How private equity leaders are retaining Klosterman Baking Company’s legacy and family values 

A great sandwich is only as good as the bread it’s served between. The same goes for burgers, sliders, and hot dogs – in fact, bread and baked goods can make or break a meal.

One business that truly recognizes the importance of baked goods is Klosterman Baking Company (Klosterman). With a history spanning 131 years, Klosterman prides itself on consistent quality, reliable delivery service, and unparalleled customer support.

Klosterman Baking Company was family owned and operated for 130 years. Several generations of the Klosterman family led the business to success until 2022, which is when private equity firm, New Water Capital (New Water), identified a great opportunity to invest in Klosterman and maintain its growth trajectory. Despite new private ownership, Dale Easdon, Klosterman’s CEO, is keen to ensure that family values remain at the heart of the business. We sat down with Dale to discuss the history of the business and his plans under New Water Capital’s involvement.

“Klosterman was founded in 1892 under the name, French Baking, when Frank Klosterman, along with business partner, Charlie Thiewald started a small, yet creative French bakery in Kentucky,” Dale begins. “In 1918, Frank bought out Charlie, changing the company name and bringing his brother, Benjamin, onboard. Over the decades, the bakery gradually grew in terms of both its production and geographical footprint, with multiple bakeries and fresh distribution centers, eventually becoming the largest family-owned bakery in the Midwest.

“When it came to the family’s fourth generation, they decided to pass on the baking torch to new ownership. That’s where New Water Capital and I got involved; we saw it as an exciting opportunity to grow the business through providing top-notch customer service and products, and, of course, continue the family’s well-deserved legacy.

“Klosterman is the third company I’ve worked for under New Water Capital’s ownership, and they are great business partners,” Dale explains. “It is certainly not a typical corporate remote private equity firm. Rather, as investment partners, they help to create opportunities for businesses in the middle of a transition, focusing on reinvestment instead of micromanagement. We have regular review sessions, and they are always keen to support in whatever ways they can. For instance, I currently have support from New Water to assist with data analytics and system launches.

“In terms of reinvestment, New Water refers to the lighthouse concept, which means prioritizing investment that ensures our bakeries are a beacon of best practice,” he adds. “Together, we must consider how to scale the business while maintaining our focus on customer service, fulfilment, quality, and safety.”

Turning to products, Dale explains: “Klosterman has always excelled in meeting evolving customer demands. We’re known for a series of baking ‘firsts,’ like the first square loaf of bread, half-size retail loaves, and hamburger buns.

“Today, we’re best known for our delicious fresh products, which can be divided into three categories – bread, buns, and donuts, which we produce exclusively for a large US chain. We supply fresh products directly to groceries, restaurants, hospitals, and schools, but we also operate a very healthy stream of frozen business. This means we fast-freeze freshly baked goods, enabling us to ship products to customers all over the US.”

Waste reduction
When it comes to company values and working culture, Dale is passionate about retaining the Klosterman family’s ways of working to ensure the ownership transition is smooth and positively received. “It’s all about the behavior of leadership from the very top,” he states. “By that I mean going beyond an open-door policy to actually spend time with staff. I often visit the bakeries and I like to be known as Dale at every level of this organization; it sounds strange, but it’s not a panic moment when the CEO turns up. Rather, our employees are used to seeing and interacting with me.

“Our culture is also influenced by the fact that our number-one value is looking after our employees, with initiatives like competitive health benefits, employee celebrations, and rewards for hitting milestones.

“Another thing that’s quite unique for a bakery business is our commitment to Six Sigma,” Dale adds. “I personally have a black belt Six Sigma, and when I recruited an individual to oversee operational excellence, they too wanted to train towards the qualification. Other leaders then got involved too, so we made the decision that all our senior leaders would graduate as a black belt. We then extended this further, committing to funding the training for anyone in a supervisory role or above.”

This approach extends to the wider community too. “With some of our larger customers, we’ve implemented a returns initiative where we collect produce that has reached the end of its shelf life. We then sell the products at a considerably discounted price in selected stores to enable families to purchase high-quality fresh bread at a much lower cost. If there’s still produce left over, we then allow farmers to collect products for animal feed, so that absolutely nothing is wasted.”

Best-in-class bakeries
With an evident focus on supporting both employees and the communities in which it operates, Klosterman is sure to succeed in 2024 and beyond. “I’m hoping that 2024 will bring far less challenges than those we’ve experienced over the last three years,” Dale proposes. “We’re starting to see the supply chain and distribution normalize again, but we can never be complacent with our products. We must be extremely proactive and creative to continue growing, while encouraging new generations to enter the business.

“The Ohio area will always be our core location, but I see potential for us to acquire businesses that fit our portfolio or build new bakeries in different states to grow profit and expand our geographic footprint,” he concludes. “Right now, however, our overall focus remains on bringing all our bakeries up to best-in-class with technological advancements and lean operations.”