Krusteaz focuses on fundamentals to fuel growth

SEATTLE — After nearly 100 years, The Krusteaz Co. is continuing to create sustained momentum in the baking mix category and beyond through a focused approach to its fundamental categories and long-term licensing partnerships.

The company began in 1932 as a manufacturer of just-add-water pie crusts, operating as Continental Mills, Inc. from its founding until September 2022. Today, Krusteaz markets a core portfolio of prepared flour and gluten-free products, including a variety of pancake, waffle and baking mixes.

“The categories we’ve historically competed in are products that require some level of engagement and creativity that you’re adding yourself in the kitchen, and we’ve been pretty disciplined in sticking with those types of categories,” said Andy Heily, chief executive officer of Krusteaz, in an interview with Food Business News. “The single most important thing, if I had to prioritize, is making sure that we’re continuing to invest in our core categories: bake mix and breakfast mix. Those are the categories that represent 90% of our total business today, and so a little bit of growth there goes a lot further than incremental growth in new categories.”

The company’s focus on executing in its core categories has yielded positive results, garnering an average compound annual growth rate of approximately 6% since 2018. Krusteaz’s financial performance over the period also comes in part due to exiting “some less strategic businesses at the same time” and macro factors such as COVID-19, Heily said.

“A lot of brands that were historically competing in pretty mature categories that weren’t typically growing on their own actually experienced pretty significant growth that was initially sort of stimulated by COVID, and then all the downstream things to COVID created a sort of growth environment for center store grocery, which you know historically has been relatively flat,” he said. “We benefited from that as well, but we ultimately, in my perspective, out-executed others in the category and outpaced everybody in that category.”

In addition to sharpening its focus on the company’s core portfolio, Krusteaz’s strategy incorporates the insights of a 96-year-old business and leverages its long-term perspective into a strategic advantage.

“I feel blessed to be running a privately held family-owned business because we are able to think in generations, not quarterly analyst reports,” Heily said. “It allows us to make decisions that maybe don’t have a short-term ROI, but ultimately, I think, enables us to have a more long-term and sustainable business. So even just product quality, as an example, we could have cheaper products, but they’d be worse.

“We’re able to give up a percentage of EBITDA, or whatever it might be, and have an actual product that we can really stand behind and feel confident that ultimately we have the best sensory experience you’re going to have in the marketplace.”

Another prong of the Krusteaz growth strategy has been utilizing long-term licensing partnerships to explore and experiment with new opportunities. For instance, the company entered an agreement with the Ghirardelli Chocolate Co. during the 1990s that enabled Krusteaz to enter the chocolate segment with brownie, cookie and other baking mixes.

“(Ghirardelli) really enabled us to get into kind of chocolate-centric categories in a way that, frankly, Krusteaz wouldn’t have been as relevant,” Heily explained. “Consumers absolutely give us the right to be in any kind of bake mix category, but Ghirardelli, the promise of their premium chocolate embedded in all of our formulas, is something that really takes the product to another level.”

More recently, the company has utilized the licensing partnership to enter the refrigerated category with the first line of Ghirardelli refrigerated cookie dough.

In addition to its Ghirardelli partnership, Krusteaz has worked with the Red Lobster Seafood Co. for more than a decade to produce Red Lobster Cheddar Bay Biscuit mixes, and in 2021 the collaboration enabled Krusteaz to make its foray into the frozen segment with ready-to-bake Cheddar Bay Biscuits.

“We really want to meet consumers wherever they are,” Heily said. “They’ve got a pantry, a freezer and a refrigerator, and we want to participate in every relevant spot in their life.”

The company also has ventured into the snacking space with its WildRoots trail mix. The brand was started nearly 17 years ago as a rotational item in select Canadian Costco stores, and WildRoots has since grown to include distribution across Costco’s North American stores and Sam’s Club. While the brand remains exclusively in the club channel with three stock-keeping units, Heily sees WildRoots expanding into other channels and formats beyond trail mix as part of the better-for-you snacking trend.

“Everybody’s trying to get that pallet spot, and so the fact that we’ve been able to defend our position and grow it over the years in what I think is the most challenging and competitive channel out there is a testament to the quality of the product and how strong the brand is as well, and club members have been extremely loyal to that brand,” he said. “We believe there’s absolutely the right to take that brand beyond club into your grocery and convenience store, potentially vending, foodservice and other channels, as it exists today, which is a trail mix.

“We think that brand could play in clusters and bars, granola for sure, anything that stands for better-for-you snacking.”