It's No Piece of Cake in a Baker's World

Kobi Hakak was sent to vocational school at age 15. No one thought then that the kid who couldn't sit still in class would one day be the owner and CEO of the bakery chain Roladin, which has 15 branches nationwide and a factory that makes tons of baked goods a day.

The first Roladin branch opened in 1989. Hakak, the family's youngest son, and his brother Avi - who has since changed his last name to Keinan - renovated the store together and baked cakes and cookies in an oven on site. The oven had to be removed due to municipal zoning regulations and now the baked goods are manufactured in a 3,500-square-meter factory.

Even now, with 200 employees, Roladin is first and foremost a family business. Kobi is CEO and handles operations, Avi is responsible for production, and eldest brother Dudi is in charge of the chain of bakeries.

"We disagree because we are brothers, but we are friends and there is a clear delineation of jobs," Kobi Hakak says.

"Today, any kid with a little bravado who has worked in a bakery for a year, opens one of his own. In France, he would have to wait 30 years," says Hakak, who appears after 15 years in the business to be far less forgiving of youths similar to him and his brother of yore.

"They are always opening and closing bakeries and cafes - the only ones doing well are the guys selling tables and chairs," he says. "Just recently, near our Ramat Hasharon branch, two bakeries closed down, a branch of Lachmi and another one. They made trouble for us for two years, and then they folded."

Hakak explains that the threshold for entry in the coffee market appears low. "Someone who is not professional invests $30,000-50,000 and closes down after a year. This kind of business needs at least $150,000." But money isn't enough. "Above and beyond the investment, you need a professional entity that understands the work."

Part of Hakak's philosophy is not opening more than two or three branches a year, on the way to the total of 23 he believes Israel can support. "We still want to be here 15 years down the road." In the past year, the Hakak family has focused on consolidation, buying branches back from franchisees and investing NIS 1 million in rebranding. Some of the existing franchisees are former branch managers who bought their branch at cost - "a method that has proved itself. The franchisee gets a portion of the profits and everything is transparent," he says.

"We are still a bakery chain and coffee goes with cake. Coffee is just 20 percent of sales," Hakak insists. It is important to him to emphasize that Roladin is a bakery, different from the cafe chains. Roladin's baked goods are made by hand at its factory in the Kadima industrial zone.

"Arcaffe brought the coffee culture to Israel and kudos to them for it. Lechem Erez brought the gourmet bread culture and kudos to him for that. They opened the market for companies like Roladin. Roladin has improved unrecognizably from what it was 10 years ago. Lechem Erez should be a bread factory, Arcaffe a cafe chain and Roladin should be a bakery - that's what we all do."

Competition with Arcaffe and Lechem Erez doesn't begin and end with which chain the customer chooses. Lechem Erez products are available today at other cafes and Arcaffe sells sandwiches and baked goods to cafes outside the chain, as well. Whispers can be heard in the sector about overcapacity, but Hakak is quick to note that Roladin manufactures only for itself, selling very little to other cafes, and those products are different than those sold by the chain.

"Our advantage is that we make our own baked goods, so we can sell a coffee and cake that just came out of the oven for NIS 13. Anyone selling a Lechem Erez croissant is selling something baked at 11 P.M. yesterday. Many cafes seek out our products, but I don't sell to just anyone. I am a marathon runner," Hakak says of his business logic.

When Hakak says Roladin only manufactures for Roladin, he means in the cafe field. Roladin does manufacture for national airline El Al and foodstuffs giant Tnuva. Hakak says the partnership with Tnuva, which began with just Shavuot cakes and broadened to the rest of the year, is just starting out. "Tnuva is a big player or doesn't play at all," he summarizes.

Hakak, a fluid speaker, stops when asked about Roladin sales turnover. After some thought, he provides just a few numbers and none of them in nominal terms. "Our same store sales grew 8 percent last year. The factory's turnover is 50 percent of the cafe chain's."

Estimates in the sector are that Roladin's sales turnover is in the NIS 30-35 million range annually. That puts the factory sales at NIS 15 million a year, and Hakak projects sales will increase 30 percent this year, testimony to his faith in the Tnuva partnership.

Tnuva won't be the only source of Roladin growth. The chain is investing NIS 350,000 in a branch inside the Gelilot junction branch of food discounter Jumbo. "This will be a special concept branch with bread baking on site, in front of the customers. The branch will be 250 square meters and a cafe will allow customers to sip coffee and enjoy their supermarket experience."