Baking Principles into the Business


How Dancing Deer, a small Boston bakery, rose up to become a multimillion-dollar business -- without losing its socially responsible core values

When Patricia Karter and her two partners co-founded the award-winning Dancing Deer Bakery in Boston in 1994, they did so with a simple yet unconventional business philosophy: If bakers love what they do, it shows in the food. A decade later, that guiding principle has helped propel the natural, home-baked goods outfit into a fast-growing business that's both unstintingly consistent to its core values (all-natural ingredients, philanthropy, environmentalism, and employee development) and highly profitable: Sales are expected to reach $8 million this year, a 40% jump from 2004.

The quirky bakery that has earned financial success and industry accolades actually got its start as a result of serendipity. Karter, a former entrepreneur who had returned to her true passion, painting, had fallen in love with the cakes and cookies of baker Suzanne Lombardi. At the time, Lombardi was selling her goods at coffeehouses around Boston, hauling her pots and pans to a rented kitchen each day.

Lombardi asked Karter, who had a master's degree in public and private management from Yale, for business advice, and they ended up launching a company together. "She was an amazingly talented baker," says Karter, "and I decided to invest in her."

SWEET SUCCESS.

Karter and her then-husband, Ayis Antoniou, poured $20,000 into Dancing Deer and set up the fledgling outfit in an old pizza parlor in the inner-city neighborhood of Roxbury. The original plan had Lombardi and Antoniou, a business strategist and foodie, involved in the day-to-day operations, while Karter would spend half a day each week on design issues and consulting.

Capitalizing on the growing popularity of gourmet coffeehouses, the Dancing Deer team saw an untapped market for quality baked goods to be sold alongside the double espressos. "The coffeehouses were sophisticated, but there wasn't much to eat that was good," says Karter, "and natural products weren't really available."

What began as a hobby investment quickly took off. Sales of Dancing Deer's made-to-order Snickerdoodle cookies, shortbreads, and deep, dark gingerbread cake were so brisk that a year after launching, Karter put her paintbrushes down temporarily to help guide Dancing Deer as it grew into a more formal business. Indeed, within two years Dancing Deer's sales reached $283,000 and the following year more than doubled, hitting $692,000. "I thought I would take three to four months off," says Karter. "That was 11 years ago."

RECIPE FOR RESPONSIBILITY.

From the outset, Dancing Deer strived to be more than just another small-business bakery. The trio resolved to create a company and working environment that was, as Karter explains, "exceptional." It would not only make good cookies but also make good business, and it would do so by remaining socially responsible.

Almost since its inception, Dancing Deer has won awards for its baked goods and innovative business practices, as well as its dedication to the community and the inner city where it operates.

"Dancing Deer is a successful company with an incredible reputation," says Deirdre Coyle, a senior vice-president with the Initiative for a Competitive Inner City, a Boston-based, national nonprofit. "It is an incredible asset for Boston's inner city and a role model for cities across the U.S. They demonstrate what can be done and what should be done."

PEOPLE POWER.

To begin with, all employees have an ownership stake in the company. Dancing Deer provides all staffers with health insurance, paid lunches, and overtime. A majority of the bakery's 60 workers are immigrants. Karter says when many of them started, they barely spoke English. Today, however, many serve in management positions.

In 1998, when the company outgrew its space, Karter decided that instead of moving to a bigger and cheaper location in the suburbs, she would stay in Roxbury so as not to lose her staff, many of whom lived in the area. "We had built this workforce," she says. "And they are a big part of why we were successful. We needed to hang onto them."

All of Dancing Deer's products are made fresh from scratch, using only natural ingredients, and it uses eco-friendly packaging and production facilities. Three years ago, the bakery went kosher, completely upgrading its facilities to meet stringent orthodox rabbinate standards. "We wanted to form a company that pushes the boundaries of worker ownership, empowerment, and creativity," says Karter. "We wanted quality on all levels and we hoped to create a brand that stands for something."

BUILDING A BRAND.

Eventually the bakery made a key decision to cut loose the small café accounts that had helped build Dancing Deer's reputation in the first place. "We found that 30% of our business was the least profitable and most complex," says Karter. "We were servicing a lot of individual coffeehouses that would order 10 of this and 3 of that. They would call us if one scone was broken, and we'd have to write up a credit invoice. There were too many operating challenges."

The bakery shifted its concentration to the high-end wholesale market. "We wanted to focus on packaged cakes and cookies and on creating a brand," says Karter. "That's where we saw the future." Today, Dancing Deer is sold in hundreds of specialty stores across the country such as Whole Foods (WFMI), Wild Oats (OATS), and Dean & Deluca.

In 1997, in an effort to further develop the Dancing Deer brand and keep up with growing demand for its products, the company began a mail-order business through an 800 number and its Web site, www.dancingdeer.com. That same year the bakery launched a corporate-gift giving program. Its blue-chip clients include Goldman Sachs (GS) and Fidelity Investments. The two initiatives now account for more than 20% of overall sales.

"SORRY."

However, the main test for Dancing Deer has been to continue to develop the business -- which has maintained an average 20% to 30% annual growth rate -- without sacrificing its principles. "It's a real leadership challenge," says Karter.

A defining moment came in 1999 when giant San Francisco-based retailer Williams-Sonoma (WSM) wanted to sell Dancing Deer's signature molasses clove cookies nationwide. It would have doubled the bakery's business. But in order for the cookies to survive the long lead time between oven, William-Sonoma's warehouses, and its store shelves, Dancing Deer would have to use preservatives.

"To get that call from a top food buyer when we were a speck of nothing was a huge opportunity," Karter says. "But it was clear to me the answer had to be: Sorry, we can't do it. This was not just about the quality of food but the integrity of who we were, and we weren't willing to make compromises."

Impressed and determined, Williams-Sonoma called back a few days later and asked if Dancing Deer could make them a gingerbread mix instead. "Now they're one of our most important relationships," says Karter.

HELPING HAND.

A shakeup six years ago -- Karter and Antoniou divorced, and she ended up buying his and Lombardi's shares of the business -- led Karter to reassess Dancing Deer's future. "I came out on the other side and came to the idea of building a company that could change the world, at least in our little space," she says.

So, in 2001, the bakery reinvigorated its philanthropic commitment and launched the Sweet Home Project. As a result, Dancing Deer donates 35% of the proceeds from its Sweet Home line of cakes to help homeless families find jobs and housing.

As to what's next, Karter's target is to hit $20 million in sales within three years. The challenge, she says, is to maintain the unique small-business culture and innovative management philosophy as Dancing Deer grows. "Increasingly, one of the most important jobs I have is to hold the team together and maintain an exceptional culture of respect and passion, excellence, and working values," she says. So far, it's a recipe that is working.


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