Wrapped up

April 30, 2009

Tammy Young has expanded her tortilla business into several market segments to pave the way for growth.

To understand how Tampa’s Tammy Young has become a successful entrepreneur, consider her product: the simple tortilla.

Once the staple of Mexican restaurants, it is now in nearly all restaurants with the arrival of wraps—healthy sandwiches wrapped in a tortilla.

Young, founder and chief executive officer of La Bonita Ole in Tampa even developed a low-carb tortilla (“one that actually tastes good,” she says) to cater to weight-conscious consumers, as well as flavored and other special nutrient-added tortillas with omega 3, calcium and fiber.

La Bonita makes traditional flour and corn tortillas, and flavored wraps and chips, for its Tam-x-ico and Wrap-itz brands. Innovating is one of the main ways La Bonita tries to stay ahead of the competition, which includes Mission Foods, a $4 billion company.

Thanks to the popularity of Mexican food and the diversity of the tortilla, tortilla making has gone from a $300 million market in the 1980s to an $8 billion market today.

“There is lots of opportunity in the market,” Young says. “But it is very competitive.”

La Bonita, which is in 28 states, is now one of the largest refrigerated tortilla producers in the country. It is available in Publix and Sweetbay grocery stores and La Bonita ships it out by truck, rail and ship.

La Bonita sells to four channels of customers: retailers; co-packed for other distributors; private-label tortillas for store-brands; and food service brands for restaurants.

Food industry experience
Young started La Bonita in 1992 with $13,000 of her savings from her 401(k). Before then, after one year of college, she worked several years in the food business. She set high goals.

“My parents were educators, so I must have devastated them leaving college,” says Young, 50. “But I always wanted to be an executive vice president and a CEO.”

In 1977, she worked for Tom’s Potato Chips in Louisville, Ky. as a route driver, filling vending machines.

Young then drove an 18-foot truck for a salad and lunchmeat company in Nashville, Tenn. After that, she worked for Armour-Eckrich Meats LLC for 10 years and was promoted seven times. , Armor transferred her from Louisville to Tampa in 1989.

“I earned my stripes with that food industry experience,” she says.

Young had a friend in Detroit whose family had made tortillas for 60 years in Monterrey, Mexico. That friend owned two Mexican restaurants and a tortilla factory in Detroit using that family recipe.

After trying the tortilla, Young was hooked. She wanted to take it to market and designed the packaging for it. And in 1992, Young, by herself, started La Bonita with her Detroit friend as the supplier.

“It was just me, with a phone and fax machine,” Young recalls.

The early years were lean. La Bonita lacked the funds to pay the slotting fees to get on the shelves of every major grocery store. It held a private stock sale in 1996. It got funds from family and friends.

At one time, La Bonita shared a 6,000-square-foot building in Tampa with Tijuana Flats, the Mexican restaurant chain. Eventually the companies developed a partnership. La Bonita shipped its products to all Tijuana Flats locations in Florida, Virginia, Pennsylvania, North Carolina and Indiana.

As La Bonita grew, it used other tortilla suppliers. Eventually, Young knew that it needed its own production plant, so it opened a 31,000-square-foot facility in east Tampa in March 2007. It moved its headquarters office there the following year.

In its first year, the company had $200,000 in revenues. With modest billboard and radio advertising in Florida, sales rose. Some retailers began to carry the product, including Kroger, Publix, Albertson’s and Wal-Mart.

La Bonita Ole has 32 products from both Tam-x-icos, its signature line of refrigerated tortillas, and Wrap-itz, its newer line of tortilla wraps.

In 2004, revenue hit $5.6 million. That climbed to $11.2 million in 2007. Last year, La Bonita brought in $12.3 million in sales. It has 44 employees, including a vice president of sales in Louisville and a national sales manager in Buffalo, N.Y., close to many of its accounts.

In 2007, in recognition of its efforts, Snack Food and Wholesale Bakery magazine named La Bonita the tortilla manufacturer of the year.

Ironically, the next year, despite a 9% increase in sales, in July 2008, La Bonita ran into a challenge with its lenders and filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code. However, Young says the La Bonita is two to three months away from emerging from Chapter 11 as a stronger company.

“This is a very successful Chapter 11,” Young says. “We filed because of the credit climate. The notes were due to expire and we couldn’t renegotiate with the bank. We have done some cost-reduction measures, but were able to maintain the same level of payroll.”

La Bonita had some one-time non-recurring events related to its expansion in the Northeast and Midwest retail markets which caused the company to go outside of its covenants with its bank and the bank would not renew some notes.

The company acquired debt because it bought state-of-the art equipment, property and built out its new facility. Young does not think the company went too far.

La Bonita was then unable to obtain financing, and as a result, had to seek Chapter 11 reorganization protection.

It has since corrected the losses and had 9% gross revenue growth in 2008.

Plus, La Bonita has been profitable nine out of the last 10 years. Young says the timing of the one-year loss, in the midst of the credit crisis, was the issue.

Fortunately, it is in an industry and product category that is growing and unlike other consumer goods companies, it has the ability to grow in a declining economy.

“People have to eat and are certainly choosing foods that are versatile with wide applications at a great value,” Young says. “Tortillas can be used in every way imaginable.”

Does she think the company expanded too much too fast? “Absolutely not,” she says. “Our investment has opened the door to far more trading channels, including retail branded expansion, co-packing, food service and private label. It not only allowed us to accomplish better controls over our finished goods quality, but also provide further avenues for continued growth.”

Managing growth
Young’s biggest challenge at La Bonita is managing the company’s growth. The new production facility added costs, but it also gave the company the capacity to serve more customers.

“I’m a very typical entrepreneur,” she says. “I believe you can do anything you want, you just can’t do it yourself. We’ve been very fortunate. You have to stay on your game and manage everything well.”

La Bonita has a 99.7% fill rate on orders, meaning that it is almost perfect in getting the right tortillas to the right customers on time. It has made a $6 million investment in machinery in its plant. Getting production running smoothly has been a big challenge for the company.

“We still have some production issues,” she admits. “We’re working on those very diligently.”

Although there are workers on the plant floor, none of them actually touches a tortilla with their hands. A tanker truck drives in a batch of flour. Machines mix dough; weigh, shape, bake, stack, count and bag the tortillas; and then stamp the date on the bags. The staff operates the stainless steel machines, does inspections and other tasks.

Young’s biggest CEO lesson is managing people.

“I think the CEO has a responsibility to build a culture that exhibits all the company’s goals,” Young says. “It’s important, as a CEO or employee, that instead of looking at things as challenges they are seen as learning experiences.”

Young considered a number of different growth strategies for La Bonita, including mergers or acquiring other companies, but she likes being independent.

In the future, Young wants to expand nationally and internally, but she expects La Bonita to stick to tortilla making. She recalls Orville Redenbacher and how he stuck with popcorn and became successful.

“I think there is a wisdom in doing one thing and doing it right,” Young says.