Hamburg native Robert Drago began in the food business with his family’s company, Bison Canning Co., which was sold to Goya Foods in 1991. The University at Buffalo MBA graduate held executive positions at several different food manufacturers before becoming the first ever non-family chief executive officer at Costanzo’s Bakery.
Costanzo’s, which sells its products throughout the United States and now in Canada, is celebrating its 80th anniversary.
Q: How has consumer aversion to carbs affected your business?
A: It’s an opportunity. If people are going to eat a traditional bread or roll, they want the best quality they can get. They’re much more likely, if they’re going to eat a white flour-based product, to eat a Costanzo’s roll versus two slices of Wonder Bread.
Longer term, we’re looking at other types of healthier products like flatbreads that taste good but just have a lot less bread. Down the line that’s a future expansion opportunity for us.
Q: What are the challenges of expanding into Canada?
A: The perceived challenges were what kept us from penetrating that market in the past. There are some unique labeling and food safety requirements, but they’re very manageable. The biggest issue is Canada is a relatively small country population-wise, but it has two very large bread companies that pretty much dominate the business up there.
Q: What niche have you found to fill in Canada?
A: There are two dominant types of bakery products in Canada that have very established players: Canada Bread and George Weston on the commercial side and ACE Bakery which produces artisan-style products. There’s really nothing in the middle and that’s where our product really falls. We’re nicely positioned for people who want to move up from a lower-end product or for people who want to trade down from artisan bread to save money.
Q: How are you doing there?
A: We service several small restaurant chains and we’re just now finalizing a program for four items at about 200 Loblaw stores in Ontario, so that will be our first test of retail. We’ve only been up there for six months so we’re just now getting some traction.
Q: You’ve had to take bromate out of some of your recipes because it’s banned in Canada. What’s that about?
A: Bromate helps speed the leavening process. Most companies have phased it out because it’s not allowed in Canada or California. In reality, it’s one of those ingredients that you’d have to eat mass quantities of every day for 30 years for it to have a negative impact, so the perception of its harmfulness is much worse than the reality.
But the bigger issue here is there’s a big movement in the U.S. toward cleaner-label products. We have a whole initiative here that is designed to take out over time some of the traditional ingredients you put in bakery products to do things like improve shelf life, inhibit mold, give the product more springy volume. There are so many all-natural options now to accomplish the same thing. Consumer awareness today is very high. People are very astute label readers. The extent to which you can minimize the use of unnatural ingredients is only an advantage for people like us.
Q: How have you addressed gluten and peanut allergies?
A: We don’t even allow peanuts in the building because peanut allergies are so severe and allergen control is a big part of food safety today.
In terms of gluten free, it’s growing like crazy in the U.S. but it’s still a relatively small part of the bakery volume that’s out there. To do it right, you really need a dedicated facility. For a company like ours, it just doesn’t make financial sense to do it but in the future we’ll either distribute products made by other gluten-free manufacturers as a service to our customers or it might be a potential acquisition target someday.
Q: Your ingredient vendors help you come up with new ways to use their ingredients. How do you work with vendors to stretch your research and development dollar?
A: Those resources used to be available to only the biggest companies, but now it’s trickling down to companies of our size. It’s difficult for a company of our size [about 120 employees] to have an expert in every area, so we’re using vendors that have specific expertise in different areas and we’re reaching out to them to solve problems.
Across the board, whether it’s clean-label products, product development, packaging, technology, we are leaning much more on our vendors and it’s working very well for us. It allows us to do things better and quicker than we could ever do it on our own.
It has changed the way we sell to our customers, too. We need to go to restaurant and supermarket chains and bring them ideas. We need to not just sell cases, we need to sell solutions and concepts.
Q: Are there certain kinds of bread you’ve tried that didn’t work or certain kinds that have fallen out of favor over the years?
A: There were low-carb breads when the Atkins craze came and they were the darling of the baking industry for probably two years. Now you’d be hard pressed to find one of them anywhere. We didn’t necessarily do that, but that was something that was a boom for a period and has been a complete bust since then because the taste and quality just wasn’t there.
Q: How has the food industry changed?
A: Quality and food safety are one and the same today. In the old days, the focus was just on the finished quality of the product. Today it’s really 50-50. You have to have a good product, but it has to be produced in a very safe environment.
Q: How is Costanzo’s changing?
A: The majority of our business is sold to food service accounts – restaurants, schools, hospitals, non-retail operators. We’re really going to go much more aggressively on the branded retail side. When food service tends to be soft, people eat at home more. We need a retail presence because when times are slow in food service we’ll pick up some of that volume in retail.
Q: You’ve said Western New York really takes care of its own.
A: It’s a trend all over the U.S. – buying local – but I’ve lived in a number of different areas, and Western New York is probably one of the most loyal markets that I’ve seen in terms of people who really want to support their local businesses. That’s why we’re pushing much more aggressively into retail supermarkets. People want to support us, they’ve been asking for our products and we just needed to give it to them.