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Not Business as Usual

What happens when you completely disregard conventional wisdom and go with your own plan for greatness? These three companies are doing things a little differently and proving that trusting your instincts and listening to your customers can be the most important blueprint for success.

By Kristen Wolfe Bieler

Who expands and raises prices in a recession?

The Pasta Shop does.

At the peak of the economic downturn, when consumers were losing jobs and reining in expenses—particularly on luxury goods—Sara Wilson, owner of The Pasta Shop, with locations in Oakland and Berkeley, Calif., began raising her prices.

The timing was something of a coincidence, spurred by a new “protein program” that had been in the works for months. “We upgraded our meat and poultry—it’s now all hormone-free, air-chilled and local when possible,” shares Wilson. “We stopped buying shrimp from Asia, and started sourcing exclusively from the Gulf. We spent a lot of time and money on this, and it resulted in lower margins for us on some items and in many cases, it required raising prices.”

The Pasta Shop’s chef, Scott Miller, reports that poultry and pork costs went up 25 percent, and consumers have had to absorb a big portion of that: The rotisserie chicken, for example, went from $9.95 to $14.95. But prices weren’t the only things increasing—remarkably sales did, too.

How does Wilson explain this? “There is no doubt that people are anxious about the recession, but this coincided with worries about food contamination and protein. It was a striking need that came about at the same time people were watching their dollars. They understand they don’t need half a pound of steak on their plate, but they need better quality steak. People didn’t turn away from our store because our prices increased—sales have not suffered one bit.”

Undeniably, Wilson is blessed with a particularly food-savvy clientele. The original Pasta Shop is located inside Oakland’s Rockridge Market Hall building (which she owns with her brothers), a high-end food mall with a handful of independent vendors. (The second location is a free-standing store in Berkeley.) She has run The Pasta Shop for the past 25 years selling homemade pastas, prepared foods, olive oils, cured meats and groceries to a well-heeled and loyal crowd. “We are lucky to be in a fairly affluent neighborhood primarily made up of two-working-parent households,” she says. “People care about food but they are short on time and pretty stressed out.”

In another decision many from the outside might consider ill-timed, last year Wilson broke ground on a major store expansion at Rockridge. “Businesses like ours that have been around for a long time have seen many ups and downs; the most important thing we can do is stay focused and keep paying attention to our community. So the decisions to raise prices and expand during the recession were just about staying the course for us. We were also fortunate that we didn’t have to ask the bank for a loan during the downturn—that has been an obstacle for a lot of younger businesses.”

The expansion was motivated by a desire to stay relevant, explains Wilson. In chain stores, people expect everything to look the same, and the promise of “huge sales” often lures shoppers. But for small businesses, Wilson explains, it’s imperative to update and refresh because discovery is a big reason why people come to the store. Specialty retailers must always be asking themselves: Are customers having a good time shopping in my store? Is their experience here truly of value to them? “At this time when people are working hard and struggling, we must make them feel that a visit to The Pasta Shop is enjoyable and that we are paying attention to their needs. We must give them a good reason to part with their hard-earned dollars,” she adds.

The store’s makeover added about 40 percent more space overall, and the biggest addition was in the prepared foods area, which gained 12 feet. “We make about 65 percent of what we sell, and with customers’ busy lifestyles, prepared foods was becoming an extremely important part of our business.” After the expansion, The Pasta Shop was selling 20 percent more prepared foods than before. Wilson also takes advantage of her location near a major commuter train station by adding more “grab-and-go” prepared options for customers rushing to make their train.

The cheese counter also grew 50 percent. Wilson was less concerned with adding SKUs in the new space, than with giving the cheese “room to breathe and be seen.” A six-foot cheese tower and a wall-case with a refrigerated back-wall also increase the visual presence of the store’s cheeses. “It’s not about how many cheeses we have, it’s about having the right ones,” Wilson says. “Whether it’s the mustards we have chosen, or the mashed potatoes we prepare, we spend a lot of time making sure everything tastes good.”

Which perhaps explains why The Pasta Shop has never had a down year, according to Wilson. “Our store is an expression of our values—values that we are fortunate to share with our customers. Regardless of the economy, what we provide is of value—not to everyone, but to some, and for those people, we are able to make their lives more enjoyable,” she adds.

Who launches a premium restaurant in a resurging but still transitional neighborhood?

The team behind 5 and Diamond does.

If Lia Sanfilippo is confident about one thing, it’s that she knows her neighborhood. She’s lived on the southwest edge of Harlem on Manhattan’s Upper West Side for the past eight years; she attends a local church, teaches a free fitness class in Harlem and spends her every day immersed in the community. It’s this familiarity that gave her the confidence to open her restaurant, 5 and Diamond, when so many others doubted it would succeed.

“I spoke to so many restaurateurs who were not willing to invest in this neighborhood; they did not feel there were enough people here or that the neighborhood was ready,” Sanfilippo recalls. “Even when I was applying for my loan and raising money with investors, people believed it was a bad idea, but they simply didn’t understand the neighborhood and the market. I am here every day and I know who lives here. And I know they were looking for a really good restaurant.”

Concerns by some potential investors were understandable. With all the talk of Harlem as New York’s new “it” neighborhood, the area is still in transition. When the real estate market crashed, Harlem was one of Manhattan’s worst hit areas. “The downturn hit right at the time my partner, Selene Martinez, and I acquired our space and started raising money,” says Sanfilippo. “The common bond we have with all the investors that came forward to put up money for this project is that we all care about the Harlem community and we wanted to give something back. We stayed true to our concept in spite of the recession.”

And the concept is this: Create a truly fine dining experience in a neighborhood where there was none—yet plenty of people who would want one. After years of hearing people talk about traveling downtown to get a good meal, the partners got to work on 5 and Diamond, hiring well-known chefs to create an ambitious Mediterranean-American menu of locally sourced, mostly organic ingredients. Almost everything is made in-house, from the breads, pastas and desserts to the rabbit-and-ratatouille sausage with spaetzle. The burger, a blend of beef and pork fatback, is one of the best in town (according to neighbors as well as New York Magazine).

The kitchen also offers two tasting menus, and the five-course option for $50 costs about half what a tasting menu of its size and quality would cost downtown. “No one else in Harlem that I know of offers a tasting menu, and it’s been enormously popular,” says Sanfilippo. “We designed our menu so that you can have a burger and a beer and leave for $20, or enjoy a slow, multi-course dinner and great wine with your spouse or friends.”

Astonishingly, she’s experienced very little pushback on the menu’s prices which—due to her significant food costs—are quite high by Harlem standards. (For example, the lamb entrée on the current menu costs $34.) “There are restaurants not too far away from ours that charge $12 for a hamburger. We charge $15, and we’ve found that people understand the quality of what we are using—meat from small farms, organic vegetables—and they don’t mind spending the extra $2,” says Sanfilippo. Besides, many people in Harlem are used to spending this much on a meal, she notes—they’ve been doing so for years at downtown restaurants. “Now they are able to enjoy this kind of fine dining experience close to home,” she adds.

The restaurant has made a few concessions to accommodate more price-sensitive diners. In June, 5 and Diamond introduced a “Five for $5” happy hour menu, with five small plates at $5 each (the juicy lamb sliders have been a hit) and $5 glasses of wine and cocktails. Sanfilippo is also adding some less expensive bottles to her eclectic wine list.

These days, the many naysayers are eating their words. Since opening in spring 2010, 5 and Diamond is full almost nightly, and the Sunday brunch—which includes a special Portuguese brunch option—has become a neighborhood staple. “I knew it in my heart, and it is just nice to be proven right,” shares Sanfilippo, adding that some of her most gratifying compliments come from locals who “thank me for not underestimating the potential of Harlem” and other business owners who “thank me for raising the bar one more time.”

Who expands employee benefits when everyone else is slashing them?

Clif Bar & Company does.

According to a Towers Watson survey conducted in early January 2010, 53 percent of companies questioned responded that they have reduced employee benefits, and 32 percent reported that more health care coverage costs were passed on to employees. But Clif Bar & Company is one business that has taken the exact opposite approach, by choosing to give its workforce an impressive number of healthy perks and benefits. Founded in 1992, Clif Bar, the maker of all-natural, organic foods and drinks including Clif Bar energy bar, Luna and Clif Kid, claims, like many companies, to be “committed to sustaining its people, brands, business, community and planet.” Yet Clif Bar walks the walk like few other organizations.

“Creating benefits that support the well being of our employees is as important as other more traditional business goals,” says Jennifer Freitas, Clif Bar’s human resources manager. “Our goal is to foster a work environment that supports a healthful work-life balance where employees feel supported in all aspects of their lives.”
In addition to a fully equipped fitness center with trainers, yoga instructors and an extra half hour of paid time off to work out each day, Clif Bar’s 239 employees enjoy free nutrition counselors and life coaches to further personal development at home and work. There are masseuses on hand to give employees massages, and an annual Health Fair with free health screening and alternative therapies. To further ease the lives of workers, Clif Bar offers concierge assistance to help arrange offsite services like car washing, catered meals, haircuts, house cleaning and laundry.

“We believe that our benefits not only create a better work environment and enable us to contribute to the community, they also add to the company’s overall success. Though we don’t conduct formal measurements on productivity or the like, we believe that happy, healthy and engaged employees do the best work,” says Freitas. “Additionally, from a hiring perspective, Clif Bar’s benefits attract well-qualified people. We have many amazingly successful people with accomplished careers who choose to work for Clif Bar because they believe in what the company stands for and they actually enjoy coming to work.”

Companies with a generous, pro-active approach to employee benefits will likely be better positioned when the economy rebounds, as well. According to recent articles in both Business Week and Market Watch, the economy is recovering, with workers being added to payrolls nationwide. Organizations who haven’t worked to engage and retain employees could be hindered by attrition once workers have more employment opportunities.

Clif Bar also has community and environmental initiatives for its employees. Project 2080 gives staff members the opportunity to volunteer at the organizations of their choice on company time. Clif Bar’s Cool Home and Cool Commute Programs incentivize workers to make energy-efficient improvements to their houses and leave their cars at home. The company founded the country’s first biodiesel incentive program, rewards carpooling and offers employees $6,500 towards natural gas-fueled or hybrid vehicles.

And as of June, employees now own 20 percent of the company, a result of the husband and wife owners, Gary Erickson and Kit Crawford, selling off family-owned shares. “All along we wanted to create a company where we would want to work,” says Crawford, co-CEO. “Employee ownership is one more way we could run a different kind of business—one that inspires a team of people to make the kind of delicious, nutritious food we’d like to eat, and that strives for a healthier, more sustainable world.”

“I would encourage companies to think of benefits as an investment rather than an expense,” says Freitas. “Creating an inspiring, fun and satisfying workplace will benefit any business. Ask employees what things they think would make their work experience more rewarding. Start with some small initiatives, perhaps subsidized chair massages once a month, or fresh organic fruit delivered weekly to the break rooms. Then watch for smiles around the office.” |SFM|

Kristen Wolfe Bieler is a contributor to City, GQ and Woman’s Day magazine.