Tastykake bites the dust

April 12, 2011

This post was written by Joe Hassett, Senior Vice President

A Georgia food company is set to acquire Philadelphia’s iconic Tasty Baking Co. That’s the third company based in the City of Brotherly Love to fall prey to an out-of-town suitor in the past month. Both jobs and the region’s prestige are set to take another body blow. Rocky wouldn’t be pleased.

For public companies pressed for growth by their investors in what is a still moribund economy, acquisitions are an attractive option to quickly boost revenues and, ostensibly, earnings. And with their hefty bank accounts, corporations have the wherewithal to make acquisitions on their own terms and with their own money.

For the companies getting acquired, it’s an economic lesson in the laws of market supply and demand. Though a leading metropolitan Philadelphia brand, Tasty Baking was, in reality, a small niche player in the gigantic food industry. In a world of increasingly global brands supported by eye-popping marketing budgets, Tasty was the Philadelphia street fighter competing with the polished professional boxers punched out by the well-oiled (and well-financed) machines.

These larger firms benefited from greater scale that enabled them to spread their costs of both distribution and manufacturing across a national, and frequently international, customer base. Heck, until recently, you couldn’t even get Tastykakes at a Phillies game!

Charlie Pizzi, Tasty Baking’s President and CEO, and his management team waged a fierce battle to preserve the company’s local roots and identity. Years ago, over the howls of local protest, they made the difficult decision to abandon the company’s aging Hunting Park facility for a modern bakery at the Navy Yard.

But, in the long run, even these bold moves were not enough to satisfy the company’s many constituencies, customers, employees, politicians, investors, and others, eventually stretching the company way too thin and landing it in the discount aisle.

Like others before it, this Philadelphia staple fell victim to the inevitable force we call progress. Straddling that desire to maintain a local flavor with the need to continually grow proved as challenging for Tasty Baking as it did for many other local companies before it.

The new local model is Comcast, a Philadelphia company that has managed to prosper while evading the lure of a New York address so temptingly dangled before them several years ago.

Clearly, Comcast has proven there is a winning formula for local firms to maintain a provincial feel while succeeding outside of our immediate geography. This demands difficult choices, but is clearly a strategy that will preserve our heritage and embellish our reputation globally.

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