Jeffrey W. Overby
The Bakery Cos. and the Internationalization Question
The Bakery Cos. (TBC) was a Nashville based company that supplied buns to McDonald’s and other restaurants in North America. Its CEO, Cordia Harrington, aka the “Bun Lady,” had opened the company in 1996 with the last few remaining dollars left in her savings account. Harrington had already become successful as a McDonald’s franchisee. However, while traveling to bakeries around the world that supplied McDonald’s, Harrington realized that the wholesale supplier industry allowed for a far more flexible lifestyle than restaurants. This realization sparked the idea of building a bakery and becoming a McDonald’s supplier. Luckily for Harrington, McDonald’s Corporation had a need for an additional bakery supplier and for a one that could offer diversity in supply. She eventually sold her McDonald’s franchises to focus solely on TBC. By 2018, TBC had become a key supplier to McDonald’s, O’Charley’s, Chili’s, and Pepperidge Farm and was producing over 8 million pieces per day. One of its factories was among the fastest high-speed bakeries in the world - producing over 1,000 buns per minute. However, the U.S. bakery industry was changing due to falling per capita wheat flour consumption and consumer desires for healthier and artisanal products. As a result, U.S. revenue growth was forecast to slow significantly. The most attractive opportunities for growth were likely to be in international markets where the bread industry was often not yet in the maturity stage. Back at TBC, these global trends were leading Harrington to consider the idea of taking her highly automated processes and duplicating them in other countries. Being a McDonald’s supplier had brought steadiness and certainty to the production volume, which made planning and investment decisions much less complex. The Bakery Cos. had a number key issues that needed to be addressed to ensure future success. For example, what were the implications for commercial bakeries in the face of changing consumer tastes and were these trends local or global in nature? And from an international perspective, the firm faced uncertainty about whether and which foreign markets to enter, lack of infrastructure in potential foreign markets, high competition with other suppliers who already had foreign market share, and many political and cultural barriers. For Harrington, the question remained, which market should TBC enter and what mode of entry should it use?