Brill Inc Acquired by Rise Baking Co – Speciality Bakery &

Ingredient Update – 22 October 2021

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Specialist: Ward Elwood (WE)

Title:

Moderator: Nyree Hinton (NH), Third Bridge Sector Analyst

Former Head, Products, North America at Brill Inc

Agenda:

1. Brill strategic update post-June 2021 Rise Baking acquisition

2. Category overview – cakes, cookies, muffins, icings, glazes and toppings

3. Product innovation and retail and foodservice distribution landscape

4. Pricing and supply chain pressures

Contents

Q: How do fully finished bakery products compete against speciality bakery ingredients, such as icings and

toppings? Are there any trends in the speciality pieces category?

Q: Who is Brill’s end customer?

Q: How did Brill’s channel volume shift between foodservice and retail during the pandemic? How difficult

is adapting supply chain agility to meet demand in the versatile channel?

Q: Was there a post-lockdown rise in consumer indulgence?

Q: Is Brill selling as a private label or are its premium finished products branded?

Q: Why do you think Brill decided to operate as a private label speciality bakery?

Q: How has coronavirus impacted industry players, particularly in other categories? The supply chain issues

you mentioned, such as ingredient sourcing, would affect traditional fresh and frozen bakery. Do you think

speciality bakeries had advantages or disadvantages during coronavirus?

Q: What are the advantages of making premium products? Many big players or small bakeries just do

private label bread. Is there a margin for speciality players in the indulgent side than just pure-play bread,

such as Flowers Foods?

Q: What were the disadvantages of CSM owning Brill? What are your thoughts on Rise’s agreed acquisition

of Brill and does it improve Brill’s resources or scalability?

Q: The industry has undergone a big shift towards indulgence, then back to health and wellness. How

innovative is Brill’s positioning towards health and wellness?

Q: How innovative is Brill and why is innovation necessary? Are retailers requesting new products or is the

company starting those conversations? What are the considerations around category positioning and

distribution into retail?

Q: What is Brill’s overall US retailer reach? Is it focused on the East Coast or West Coast? If Brill sells to one

Albertsons, do

Q: How did the supply chain prevent better expansion throughout the US? I believe Brill has seven US-based

plants.

Q: Is Brill experiencing any demand trends within its regional footprint across icings, brownies and cookies,

or are certain products more popular in the south?

Q: Are any Brill products or categories particularly popular?

Q: Is there the opportunity for Brill to test a branded product locally, or is there no demand for a new type of

branded, finished premium bakery product?

Q: Could you outline the packaging innovation with Brill’s more premium or finished products, such as

reducing the number of cookies without altering the price? How might the company approach that?

Q: Where in the supply chain is the most inflation or cost increase? Is it on the pure ingredient side or is it,

as you’ve suggested, labour and trucking?

Q: In which categories might Brill have the opportunity to build a presence, or is this necessary in all major

categories?

Q: Could you outline the margin profiles in categories such as brownies and cookies? Which categories allow

the most margin flexibility?

Q: How are retailers and foodservice operators measuring quality and taste? Obviously this is subjective, but

how do Brill and other players think about quality and taste?

Brill Inc Acquired by Rise Baking Co – Speciality Bakery

& Ingredient Update

Transcription begins at 00:00:03 of the recorded material

NH: Welcome to Third Bridge Forum’s Interview entitled Brill Inc Acquired by Rise Baking Co – Speciality

Bakery & Ingredient. I am Nyree Hinton and I will be facilitating today’s Interview with Mr Ward Elwood,

former Head, Products, North America at Brill Inc.

Ward, before we get started with today’s Interview, please state I agree or I disagree to the following

statement: You understand the definition of material non-public information and agree not to disclose any

such information, or any other information which is confidential, during this Interview.

WE: Yes, I understand. I agree.

NH: Thanks, Ward. Could you start by giving the audience an introduction of your background and various

roles you’ve held in the industry?

WE: Again, my name is Ward Elwood. I started with Brill five or six years ago on the ingredients business. I’d

been on the consumer product side before then, for a number of larger companies like Kellogg’s and General

Mills, Kimberly-Clark, but came into Brill working on the ingredients business. My job was to manage the

icings business, which was their largest category. From there, was promoted into a role where I was managing

all of ingredients, and then, as the company began to focus more and more on North America separately from

Europe, I took on the full ingredient and bakery product portfolio. For my context, icings was on the

ingredient side but other items in that portfolio are glazes, whipped toppings, fillings, ice cream products, so

chocolate drizzles and that sort of thing. Pastry mixes are also considered on the ingredient side. Then, on the

bakery product side, those are more fully finished products, so the cakes, the muffins, cookies, laminated

dough, brownies, that sort of thing. By the end, I was managing the full North American product portfolio for

Brill in North America and was in that role up until a little over a year ago. I left after COVID settled down, it

seemed like a safe time to leave, and then I went into consulting.

[00:02:27]

Q: How do fully finished bakery products compete against speciality bakery ingredients, such as icings and

toppings? Are there any trends in the speciality pieces category?

WE: Even before COVID, there was definitely a trend toward fully finished product. The more finished you

could have a product, the better. The good thing is that that means that, on the customer side, customers were

looking for things that were complete, that they could easily pass off to the customer right away, things like

thaw and serve for cookies or for muffins. The difficulty is that that means less and less customisation. That

means less and less of an opportunity to impact the product quality. What you have is what you get. From a

company like Brill, the nice thing is, because we’re putting more into it, there’s more value that we can add on

the customer side too, as we sell the products off. The harder thing is, though, that you need more and more

specialised equipment, machines that can fully ice cakes and cupcakes. If you don’t have that infrastructure in

place, you’re at a disadvantage. Brill fell in the middle there, where we had a lot of the ingredient pieces and

looked to sell a lot of the ingredient pieces. We did have some finished businesses like the muffins, brownies.

We did have cakes for a while but we found that the capital that we had made it difficult for us to fully finish,

so what we liked to do is we actually liked to pass things off partially finished so that the cake was done but

there could some customisation on the far end.

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I think that’s the opportunity on the speciality side, is, if you’re a speciality bakery, there is going to be a gap vs

the Walmarts, the Publixes, the fully finished vendors. There will be a customisation aspect niche that the

speciality bakers can fill, but there’s definitely a trend towards more and more finished goods. Harder and

harder to find labour. COVID has only accelerated that trend and, of course, coming out of COVID, having

labour is that much more difficult. I think that trend will continue. Folks like more fully finished goods.

[00:05:23]

Q: Who is Brill’s end customer?

WE: Brill sold to a variety of different customers. We sold to everyone from folks who were still finishing

products, like Aryzta. We provided icings and fillings to them so that they could finish goods for a Taco Bell or

the like. We had those industrial customers. The majority of our business was to groceries, so Walmart, to

Kroger to Albertsons, and then we also had a food service business where we sold icings and finished goods to

folks like Domino’s and Arby’s, KFC, so really ran the gamut. A lot of the products to the industrial and food

service side were more on the ingredients side, though we did have some cookies and things like that for

Arby’s, and to grocery it was a mix of ingredients and finished bakery products.

[00:06:39]

Q: How did Brill’s channel volume shift between foodservice and retail during the pandemic? How difficult is

adapting supply chain agility to meet demand in the versatile channel?

WE: We were fortunate and I’ll air quote that, I’m doing the whole air quote thing when I say fortunate. We

were fortunate because a good deal of our business, the majority of our business was on the grocery side. All of

our business took a massive hit with COVID. Focus was on meats and paper products more than bakery goods,

so I’ll caveat it with that, but we were fortunate in that the biggest portion of our business was the least hard

hit. Our food service business completely tanked. It was down in, it wasn’t in single digits but it was close to

single digits at one point, as nobody was going into food service establishments, as they were struggling to stay

open and figure out how they might be able to serve folks. That piece to a massive hit.

On the grocery side. I mentioned the issues that we were having with the focus on meats and paper goods.

That, we saw. For example, we were getting complaints from Albertsons about them being out of blueberry

muffins and as we looked through the supply chain to understand where the muffins were, they were sitting in

a truck outside an Albertsons warehouse. That truck kept on getting put off as another paper product truck

would come up and they’d unload the toilet paper. Then another meat truck would come up and they’d unload

the meat. The last thing that stores were concerned about was getting more blueberry muffins. That was in

part because there was concern about where those muffins are coming from, from a customer standpoint. The

customer is like, “Wait a minute, you have somebody in the back coughing all over my muffins and is going to

give me COVID.” There was that kind of a concern. It also was not the area of the store that folks were most

concerned. A third piece was that there was a spike in at-home baking, so, “I don’t need to go to the bakery to

make a muffin. I’m going to make one with my kids because I’m at home with them now.” It was like the triple

whammy of issues with in-store bakery.

That said, since COVID, just before I left, we were coming back very strong, and grocery business was back,

the food service business was back. Food service was looking for more opportunities to differentiate

themselves and get folks back into stores, so there was a great opportunity at the end, but during COVID, hit

extremely hard. Again, we were fortunate because the piece of the business that was most of our business, the

grocery side, was hit less hard, but even it was down 40-50%, 60% at one point. In-store bakery was really hit

hard by COVID.

Private and confidential 4

[00:09:48]

Q: Was there a post-lockdown rise in consumer indulgence?

WE: I think that helped us as we were pulling out. You’re exactly right. I think that really helped as we were

coming out. Folks were looking to treat themselves. Folks were like, “Oh my gosh, I’ve been locked in my

house for how many months? I want to do something to treat myself.” Our muffins, in particular, were coming

back very strong. You’d asked about supply chain too and the shift in supply chain. We saw a big shift. On the

muffin side, in particular, we have all forms, so everything from the mixes that you would make up from

scratch from, basically, sugar and flour with some ingredients. We also had the batter that you could scoop up

and use as a muffin or whatever. We had PDMs, which is pre-deposited muffin, so picture a muffin puck that

you would then throw in the oven and you’d finish baking, to fully finished muffins. We saw a shift, again,

mentioning about fully finished products and the shift in that direction, we saw a massive shift towards thaw-

and-sell muffin, so a finished muffin that’s been frozen that all you need to do is just thaw it and put it on the

counter. Our supply chain was set up more for PDMs, the pre-deposited muffins, the ones that you finished

baking and then put on the shelf, and so we had to shift our supply to the more fully finished goods. We did

have some struggle doing that, just because of capacity, but towards the end we saw a massive shift towards

the fully finished thaw-and-sell muffin side. Again, to your point on indulgence, there was a big comeback in

our products as folks were looking for ways to treat themselves, whether it be a cookie or a muffin or a

brownie, something like that.

[00:11:58]

Q: Is Brill selling as a private label or are its premium finished products branded?

WE: We did not brand anything. We did have some licensed products with Hershey’s but really we sold the

muffin to the retailer and the retailer would brand it themselves. If you picture walking into a Kroger or an

Albertsons and you see over by the in-store bakery, you see those clamshells that have the muffins and the

cookies, we were the suppliers of those muffins. Those cakes that you see in the case, those are often our layers

and our icing. We didn’t brand it. Our products were branded CSM Brill but a customer would never see that.

A customer doesn’t know what Brill is.

[00:12:58]

Q: Why do you think Brill decided to operate as a private label speciality bakery?

WE: I think a big piece is there was just a need for it. The retailers, they want to bake this stuff in the bakery.

There’s something about having that person back there that you can talk to. It shows more love, more care. It’s

kind of like the deli section too, the difference being people know Boar’s Head over there. For us, I think

there’s this want, there’s this need for that product to be home-made. You picture a birthday cake, your mum

was making it. Now, mum may not have time but there’s still that love and care that goes into having that cake.

Where do you get your cake? You got to Publix, you go to Whole Foods, you go to Walmart, you get that nice

cake or that big cake for a kid’s birthday party. There’s just something about having, I’m going to air quote

again, that fresh product and that feeling that it’s freshly made that’s really important and that brings value to

the customer vs where you had the licensed goods that I mentioned. They really didn’t sell as well because

those are seen as processed. Europe was a different story. Europe, you could brand things and they would do

relatively well, but in the US we want to believe that our products are freshly baked by the person that’s

standing behind the counter. That goes for foods service too, “Hey, they must have made that cookie in the

back. Ooh, it’s nice and gooey and warm,” when honestly, it was put in the microwave and heated up or put in

an oven for a little while, a Merrychef, and heated up. We like to believe that that product was made with love

and care by someone in the back.

Private and confidential 5

[00:14:50]

Q: How has coronavirus impacted industry players, particularly in other categories? The supply chain issues

you mentioned, such as ingredient sourcing, would affect traditional fresh and frozen bakery. Do you think

speciality bakeries had advantages or disadvantages during coronavirus?

WE: I think the advantage that a place like that might have had, number one, they’re focused on the bakery

goods, so they’re not held up by supply chain issues because the meat is coming in first or the toilet paper is

coming in first. Their labour is more focused on the products that they’re making there, the cookies, the cakes,

vs they’re being pulled over from the deli or something to sell a cake. It’s just the focus, the love, the care, the

indulgence that you mentioned before too, the fact that you can see that the icing is often made there, you can

almost feel the grit of the sugar in there. It just feels like more care and love is there and I think as folks were

looking to get back out in the community, it’s like those stores were almost part of the community more than a

grocery store, it felt more personal, are some of the things that I saw from the research that we had done on

speciality bakery. It felt like there was more love and more care at a time when everybody just needed a hug.

That said, we were still seeing the nice bump coming back too, but I think it was particularly important for

speciality shops because they were able to focus on the bakery category in particular and they do seem that

much more indulgent, that much more special.

[00:17:20]

Q: What are the advantages of making premium products? Many big players or small bakeries just do private

label bread. Is there a margin for speciality players in the indulgent side than just pure-play bread, such as

Flowers Foods?

WE: The thing about being more artisan or more indulgent is you can show more value, you can try and price

up for that value. As you start talking about more general baking goods, like you get the clamshell with 18

cupcakes, it’s hard to play in that business just generally because the big players can produce a ton. The folks

like Brill can just make a ton of these things. It’s hard, in that sense, to compete unless you’re going to be on

the more premium, more speciality end. Cookies are a brutal place to play because everybody can make a

cookie, so what are you going to do to make that cookie special. COVID just made that worse because it

pinched the margins of the folks like Brill. Brill was really suffering trying to get more customers, trying to see

what they could do to help their customers survive, so margins became that much tighter, and margins have

been getting increasingly tight from the time I started at Brill to the time I left. I can only imagine that as a

speciality baker, it’s going to be that much worse for you because you don’t have the scale of a Walmart or an

Albertsons or a Kroger, a KFC, that can really drive the prices down. What you do have is the ability to

specialise, the ability to get that premium mark up, if you will, by putting in that extra effort and that extra

care. I think a time like COVID helps you to get hat even further as folks are looking to give themselves that

extra little indulgence, that extra little care, that extra little nudge. It allows you to get that much more from a

customer because they see that much more value in the product you’re providing vs something that’s really

mass and more general, more typical.

[00:19:53]

Q: What were the disadvantages of CSM owning Brill? What are your thoughts on Rise’s agreed acquisition of

Brill and does it improve Brill’s resources or scalability?

WE: My sense is, and so this is going a little bit out of school, I came in after CSM had acquired Brill, but my

sense was that the intent, from CSM’s standpoint, was to take some of the knowledge and skills that they had

in terms of icing and cakes and selling to grocery, take that to Europe, and, likewise, take some of the skill that

they had in Europe dealing with speciality bakery and breads and bring some of that knowledge over to the

US. It turns out those markets were just too different and the models, in terms of what consumers are looking

for, how they shop, what their expectations are, even down to the sweetness level. In the US, we love it super

Private and confidential 6

sweet vs Europe. In Europe, they love to eat their bread, and not that we don’t like bread but we’re just as

happy with Wonder Bread vs a nice loaf. The markets are just too different. I think once that realisation was

made, it became very difficult for the company. Once it started to split apart, it became harder to manage

because you’re trying to manage two very different businesses.

What I like about the Rise acquisition is it allows a company that understands the US market more to focus

more, to take in some of the products and make it a truly North American business again. Without the conflict

of how’s Europe doing and how’s North America doing, they can focus on what the North American business is

doing. I know less about Rise, so my sense is that an issue might be their understanding of the ingredients

side, things like the icing. I think of Rise as more a bakery products company. That said, I think it could be a

really good add to their portfolio because it gives them that extra piece and the expertise, because Brill is

outstanding as an ingredients company. It gives them an extra leg in that market and allows them to play, be

an even stronger player in the bakery market overall, by having that component too. My sense is, and, again,

out of school, my sense is Rise, as a baking product company, with the Brill ingredients piece makes a really

strong partnership. You could look at that the other way and say if you bring in Brill’s bakery products, then it

makes that much stronger of a bakery products player, and then they should sell off the ingredients to another

company, like a Lawrence or somebody, who has similar capabilities, but I do think that when I heard about

the merger, I thought it was a strong move by Rise, especially if they were looking to increase their ingredient

portfolio and expertise.

[00:23:39]

Q: The industry has undergone a big shift towards indulgence, then back to health and wellness. How

innovative is Brill’s positioning towards health and wellness?

WE: I always had a fight with folks about health when they would bring up things like, “We need a low-sugar

icing,” or, “We need to reduce our calorie count,” or things like that. Bakery products strike me as something

that if I’m looking for a cookie, I’m looking for a cookie. If I’m looking for a cupcake, I’m looking for a cupcake.

I’m not looking for a healthy cupcake. What even is a healthy cupcake? I was never really a fan of the push

towards health. I’m not for pushing for unhealthy stuff or stuff that’s going to kill somebody or that’s

cancerous or something like that. The move away from PHOs, I understand why that was made and I’m not

against it, but, by the same token, something like trying to get to lower sugar or bakery products, I don’t know

that that’s a good idea. Health and clean label and things like that, I think it’s important to keep your finger on

the pulse, but I think it’s easy for a category that’s more indulgent in the first place to get carried away with it

and try and do too much with it.

I guess this is all a way of saying how innovative is Brill in the health and wellness space, it’s probably not so

much. The way we tried to think about clean, this was a big push from me, a big focus as we tried to look at

clean label, clean label has no real definition, so we were looking to define it and looking to explain what clean

label meant to us. What clean label meant to us was we’re going to make sure that you have the best

ingredients that are well-sourced, that are more naturally sourced, but, by the same token, we’re not going to

go overboard because in the end we know we’re making icing, we know we’re making cakes. First and

foremost, we need to be delicious and if we end up being healthy in the process, great. We’re not looking for

weight management filling or something like that. Did that answer the question? How innovative were we? I

think we were always looking for ways but it wasn’t first and foremost in our mind, how do we reduce sugar, or

something like that.

[00:26:26]

Q: How innovative is Brill and why is innovation necessary? Are retailers requesting new products or is the

company starting those conversations? What are the considerations around category positioning and

distribution into retail?

Private and confidential 7

WE: For Brill, innovation, a lot of it was customer-focused vs consumer-focused. It was looking at the pain

points at the grocery, so labour always there, cost always there, trying to supply something that might be clean

label as your customers are asking for more clean label. We were always looking to innovate on those aspects.

We were always looking to provide insight around the consumer to our customers but our innovation was

always very customer-focused.

In terms of what those innovations might be, they really fell into two camps. I started an LTO programme, a

limited-time offer programme, seeing the success that folks in food service saw with LTOs, the news that they

would bring, also seeing that there were a lot of retailers, particularly mid-sized retailers that are looking to

bring news to the bakeries, so something seasonal was very well-received. We had those seasonal LTOs, which

tended to be flavours, and saw those as a stretch in the innovation, because it’s really not innovative to put a

flavour into the same kind of icing. Then we also had programmes that were looking to continually improve

the ingredient, the product that we had in our icings, the way we were packaging our icings to make them

easier to use for folks in the back, for ways that we could use our products in new and innovative ways. For

example, if you take our PDMs and put them in a pan, you can create a completely novel, almost like a cake out

of them. The innovation was very much on the product and the packaging side. Where we could have had more

innovation, I think, is on the production side, to help reduce cost. We weren’t as good there though. A lot of

our funds for capital were held up in maintenance and things like that because some of our equipment was

older. We were trying to streamline our supply chain, so a lot of investment in the plant side was going

towards that. Again, a lot of our innovation was more focused on product and ingredients to help customers

but probably less so on the production side.

[00:29:57]

Q: What is Brill’s overall US retailer reach? Is it focused on the East Coast or West Coast? If Brill sells to one

Albertsons, do these contracts apply to all US Albertsons?

WE: They were national contracts. We were a large national player. We would talk to smaller companies and

we did have a whole wes force that was going after mid-size for Midwest groceries like Spartan or something

like that, but most of our contracts, most of our business was with the larger national players. Albertsons, I

know that they’re split up by regions but we had somebody who was focused on Albertsons and making sure

that we got every region. We were a large national player. Most of our companies were in the south, Midwest,

west. We had less of a presence in the northeast, partially because of where our plants were, partially because

supply chain and how those folks tend to be more regional anyway and have different distribution, but we

were a large national player. Probably our weakest area was the northeast.

[00:31:46]

Q: How did the supply chain prevent better expansion throughout the US? I believe Brill has seven US-based

plants.

WE: The biggest issues we had, we had a big plant in California and so getting stuff from California to the

northeast, super difficult, and that’s where the biggest portion of our brownie business was. That made things

difficult. We were fortunate in that we had a bakery products plant right in the middle of the country that

could supply well. Our icings, we had the biggest plant here in Atlanta, so getting that to the West Coast

became more of a challenge and more expensive. Generally, we were set up relatively well in terms of where

our plants were, the biggest gap, again, being probably the northeast and being able to supply the northeast. If

we could start all over again, I think our plant in California, if that were more centrally located, that would

have helped, and then if we had a larger icing plant in probably the upper Midwest, although my

understanding is they’re looking to shift some of their resources, some of their assets to the Eagan plant in

Minneapolis to help with that.

Private and confidential 8

[00:33:35]

Q: Is Brill experiencing any demand trends within its regional footprint across icings, brownies and cookies,

or are certain products more popular in the south?

WE: We had hypotheses that there were some products that might do differently in different parts of the

country, like our icing was super smooth, would a grittier icing do better in the northeast, but really we didn’t

see as much regionality in our products. Our products were pretty ubiquitous. The one difference might be as

we look at loaf cake, we would have liked to have sold more loaf cake in the northeast. We didn’t see as many

sales there, but I think that was more a supply chain issue. That was our California plant that made the loaf

cakes and it was, again, hard to get products to the northeast. Generally, our products were pretty ubiquitous.

[00:34:48]

Q: Are any Brill products or categories particularly popular?

WE: Brill, most of our business, our icing business was super strong. Our cake business was decent but,

honestly, we sold cakes as a way to sell our icing. Muffins were super strong too. Our cookies were less strong.

Our cookies were more so that we could round out the portfolio, and there are other players, honestly, that

could do more with cookies and do it cheaper. Our brownies business was small. The biggest categories were

really icings, cakes and muffins.

[00:35:47]

Q: Is there the opportunity for Brill to test a branded product locally, or is there no demand for a new type of

branded, finished premium bakery product?

WE: Depending on how it’s done, there could be a market. If you look at something like Kimberley’s with their

cupcakes, those seem to do well in grocery. What they’re offering is unique flavours and fully iced. Their

biggest advantage is probably their packaging. If you flip it upside down, the cupcakes, because of the way that

the package actually grabs the cupcake, they’re not going to smush, you’re not going to smush the icing, so it

works really well from a packaging standpoint. If you look at a Kimberley’s, that’s a branded product and it

does pretty well. Is there a space? Sure, but you need to offer something special, something that a bakery can’t

do on their own that you can prove that consumers want.

[00:37:06]

Q: Could you outline the packaging innovation with Brill’s more premium or finished products, such as

reducing the number of cookies without altering the price? How might the company approach that?

WE: The way we were working with customers around number of items, counts and stuff like that, I’m trying

to think how best to say this. We were seeing trends towards small, towards fewer portions as we looked at

cakes. Instead of the big sheet cake that you might have had as a kid at your birthday party when you had the

entire kindergarten class over, moves towards smaller more indulgent cakes, so now think about Whole Foods

with their six- or eight-inch round that’s stacked a little higher and just looks really indulgent. We saw moves

towards smaller that way, but as you look at something like a cookie, we were actually seeing moves towards

bigger, more of a treat for yourself. We had programmes with a couple of retailers like Meijer, where we were

developing larger-sized cookies that you would pick up and go at a USD 0.99 price point. It was like a garbage

sink, or a kitchen sink, garbage kind of cookie that had a little bit of everything but was bigger and was just for

you as a treat. We actually saw moves in those directions and were working towards packaging solutions for

those. How do we make cakes that are smaller but make them efficiently still? How do we make brownies and

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cookies that are bigger, so that they’re more indulgent for the single-person treating themselves?

For packaging generally, we also developed a special bag called DecoPro. Instead of the big 35-gallon drums

that can get really heavy and bulky and difficult back of house, pre-packaged icing bag that were easier for a

decorator to manage. They didn’t need to take the whole bag, the whole bucket and then fill up a pastry bag. It

was already pre-filled for them. It was easier to use, it was less weight. We were looking at back-of-house

solutions like that to help back-of-house operations from an ingredient packaging standpoint. A lot of pouches

there.

[00:40:12]

Q: Where in the supply chain is the most inflation or cost increase? Is it on the pure ingredient side or is it, as

you’ve suggested, labour and trucking?

WE: It was transportation was the biggest that I’d seen. I have a little more trouble talking to cost, because I

haven’t really seen what inflation has done to things like the ingredient side, but when I was there the big issue

was transportation. The transportation costs were just spiking and making it more and more difficult, as we

were trying to take something from California to the northeast, which I mentioned was a problem, and it made

it more and more imperative that our ingredients were more centrally sourced, so things like our Midwest

baking plant, we wanted that thing going 24/7.

[00:41:19]

Q: In which categories might Brill have the opportunity to build a presence, or is this necessary in all major

categories?

WE: That’s difficult to say. We explored getting more into cookies but decided there are too many players that

can do it that much more efficiently and effectively. We talked about getting into brownies, because I think

brownies was an area of growth, and iced pound cakes, iced, sliced loaf cakes, we were looking to grow those.

As you look at categories where we weren’t and where we might go, we could have gone into something like

bread, but I don’t think we would have been particularly good at bread. If you look at something like Danish or

laminated, laminated was a space that was interesting to us but we were struggling to figure out how we could

to that cost-effectively too. Honestly, as I was leaving the big question was how do we take the categories we’re

in right now and improve margins further on those? I don’t think we were ready to expand into something

else.

[00:42:44]

Q: Could you outline the margin profiles in categories such as brownies and cookies? Which categories allow

the most margin flexibility?

WE: Icings was a really good margin category. The issue was you had to maintain the quality. If you didn’t

maintain quality, you’re just fat with flavour, fat with sugar. If you can show high-quality, and Brill had an

advantage because of its sugar, it was ground ultra fine, finer than you could buy in the market. It had an

advantage there in terms of taste and texture which allowed it to demand more of a premium. The flavouring

that they would use, too, was ultra high end, so, again, would demand a premium. If you can do that, then you

can get the margins. If you’re going to try and play with some of the low-cost players, you’re going to end up

losing. There was a point, because Brill had some issues with their SAP implementation, there was a point

where, to get Walmart business, they were willing to play a price game and they paid a price. They ended up

hurting margins pretty badly and ultimately, when the contract came up again, we elected not to take the

Walmart business, even though it was a huge chunk of volume, just because it wasn’t worth it. If you’re going

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to play low end, the margins aren’t there. If you’re going to be premium, if you’re going to be more speciality,

you can get decent margins. That’s what Brill was able to see on the icings side and, to some degree, on the

muffins side, too. That’s also a reason why they weren’t going to play in cookies, because we were like, “The

margins just aren’t there for us.” If we are going to play in cookies, we’re going to do something like we did

with Meijer, where it’s going to be premium ingredients, it’s going to be an indulgent cookie, not your everyday

cookie.

[00:45:18]

Q: What opportunity does Brill have in foodservice and what is the margin profile there? Is Brill potentially

missing out on foodservice market share by not being sufficiently active, or does the whole industry lack in this

market?

WE: That could be answered a couple of different ways. If you look at the food service opportunities where

Brill could do well, if you look at something like the Arby’s cookie, or the Chick-fil-A cookie that they used to

make, those were premium finished goods. They would need to be the puck that had to baked off, but generally

all the ingredients and everything were there and they were ultra-high premium. Where they would have liked

to have gone is to thaw and sell with those cookies, but then you lose some of the quality. It’s all about the

quality that a customer is willing to pay for. If you can find the right player, like a Chick-fil-A, who’s looking for

high quality, then you can do something special. If you’re looking for somebody that’s looking for versatility, so

we were looking at ideas for KFC in terms of brownie desserts and what you could do. One of the ideas that we

had was you have a brownie base and then you can add different toppings or different icings to give you

different flavours throughout the year, so then you have a stable menu item that’s always being refreshed, it’s

always being renewed for the season. If you can talk to a food service provider about doing that, that kind of

play, there’s a lot of upside for a place like Brill. Again, it has to be a player that’s interested in doing

something more premium, and then you’d probably want it to be somebody that could provide enough scale to

make it worth Brill’s time.

Upside on the food service is really up to the food service industry and if you get somebody that’s just looking

for something cheap, that’s not something that Brill is going to play particularly well in. I can’t imagine, and

this is picking on them a little bit, and I know they have the McCafé that’s trying to be more premium, but if

you’re talking about a McDonald’s or somebody, amazing volume but my sense is, looking at their bakery

product offering, they’re not the kind of a quality that a Brill would provide. It’s a lower-quality product but

decent quality and a lot of volume. If you look at somebody like a Starbucks, and I believe they regionally

source, there was a time when they would nationally source, something like that, if they’re looking for

something more premium, more high end, that could be a good play for a Brill.

[00:48:30]

Q: How are retailers and foodservice operators measuring quality and taste? Obviously this is subjective, but

how do Brill and other players think about quality and taste?

WE: Part of it is the relationships are huge. Having the right sales force that has the right relationships with

the buyers is so important, and building up that trust. Then it comes to what that buyer is trusting you for, are

they trusting you to deliver something cheap that hits a certain price point or are they trusting you to deliver

something that’s really high quality? The relationships that Brill built were with buyers that were looking for

something more high quality. The way that we would demonstrate it to them was by bringing in some

competitive product. If you showed a Bake’n Joy muffin vs one of our muffins, the difference in the colour, the

difference in the way they baked off was apparent visually and then from a taste perspective too, the way it felt

in the mouth, it was really clear as well. Then it becomes what is the buyer really looking for, are they looking

for something unique and special or are they looking for something that hits a certain price point? In the end,

it’s probably a mixture of both. Like you said, it can be really subjective but we would target buyers that were

looking for something more premium and more quality.

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[00:50:37]

NH: I think that’s a good place to conclude the Interview. Let me just close by saying, thank you, Ward, for

your time today. We were able to cover an extensive amount. Thank you, clients, for joining Third Bridge

Forum’s Interview. If you would like to speak to Ward in a private call or meeting, please let your relationship

manager know. Have a good weekend.

WE: Thank you so much, really appreciated the opportunity and had a good time. Thank you.

Transcription ends at 00:50:55 of the recorded material

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