wholesale business is a much more steady ship. I sort of describe it as, you have this big ship, it's moving up and down in the water, but ultimately is forward moving. It's harder to capsize, it's harder to knock off course. And that makes it a little bit, let's say, less crazy. The restaurant business, which was what I wanted to get into in the first place, had I known what it would be like now that I'm there, you know, maybe wholesale would have been better to stay at. It's so much harder. It's much more dynamic. Everything is changing all the time. Much more difficult to isolate the variables. There's far more variables to consider in the restaurant, especially when you bring in customer, customer behaviors and how things really just consistently fluctuate across the board.

[Karen Moscow]

Bloomberg Daybreak is your best way to get informed first thing in the morning, right in your podcast feed. Hi, I'm Karen Moscow.

[Nathan Hager]

And I'm Nathan Hager. Each morning we're up early putting together the latest episode of Bloomberg Daybreak US Edition. It's your daily 15 minute podcast on the latest in global news, politics and international relations.

[Karen Moscow]

What's special about Bloomberg Daybreak is the immediacy of of the news we bring you each day in your podcast feed by 6am Eastern Time.

[Nathan Hager]

This isn't a deep dive on yesterday's news. Instead, you get the latest stories with.

[Karen Moscow]

Context and that's something you don't get from other news podcasts. So join us for the best from Bloomberg's 3,000 journalists and analysts around the world, with reporting backed by data and journalists at the center of the stories we cover.

[Nathan Hager]

Listen to the Bloomberg Daybreak US Edition podcast each morning for the stories that matter with the context you need.

[Karen Moscow]

Find us on Apple, Spotify or anywhere you listen.

[Tracy Alloway]

One of the themes that comes up in a range of topics that we talk about is distribution and the actual like both distribution in terms of sales, but also the physical distribution. How does it work in Los Angeles? Do you have your own vans? Are there third parties that drop off the bread to the restaurants? Like talk about how you like built up that network and how the bread physically gets from your commercial bakery into the restaurant?

[Andy Kaden]

Sure, yeah, we have, currently we have six vans that are either leased or owned and it's been a bit of an excruciating endeavor building out this whole network because it is a major, major part of what we do, especially because we're wall to wall. When I say wall to wall, it basically means there is literally no more oven space per hour available for, for new loaves of bread to increase our production. So if you start baking at 2:30 in the morning and you need to get bread to all of these accounts before they open at 8am, you have a very narrow window to cool that bread, pack that bread, get it into the vans and get it out to these accounts. So our ops team at the bakery are true geniuses in building out these routes because you have only have this very narrow gap to hit. And if there's famous LA traffic or anything else that gets backed up in the baking process, you are scrambling to try and make sure that you take care of these accounts in a way where they can still do their jobs. So we have to do our job. Not only just the baking job, but the distribution job before they show up, before anybody else from our accounts show up to work. Also, the vans themselves are, you know, deeply problematic. They are the number one, number one thing that breaks, needs service, needs attention. You know more, even more so than our ovens, which are in near constant use. And we have explored a number of different options, especially for when we potentially move to a bigger space, about outsourcing our distribution. There are a lot of upstart wholesale distribution companies, some of which are based in, in la, a lot more in San Francisco, that are sort of taking the Uber approach and outsourcing their drivers or having a dedicated pool of drivers who work with a variety of different accounts as opposed to one to one. So that one of the major issues with our business is the fluctuating repair and maintenance numbers for our vans. If we can offload that to someone else, that is something that we have certainly looked into. But when we get into the mix with these conversations, we always kind of end in the same place. Where, yes, we are not a, you know, a consumer facing company, but our business relies on that single interaction between the chefs and our drivers. They are our point of contact with our customers. And if that is not an authentic connection, if that is not something our employees are connecting with our customers, there's a potential for things to go wrong and a potential for that relationship to be sour. So we've ultimately stuck with our own employees and our own vans for now.

[Tracy Alloway]

Tracy, I'm just thinking about how crazy it must be to like have an interest in bread such as yourself and then suddenly like you're in the brake.

[Joe Weisenthal]

Pan, become a mechanic.

[Tracy Alloway]

No, you're in the brake business too, and you got to take that into account.

[Joe Weisenthal]

No, I was thinking the same thing. And it's something that, I guess when people envision a bakery, you don't necessarily think about the transportation and delivery aspect of it. But andy, you mentioned 2:30am just then and the narrow window for delivery. And I have to ask, what's it like getting actual workers in the door who, who want to, I guess, wake up at like 1am in the morning and go bake bread?

[Andy Kaden]

Yeah, it's, it's tricky. You know, you. First of all, you have to love it. You have to love the process. And I mean, the 2:30 aspect is, is, you know, very, very early and a very, very different lifestyle. In a literal way, you are falling asleep at 5:30pm and that means that you're, you know, connection with your family or connection with your friends, you're operating on a completely different time zone than they are. And it makes things complicated if folks are not operating on the same schedule as you. But you know, the, it's. That was the last baking shift that, that I did was The Sunday morning 2:30am Bake for the Hollywood Farmers Market. I would, you know, get up at 2, roll down to the bakery. It would be just me in the dark, A lot of people returning from their various parties on Saturday night, which made driving there a little bit sketchy, but always, you know, being careful. And then, you know, finish the bake, pack it up, put it in my truck and go to the farmer's market and sell it. And then the day would wrap up around 2:30. So it would be this 12 hour kind of sprint and then sail and then come back and you know, at a certain point it was the only bake shift that I was doing because I had to manage the business during the other days of the week that I was not doing that. And when you just bake one day a week at 2:30 in the morning, it scrambles your mind so wildly and your sleep schedule that I had to eventually abandon it just because I needed more time to manage the businesses. But you really have to subscribe to the lifestyle if you try and push the edge, you know, especially when I was baking and managing five days, baking five days a week and still trying to manage the business, I was getting sick a lot. It was very difficult to stay healthy. When you're operating across two time zones, really you're living in this kind of, oh, my wife and my friends are all living in this time zone and my business is living in this time zone and I need to be there for both. Those were far more complicated times for my own health. But we're on the other side of that now.

[Tracy Alloway]

We mentioned in the beginning, you know, we like this topic because it's sort of a lens into everything. But what are you seeing today in terms of, you know, if you compare now to when you started, how do you think, or versus the peak of the inflation, whatever it was, how do things look today when it comes to both hiring availability and also raw commodity cost, ingredient costs.

[Andy Kaden]

Hiring availability is unique for us. Obviously we are looking for a very specialized group of people. So the skills that they hopefully already have are in, in rare supply in Los Angeles. And that makes hiring complicated. Far more so for the wholesale bakery than for the restaurant. The restaurant has a lot of over. The pool is much wider and we have very little trouble hiring at the restaurant, the bakery.

[Tracy Alloway]

Would you have said the same thing in 2022 or 2023? Or does it feel easier today than it would have back then at the, at the retail level? Because that's where. That's where like all the Complaints were right. Everyone, all the restaurants and service entities were complaining about how impossible it was.

[Andy Kaden]

I, I think that it's. I think that it's impossible if you don't already have a name that people know. And I think for us, we've spent a lot of our efforts making sure that our employees are well taken care of and supported and treated like the human beings that they are. And I think that when we open the restaurant after the bakery, that was already somewhat established in the, in the public eye, so that helps us to kind of make this play. I mean, this is the point of it all, is we want to make this a desirable place for, for people to work so that when they come here, they have a good time, they're well supported, they get fed, they get treated well, they have health care. And, you know, we really built this thing on that. It's becoming harder and harder to have a functional business, including all of those things, which is, you know, the real issue at hand here is that the expenses are enumerating and the, you know, sales remain the same. So when we talk about raw materials, there's been, There's. We're actually in a much better place than we were, say, a year ago or even a year before that. The bakery goes by one ingredient. It's flour. Flour. Flour is wheat. And wheat is, you know, a global commodity that has a lot of fluctuations. It's usually compared to others, fairly steady. But for example, when the Russia Ukraine war broke out there, Russia was not allowing Ukraine's wheat to leave the country. Ukraine is the sort of breadbasket provider of wheat for Europe. And when that happens, there's much more demand coming from the United States. Prices go up, and the American users of American wheat are the ones who end up paying more so that those products end up in Europe to cover for the loss of supply. So we saw maybe a 10, 10% increase in flour pricing. It caused us to have to drive our prices up for the first time in a long time breadwise. Now it has settled back down, but in the meantime, everything else has gotten more expensive. And, you know, there's. There's a, you know, massive wave of restaurant closures in Los Angeles right now, including yesterday. Kohl's 117-year-old restaurant announced that it's closing. The pantry, which has been around for 100 years, closed. It's a very, very, very, very difficult time for restaurants to thrive, let you know, survive, let alone thrive in, in this town. So interesting times, for sure.

[Karen Moscow]

Bloomberg Daybreak is your best way to get informed first thing in the morning right in your podcast feed. Hi, I'm Karen Moscow.

[Nathan Hager]

And I'm Nathan Hager. Each morning we're up early putting together the latest episode of Bloomberg Daybreak US Edition. It's your daily 15 minute podcast on the latest in global news, politics and international relations.

[Karen Moscow]

What's special about Bloomberg Daybreak is the immediacy of the news we bring you each day in your podcast feed by 6am Eastern Time.

[Nathan Hager]

This isn't a deep dive on yesterday's news. Instead you get the latest stories with.

[Karen Moscow]

Context and that's something you don't get from other news podcasts. So join us for the best from Bloomberg's 3000 journalists and entertainment around the world with reporting backed by data and journalists at the center of the stories we cover.

[Nathan Hager]

Listen to the Bloomberg Daybreak US Edition podcast each morning for the stories that matter with the context you need.

[Karen Moscow]

Find us on Apple, Spotify or anywhere you listen.

[Joe Weisenthal]

Just on the commodities front, how does it work in terms of actually sourcing things like flour? Do you sign, you know, forward agreements with suppliers at a certain price and I guess like how long term term are those prices set?

[Andy Kaden]

Yeah, it's, it's depends very much on volume. And we are in this very unique sort of middle ground where we are not a giant 25,000 square foot bakery and we are not one of the sort of more retail oriented 2000 sq ft bakeries. We are in the middle looking to make this leap to where we can buy directly from our purveyors and when we can, like purveyors as in non distributors, directly from King Arthur, directly from Camas Country Mill, directly directly from, you know, a variety of other flower purveyors. And when we can do those types of things and buy at scale, say 17 to 20 pallets of flour at a time, we can lock in forward pricing with King Arthur, with some of the other ones. But in the moment now where we're operating through distributors, we are subject to their markup and they, they are fluctuating what they're doing based on whatever algorithms they're, they're using to calculate proper pricing, not only just from what they're getting charged from the, you know, the actual producer, but also however their business is doing and whatever markup they need to include. So what we do in that circumstance and what most restaurants do is regularly pit distributors against each other for our business, especially because we have a lot of leverage with our flower orders. It's, it's a fairly significant regular order. So even if they're making a very small amount on that, on each bag there. There's a large volume and a large frequency that has those purveyors kind of jockeying for the lower price and that's, there's no service, there's no anything else that really matters in that relationship. It's just if you can get us the price, we will order from you this week. And we know that. And they fight.

[Tracy Alloway]

And it's a weekly price.

[Andy Kaden]

It's, it's more frequent than week weekly at the moment there's a little bit of flux. June, June, you know, and I've just have regular conversations with King Arthur, who's our main bread flour supplier, who are one of the most wonderful businesses in the country and just good people and, and always, you know, driven to, to help their clients. They always are monitoring, you know, the commodity future futures and how things are looking going forward. And I will sometimes reach out to them to find out, you know, how, how they are pricing things relative to who they're selling to the distributors so that I can see if the, the increases in price are coming via the distributor or via King Arthur. And then I'll know whether I have some leverage to kind of push down a little bit further to try and fight for cheaper prices. But there was a big spot, you know, things have been trending downward in, in price. That, that the war, you know, the embargo opened up or whatever it was that opened up and allowed the wheat to leave Ukraine. So prices in the state settled back down because there's less exports. And it's a, you know, something that if you're constantly monitoring it is changing very often in minor increments. But if you do that across an entire batch of milled wheat, that's, that's hundreds of thousands of dollars.

[Joe Weisenthal]

So how does that actually feed into your prices for bread and how dynamic are they? If you get a price increase one day, do you immediately pass that through to the customer?

[Andy Kaden]

Almost never. And that, that's, you know, the increases and decreases are fairly minor at the moment. They are in flux, but they are staying in the general vicinity. You know, if we're talking specifics, we're talking about somewhere between 15 and 1750 for one 50 pound bag of bread flour. And that fluctuation, it stays in that zone. Maybe a year ago it was up at 23. And if you think about that, if we're ordering, let's say £5,000 a week of flour, it's actually more than that. I think it's closer to £6,500. And we're talking about a fluctuation of a dollar. That is a massive change in our end of year, you know, bottom line. So it's, it's the kind of thing where if there are any changes whatsoever within that zone, they're multiplied over a large number of bags and end up changing things fairly significantly. So we really have to, even if it's within that 15 to 17 range, as opposed to going all the way up to $23 a bag, that is, it's crucial for us to stay on top of it. But in terms of passing the pricing on, we've given ourselves a pretty wide range to stay within and that makes our pricing valid and we're constantly staying on top of it. But bread in general, the food cost is not the main issue unless you're talking about a jump from $15 a bag to $23 a bag. The main issue is labor because cogs typically with bread are in the, you know, 10 to 15% range, which is the cheapest food product you can possibly make, even if you're using like really fantastic ingredients like we are. The thing is, is it just takes a lot of human beings and a lot of skilled human beings to execute production. So if we're talking about the traditional model where you see like 30% for labor, we're looking at more, 42% for labor and 12% for COGS. Where cogs, typically in a restaurant food business environment is somewhere to 25 to 30. If you're doing okay, we're at 14. So the model is a little bit different in the wholesale universe than it is in the retail restaurant. And that, that is, you know, we're able to have those extra bodies to get things done because the cost of goods are so low.

[Tracy Alloway]

This is fascinating. Let's continue on this. You're talking about your wholesale distribution bakery. When you're talking about the restaurant, how do you think the generally about the strategy of price increases? Because obviously, you know, you're not going to be sensitive to the day to day or the month to month. My guess is many, most companies want to pass some sort of price increase on, on a semi regular basis, maybe once a year or something. But generally like talk about like how frequently you make those decisions to increase, increase prices and when.

[Andy Kaden]

Yeah, I would say that we are less on, on a schedule than is typical for a larger bakery. I think when you get to scale like us or larger, there's an inclination just from the operation side of things to make these, these changes regular. And for us it's more about making sure that our accounts are getting what they expect and are not being pushed further when it's no real issue for us relative to cogs to float a little bit of that within a range. It's also even more relevant to monitor our competitors pricing. Our products are not entirely apples to apples. Talking about two different basic, what we call a house loaf, but most places call a country loaf, basic sourdough loaf of bread, which we charge $6 for wholesale and a lot of other places might charge 750, but their loaf is 250 grams heavier than ours or some other difference. So it's difficult to track. But in terms of what the bottom line is for our customers, we have to stay within a range. We are a higher end wholesale product, which makes us unique as well. But at the same time that doesn't mean that we're not competing with those who are making some more sort of commercially mechanized loaves of bread. So we have to be very mindful of our competitors prices. And I would say that reality mixed with some of the increases in hogs are what drive our price increases. I'd say we've raised prices maybe twice in the last four years. I think we had no choice when bags were all the way up at $8 more per than they are now. And by the time we were able to bring that price back down, which I think I would say was around May of this year. So it's a really long time of these elevated prices. Other expenses like labor and outside things are, have increased to the point where we can't lower the prices back down. It's just the way that it goes, as much as I'd like to, because I feel the benefit very, you know, I feel the benefit from passing savings off to the, to our accounts. But at a certain point you have to protect the business and that's, that's where we're at.

[Joe Weisenthal]

So I mentioned at the beginning that you're in the process of opening a pizzeria. So congratulations on that, on the expansion. But one thing we hear a lot about nowadays is the idea of, you know, regulation slowing down businesses. And there seems to be certainly a dereg bent in the Trump administration and a general sense that all these rules and bureaucracy really slow things down. And so I'm curious, what's the process been like for you in opening the pizza restaurant? How long have you been doing it and I guess how much paperwork have you actually had to do?

[Andy Kaden]

Well, Los Angeles within the restaurant world is fairly famous for the ineptitude of its governmental oversight agencies. We have to sort of deal with both the county and the city. There's building and safety and the health department. They don't talk to each other, but you're, they're both kind of looking at the same thing and they both point you in different directions. And it gets very complicated when the inspectors start showing up, which is throughout the process. The thing about the pizza place is that it was a second gen space, it was already a pizzeria. That said we're, you know, stripping out all the equipment and rebuilding it, but that makes the process significantly faster. And if I, you know, I don't want to say anything or be an absolutist in any way, but I will never do a first gen space ever again because it's just excruciating. And you know, when we opened the restaurant, we signed our lease in November of 2019. So taking, obviously there's a pandemic to consider, but it took us three years to open. A lot of that was due to problems with the city. You know, a lot of it is very analog. They print up your application and it sits on a literal stack on someone's desk and if you don't follow up with them incessantly, that stack just gets piled on top and your thing just disappears deep into the, you know, into the file. So it's, it's a very, very, very difficult process. Do I think the exact opposite? Just stripping down things to nothing is the, is the answer? Definitely not. But you know, LA has a lot of red tape to navigate. It also is expensive red tape to navigate. So you're paying a ton for, you know, sort of non service and making things really complicated for you. You can get to the very, very end of the finish line and you're, you're ready to open and the health inspector walks in on the last day and says this floor drain is not in the right place based on the plans that they approved and you know, eight months ago from somebody else. And then you have no choice but to spend an extra $8,000 rerouting your plumbing and then getting plumbing inspection again.

[Joe Weisenthal]

It sounds like you're speaking from personal experience on that one. That's a very specific example.

[Tracy Alloway]

Well, no, I mean, by the way I, I looked Kohl's, the restaurant you mentioned, and I'm reading the article and it talked the quote, litany of reasons for its closing pandemic. Actor and writer strike, crime, labor costs, bureaucracy, et cetera. But just on this point, like I have never worked in a actually I did work in. Well, actually, I worked in San Francisco.

[Joe Weisenthal]

You worked at a sandwich shop and.

[Tracy Alloway]

I worked in a Nigerian restaurant in college, which I never talk about. But is it like the bear? Basically, that's all. Cause when people hear all of this stuff about, like, oh, you gotta move the drain. What was there was like something with a balloon or something like that. I don't remember the exact scene, but is it like that stressful where, like, you know, they come in and everyone's like, on bated breath about whether they see something or not before you can open the door.

[Andy Kaden]

100%. 100%. The fear that has struck into the hearts of restaurant managers when someone with a hanging necktag comes in from the city is overwhelming. The messages on Slack go immediately out and everyone springs into gear because a lot of the things that they require are not logical, make sense, are there for the purposes of checking some ridiculous box from 1965 that isn't applicable anymore. But no one wants to make the effort to change things with the state government or the county government. And you just kind of get locked into, you know, for. For someone who is so focused on logic and the logical approach to things and really reasoning things out and finding out the best way forward, it's just excruciatingly frustrating to be put in this position where nothing is logical and the decisions of this individual largely have to do with their mood that day or whether they don't, whether they like your place or whether they like you or whatever's going on. It could be motivated not by anything on paper, but more about this sort of unknowable nuance. And it's excruciatingly frustrating. There are, you know, known inspectors that people fear. There are known inspectors that people hope for, and you never know what you're going to get. There's I. I heard stories of. So a lot of architecture companies have sort of sprung out into, become expediters as well. So they basically are. Will take all of your paperwork and the ridiculous amount of stuff that you need to do. You pay them a fixed fee, and they're the ones who not only, well, if their architects design the restaurant, but then will run everything through all the necessary channels with the city and the county and the state, and that costs an incredible amount. So that's another thing that gets, you know, piled on top, but no one wants to do that anymore because it's so ludicrous that it just makes your. You go crazy. I hear, I have no experience outside of Los Angeles that this, this infrastructure is one of the worst out there.

[Joe Weisenthal]

So Joe listed a bunch of reasons that a restaurant might close earlier. But I would love to get your take on exactly is causing restaurants to go out of business in la. And also one thing I've always wondered about, why do people still open restaurants? Because the thing you hear is always that, like, it's a tiny, tiny margin. It's really difficult, it's really competitive. You have to basically give your entire life over to this endeavor. It sounds like a hard job, but new restaurants open all the time.

[Andy Kaden]

It's true. I think I'd say that the motivation to open most restaurants is a flawed motivation. It's usually based on ego or showing off cash or trying to acquire digital fame. Other things that will inevitably either lead to a short burst of success followed by an immediate decline or just an immediate misfire. And that's why most restaurants close in the first year, because it's excruciatingly difficult to do this. And I think that the general view is that working in a restaurant is easy. It's a cop out from some more corporate approach to living. And it's just not. It's so much less manageable. It's so much wilder than a more corporate career that it makes it very, very hard to do. But there is, to answer your question, incredible joy in interfacing with people and making them happy and being connected to hospitality and the pleasure of taking care of people and giving them something that they get to do, you know, three times a day. But making it something that brings them joy, you can see that. And that reverberates back to you in a way that feels far more authentic than it felt when I was writing and producing commercials, trying to manipulate people into buying. It's about that authentic connection. And I don't want to have to feel bad for what I do for the rest of my life. I don't want to have to feel bad about it. And I did that for almost a decade. And I think that this provides a authentic reality for me and the people that work here despite all of the challenges of doing it. And I think the challenges are in place because the challenges are always in place when you're trying to do something that's authentic. And aside from the general flow of our sort of controlled existence that we have right now.

[Tracy Alloway]

You mentioned digital fame. You're at the pizzeria at the restaurant. Do you feel like the need to have your equivalent of like, you know, the viral Erewhon smoothie? Like something like, is that an important thing You Think about that. This is a thing that could blow up on TikTok or whatever it is.

[Andy Kaden]

No, no. But I'm unique in that way. I can't wait to remove us from social media. That is a intractable connection. Here's how I think about it. Now, where the restaurant and the bakery are established, generally people in Los Angeles know to some degree, or the people who are involved in food know who we are. If I were to seek new customers in this moment for our retail restaurant, they would be inauthentic connections with what we do. They might resonate with some with our BLT that we just put out first when the tomatoes are good now in the summer, and they might come to the restaurant on the weekend. But ultimately, our bread and butter is going to be our regular return customers who have a relationship at the restaurant. And I don't want to ostracize them because they're the people who are going to keep us here for a decade as opposed to the people who are going to make us famous in the moment, drive out our regular customers, and then move on to the next trendy thing. So for us, trends are a business killer. You can get short, short success from a trend. But if you want to be here for a long time and build a customer base that's dedicated, you have to have an authentic relationship with those people. And that has to mean that whatever your product is, they are authentically connecting with it because of own desires, not because I'm forcing them to have an entertainment moment with our product by, you know, creating a TikTok video that goes viral. So that's. Yeah.

[Joe Weisenthal]

Well, speaking of the moment, we're recording this on July 8th, and we. We still don't really know what's happening with the tariffs, but I imagine in the course of building out a pizzeria, you're probably ordering equipment from various places, giant pizza ovens and all that. Have you been impacted at all by the tariffs yet?

[Andy Kaden]

Very little. It's still very confusing from my vantage point as to what is happening or what is supposed to come down the road. And we were certainly anticipating, you know, our ovens are from Germany. Our, you know, a variety of pieces of equipment are coming from international places, but I haven't seen any major increases. We did have some shipping increases. We make these coffee cans that we serve our roasted coffee in that come from China. There was a massive tariff increase on our shipping. That's part of the process. But in terms of, you know, the pizzeria equipment, we haven't seen it really I'm anticipating that potentially we're Talking about a 10% EU tariff, they said, floating around. I just don't know what that means. And if there's anticipatory price increases from the vendors who are in Italy, say, selling us tomatoes, or who are in a variety of other places in Europe where we buy some of our more luxurious ingredients, we just haven't seen those yet. I am still anticipating that as a possibility for pizza because we need to anticipate that. And we are certainly testing tomatoes, California tomatoes, to see if we can find something comparable because the, the, you know, San Marzanos are truly the best and they do grow in California, but it's just a little bit of a different thing. So we are anticipating the need to work with California tomatoes, but so far have not seen anything really in terms of tariffs increases reaching us on this side.

[Tracy Alloway]

I just have one last question, and it gets back to Los Angeles. It feels like major American cities are always sort of dying and thriving at the same time. And obviously Los Angeles, you certainly hear about it. New York and Chicago and Los Angeles has gone through a lot, or the fires, the recent ice raids and riots. And then, you know, what people and I mentioned, you know, because it was in this article, I just looked up and reminded me, you know, people are talking about Hollywood. Could it become the next Detroit in terms of that industry gutting out? On the other hand, it's probably the nicest climate in the entire world and people are always going to want to live in Southern California. How do you feel about doing business in Los Angeles right now as a city?

[Andy Kaden]

It's excruciating. This city is, especially in the food business, is very, very much struggling. I've never ever seen so many closures of restaurants, good ones that deserve to be open in my time, let alone being a consumer. But being in the business, I think that there's an endless list of factors that make Los Angeles complicated its expanse. The reliance on Hollywood as a major motivator for, or a major provider for a large number of people in terms of income. And with that whole market shrinking, you do see a lot less business happening in Hollywood proper. That said, it's a 400 square mile city. Where we are is about 15 minutes from downtown where some of the protests were happening and a lot of that stuff. But I don't see anything, you know, it's just a regular, small, small neighborhood experience over here. And you're really kind of like, these neighborhoods have a very distinctly, you know, unique way of behaving. So as Hollywood is sort of shrinking down and moving east and west, you see a lot of development, and then you also see a lot of gentrification protests. You see a lot of things where folks are. There's a lot of expansion and contraction in this really wide city. Part of it is exciting because it's dynamic, but it's also just makes things very difficult because the city doesn't really have its own identity. The identity is defined by the neighborhood. So as downtown and Hollywood are contracting, you know, Highland park and Glassell park and this area of Glendale, kind of on the east side, is expanding. Silver Lake and Echo park and Los Feliz are kind of becoming like Hollywood once was and getting a little bit more corporate businesses in there. And they're all looking to capitalize on the growth of these neighborhoods. It's a very unique place, but it's very hard to work here. And you get a lot for choosing to be here and operating here and living here. But you're also very much behind the eight ball.

[Joe Weisenthal]

I gotta ask one more question, but why is a San Marzano tomato grown in California considered subprobal par to San Marzano tomato grown in Italy?

[Andy Kaden]

Shouldn't they be the same? I wouldn't say subpar. I wouldn't say subpar. The climate is vaguely different, slightly different. So you end up with a little bit of different result. From what we've seen, the San Marzano from Italy end up being a little bit sweeter, a little bit more robust, and maybe that has to do with even more direct sunlight, more volcanic soil. Who knows? There's a variety of different. Different reasons why the microclimates create slightly different end results. It's just like wine. It's sort of like, you know, you can grow the same grape in southern France and in Northern California and end up with a distinctly different flavor based on the microclimate, the soil, and the environment. So it's. It may just be our own projection, but we're working to try and find whatever the best possible option is for us.

[Tracy Alloway]

All right, just a couple seconds left. Give us one sandwich recommendation here on the east coast that we should try.

[Andy Kaden]

Well, I would say. Oh, that's really hard.

[Tracy Alloway]

I know you're gonna.

[Andy Kaden]

I mean, Defontes. Defontes in Brooklyn is. Is a special spot. But, you know, the. The deli that I grew up with is in Milburn, New Jersey. It's the Milburn deli.

[Tracy Alloway]

Okay.

[Andy Kaden]

And has now become kind of like a famous deli somehow, which is crazy.

[Tracy Alloway]

I'll check it out.

[Andy Kaden]

Yeah.

[Joe Weisenthal]

All right, well, Andy, thank you so much for coming on Odd lots. We're gonna have to leave it there, but it was really fun to talk about about the baking business.

[Tracy Alloway]

Yeah, that was great. Thanks so much, Andy.

[Andy Kaden]

It's my pleasure. Thanks, guys.

[Joe Weisenthal]

Joe, have you ever been to Alidoro's?

[Tracy Alloway]

No.

[Joe Weisenthal]

In soho. It's in soho. It used to be literally across the street from where I lived. Best sandwiches ever. It blew my mind the first time I went there. They've expanded since then. The expanded store is not so good.

[Tracy Alloway]

You know, shout out to our producer, Dash, because didn't he, like. He did that tour where he, like, tried every one of the hundred best sandwiches in New York City.

[Joe Weisenthal]

That's right.

[Tracy Alloway]

We got to get him on.

[Joe Weisenthal]

You should interview Dash.

[Tracy Alloway]

We should do a lot more with Dash at some point about New York City sandwiches.

[Joe Weisenthal]

That'd be fun.

[Tracy Alloway]

Yeah.

[Joe Weisenthal]

Okay. But on a more serious note, there was lots of interesting stuff to pull out from there, but one of the things I'm thinking about and this kind of came up in our chicken series when we talk to the doj, but it's that idea of the tyranny of the middleman, right? And this idea that, okay, obviously you're buying flour from a flower producer, but then in between the producer and it getting to you, there's the distributor, which is charging a markup. And then when you're setting up a new business nowadays, you have to have, like, basically a red tape Sherpa to walk you through. That's another middleman. And then the shipping costs going up. I mean, shipping, not necessarily a middleman, but certainly the middle of the process. It seems like that's where the cost pressures are really coming in.

[Tracy Alloway]

No, I think all that's super interesting also this idea that, like, you could have an Uber for distribution, but then you lose that. A bread bus, but then you lose that personal relationship. And if that's important because you need to hear feedback from the chef at that restaurant, then you don't get it. If you don't own the distribution. And then just, you know, LA itself, we should do. At some point, we got to go back to la, because it does. I mean, incredible place, but incredibly number of, like, sort of wrenching things going on in that city. And opening a restaurant, as you mentioned, sort of seems crazy in the easiest of times. Like, I feel like you have to have a little bit of brain damage to do that and then to do it in. There's a lot there that was very interesting.

[Joe Weisenthal]

I want to learn more about the pizza business as well. We're in New York. We should do pizza.

[Tracy Alloway]

We're going to do a pizza episode.

[Joe Weisenthal]

All right, shall we leave it there?

[Tracy Alloway]

Let's leave it there.

[Joe Weisenthal]

This has been another episode of the Odd Lots podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

[Tracy Alloway]

And I'm Joe Weisenthal. You can follow me at the Stalwart. Follow our producers Kerman Rodriguez at kermanarmon, Dash Obinnet at dashbot, and Kalebrooks at Kalebrooks. And for more Odd Lots content, go to bloomberg.com oddlots where we have a daily newsletter and all of our episodes. You can chat about these topics 24. 7 in our Discord, Discord, GG Oddlauts.

[Joe Weisenthal]

And if you enjoy, enjoy Odd Lots. If you like it when we talk about baked goods, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg Channel on Apple Podcasts and follow the instructions there.

[Tracy Alloway]

Thanks for listening.

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