Closing Time: An Unfortunate Result of the Gluten-Free Trend & Bad Economy

Just five months ago, the answer was three.  There were three bakeries in the Twin Cities area pumping out fresh gluten-free baked goods for us every day.  I thought we were pretty progressive for our relatively small metropolitan area.  By the end of this week the answer will be… just one.  Thursday is the last day Madwoman Foods in Minneapolis will be open before closing its doors for good.  Sad, but true.  This is the latest sudden and unfortunate occurrence that appears to be happening all too often in the gluten-free community lately.

It’s happened to many other business around the country: Laura’s Bistro closed its storefront in Texas in 2009,  Mr. Ritt’s in Philadelphia closed its retail store in 2010, Cooqi Gluten-Free in St. Paul, MN closed it’s shop last spring and now Madwoman Foods is closing.  While I’m sure I missed many gluten-free companies on this list that have had to close it’s a quick snap shot of what’s happening across the country.  The theory is that, in part, the gluten-free trend is actually killing some gluten-free businesses.

“Then the unthinkable happened….Gluten-Free went mainstream.” –Brendan Start, co-owner of Madwoman Foods

Almost anyone who’s been in the gluten-free community for some time will tell you, this last decade celiac disease and gluten-free food made great progress.  The internet has allowed us to do quick online ordering  of yummy foods that are shipped right to our front door.  Then there was competition.  Small gluten-free companies began to make incredible foods that didn’t make us feel so different — included in that group gluten-free bakeries.  Now we could go out and have coffee or tea and pick up a fresh little treat or even a fancy birthday or wedding cake — just like everyone else!

Madwoman Foods

Madwoman Foods in Minneapolis started making frozen gluten-free tea cakes and pizza seven years ago and selling them to local co-ops and Whole Foods, then the opened a retail store to add business.   Brendan Start, co-owner of Madwoman Foods has celiac disease and he wanted the shop to provide freshly baked, nutritious gluten-free and low-glycemic goodies.  Also in the shop was a place to purchase fresh tea and you could do a little shopping in their little retail corner of frozen and shelf stable products.

“Business was going well,” Start said.  “We doubled in sales in the second year then the unthinkable happened… Gluten-free went mainstream.”

Anyone who has celiac disease would still never say that gluten-free is mainstream in any way.  But as Start explains — it was mainstream just enough to have a big impact on his business.

“The big boys entered the gluten-free arena with names like Udi’s , Rudi’s, Betty Crocker, General Mills, etc.  People living a gluten-free lifestyle were getting to the point where most stores carried gluten-free options and most restaurants served some form of gluten-free food…”

Then the economy took a big hit.  “Gas prices went through the ceiling resulting in shipping cost increases of 30-40%,” Start said.  “Since we were baking nutritious gluten-free food, we bought our flours from a special mill in California…The shipping costs soon made up 1/3 of the cost of our major ingredients.”  Start said they did small increases on their products to make up some of the difference but it wasn’t enough.  “When gas prices came down, shipping prices continued to climb.   We were paying $28 to ship a 50 lb. bag of flour that costs $68…We could buy cheaper flour that is courser and not whole grain but then our products would be just like the big guys.  There would be no way we could compete with them on price due to their advantage of volume purchasing.”

That’s when Start and his business partner knew it was over.  “Our costs were higher than our sales and our customers were finding it more convenient to pick up their gluten-free products at their regular grocery store.”

Cooqi Gluten-Free

Judy Malmon of Cooqi Gluten-Free has a different story to tell. She described her business to me as “always good, in the sense that production really never caught up with demand…but we were simply unable to manage a larger volume of production in the space we had.”

The shop was a cozy coffee-shop style atmosphere with specialty, gluten-free baked goods, with popular treats like brownies, bread, pizza crust, baguettes, granola and flour mix.  The company’s goal was to use the “highest quality, most nutritious, whole-grain ingredients” in their products.  Like Madwoman, it was a small shop in the heart of their respective community.

Malmon found it was more the economy that did her retail business in.

“Business did not really slow as much as I was unable to raise the needed capital to expand to make the numbers work.”

She described that while there was a decrease in some sales with slower economy, they had a increased business in selling their pizza crusts to restaurants.  “We were caught in a catch-22 of needing to expand to succeed, but needing to show a record of financial success (meaning profit) in order to get the funding to expand.”  She says investors were “turning away from food based businesses and banks were tightening their lending policies.”  That’s when Malmon closed her store, this spring.

Gluten-Free Trend Hurting Business

The competition from big companies is undeniable.  Just over a year ago I did a blog post about how the gluten-free market had helped General Mills’ profits. I, too, have been ooing an ahhing over Udi’s and General Mills’ products. Even Brendan Start admitted, “As a gluten-free person, seeing gluten-free go mainstream is a plus because there is so much more available today than there was even five years ago. As a community builder and food historian, I worry about the lack of nutrition and flavor found in mass-produced food.”

Malmon recently discussed on Cooqi’s website the surge in gluten-free product options, but she cautions, “…do not expect a similar surge in the quality of these options. Food business has its eye on the enviable growth margins in the GF market, but it does not see the nutrition angle on this as viable.”

As a consumer, it is tough. It saddens me to see these two bakeries go away.  Yet at the same time I am saying that, I’m buying the new Gluten-Free Bisquick by General Mills, and my freezer has multiple Udi’s products.  I am sure I am not alone.   Is the fact that these companies can mass produce cheaply the reason why any gluten-free items have become mainstream?   And the fact that I’m buying it — am I in turn hurting the smaller business?  Maybe I’m a part of a group of people who want it all….to be able to breeze into a gluten-free bakery and grab something to satisfy my craving for the day — but also be able to make gluten-free biscuits for the family on a whim at home.  But if I hardly ever get to the bakery — How do I even know it will be there the next time I want to go?

Looking ahead

Brendan Start with Madwoman has a few days left in his retail store before closing down.  He says he’s a little worried about the future:  “about the lack of small, family businesses and individualized communities…about the lack of fresh baked foods…free of preservatives….mostly about the the kids who don’t know where food comes from or how it’s made.”

As for Judy Malmon, with Cooqi, she’s working to get her mixes prepared and packaged for sale at local stores. She will also do bulk mixes to send to other bakeries who want to do gluten-free baked goods. Each time you go shopping keep an eye out for her products.

As of October 1st, Bittersweet Bakery in Eagan will be the last one open.  Let’s see what we can do to keep that one alive.

Tags: bakeries, business, closing, economy, gluten-free, retail, stores, trend