La Tortilla Factory has a strategic plan to ensure family ownership as well as continued growth and success.
As corn and flour prices go up, many food manufacturers are struggling to keep costs down. Add in the steep price of rent and labor in the North Bay, and local food companies could be facing serious challenges in the near future.
But La Tortilla Factory, at least, has demonstrated it has the strategic planning and dedication to not only survive a tough economic turn, but to thrive in it. The 30-year-old company has tripled its revenues in the past five years, and it expects to increase annual sales to an all-time high of more than $30 million in 2008. It’s also expecting to continue to grow significantly during the next five years.
The Tamayo family, which founded and runs the company, is doing more than just baking quality tortillas at its Santa Rosa factory—it’s also building something to pass on to future generations. “We’ve reinvented ourselves from a mom-and-pop store to a regional company and then to a national company,” says Carlos Tamayo, president and chairman of the board. “We’re in the process of leaving behind a legacy that my brothers and I believe in. We don’t want to ever sell the company, but to pass it on.”
Carlos started La Tortilla Factory with his parents, Mary and Jose, in 1977. Today, he and his brother, Willie, executive vice president of business development, run the company. Carlos’ son, Sam, and Carlos and Willie’s nephew, Tomas, also work there. Sam Tamayo was recently promoted to COO and vice president.
Two other important promotions include that of Jonna Greene, to vice president of human resources, and Stan Mead, who’s been working at the company since 1996, to chief executive officer. Mead has a background in high-level consulting and finance positions in the telecommunication, semiconductor and manufacturing industries. He also brings experience with international transactions and served as interim COO before Sam was promoted. When he came to the company, he was an independent contractor; he officially joined La Tortilla Factory as an employee when he was promoted to CFO in 2003. He was promoted to CEO earlier this spring.
Mead is quick to point out that Carlos and Willie’s participation is changing, but rather than stepping down in any fashion, they’re actually stepping up. “They’ll be able to make decisions from a business standpoint without becoming too busy with the day-to-day things,” he explains.
When asked what his immediate plans are for his new position, he mentions the company’s goal to grow the business within sustainable business marketplaces—areas where healthy products are desired. “We’ve created that goal over the past six years,” he says. “My personal goal, from the standpoint of my job, is to use a decisive management style so I can remove any roadblocks people have toward reaching their own goals within the company.”
The company employs 180 people in its 75,000-square-foot factory near the Sonoma County Airport in Santa Rosa. Over time, it’s expanded distribution of its products throughout the Bay Area, then California, then the entire country. You can find its tortillas in major grocery chains like Lucky and Safeway, as well as smaller, regional stores like G&G and Pacific Market. Recently, it’s also begun exporting products to U.S. military commissaries along the Pacific Rim. So despite changes in the food market, the future looks good for this family-run business.
A focus on health
La Tortilla Factory makes approximately 100 tortilla products under the La Tortilla Factory, Smart & Delicious, and Sonoma brands, as well as for private labels. It specializes in making great-tasting, heart-healthy, low-calorie tortillas and wraps. In addition to the flour and corn tortillas the company started with, the product line now includes low-fat, low-sodium, gluten-free, low-carb and organic tortillas. The company uses quality ingredients, such as whole grains and extra virgin olive oil, and its wraps come in flavors like rosemary, tomato basil and multigrain.
Like most things at La Tortilla Factory, the decision to focus on health came from both personal and professional motives. In the 1980s, both of Carlos and Willie’s parents developed heart disease. Though both survived the scare, the experience left its mark and made family members aware of the high risk of heart disease and diabetes among Latinos—as well as other Americans.
“We decided we’re not going to put lard in our tortillas or aluminum in our baking powder,” says Tamayo. “There’s no trans fat in our tortillas. We wanted to be part of the solution when it came to health, not part of the problem.”
The decision was also strategic. As tortillas have moved from specialty “ethnic” food into the mainstream American diet in the last 30 years, competition had increased; Mission Foods became the largest distributor of tortillas in the United States. Being a smaller company, La Tortilla Factory needed to differentiate itself from the competition. Since it couldn’t beat Mission on price, the Tamayos decided to focus on making the healthiest tortillas possible.
In the 1980s, they began producing low-fat tortillas as part of the fat-free craze. In the late-1990s, diet guru Dr. Robert Atkins noticed that one La Tortilla product had only three carbohydrates per tortilla and promoted it as a low-carb alternative for his Atkins Diet. Although the Atkins fad has faded in the last few years, the low-carb tortillas still sell well, says Tamayo.
“The dust settled after Dr. Atkins died, and people realized there was more to losing weight than eating high protein,” he says. “But even though the Atkins Diet isn’t a buzzword anymore, people who eat healthy still want less carbs.”
La Tortilla Factory’s focus on healthy tortillas will probably continue to pay off, as more Americans are looking for healthier food.
“Healthy tortillas is a growing niche,” says Paul Travis, a marketing consultant and co-author of the book Leadership on Demand. “In general, there’s increasing awareness that over-processing of—and additives to—food has contributed to the obesity and health challenges in this country. So now you see moves that would have seemed crazy 10 years ago: Pizza Hut advertising “natural pizza” with organic tomato sauce; Frito Lay researching healthy snacks; and Wal-Mart becoming the largest seller of organic products.”
The growing tortilla market
Today in the United States, tortillas are second only to bread in sales. They’re the fastest-growing segment of the baking industry, beating out everything from croissants to English muffins to bagels. And they aren’t just being consumed at home. A 2004 survey by the Tortilla Industry Association revealed that 78 percent of fine dining restaurants and 74 percent of casual restaurants use tortillas. On top of that, 83 percent of colleges and universities use tortillas in their cafeterias, as do 76 percent of school lunch programs.
That’s a far cry from the 1960s, when tortillas were considered exotic. Experts attribute the change to several factors, including the growing Latino population and popularity of Mexican cuisine. There are also more types of tortillas on the market—as exhibited by La Tortilla Factory’s range of products—thus encouraging people to experiment with non-traditional fillings and preventing tortillas from being limited to solely Mexican food. In addition, tortillas are used in fast food, including McDonalds, Burger King and, of course, Taco Bell, among others.
“With the strength of the Mexican restaurant sector and indications that hand-held fast food will be increasing in demand, not only are more tortillas being sold in the United States, but countries like Japan and China are importing quality products these days,” says Travis.
Currently, however, the industry is facing all-time highs in corn and flour prices. On top of that, gas prices are affecting shipping costs and causing overall inflation in the economy. “It will no doubt have an impact on our business,” says COO Sam Tamayo. “Not only is the price of a loaf of bread or a package of tortillas on the rise, but the cost of things like meat and poultry are also on the rise, because they use corn to feed the animals. It’s more expensive to run the business right now, and that cost will have to be passed on to the consumer.”
To avoid that eventuality as much as possible, La Tortilla Factory is trying to increase efficiency and reduce waste while still maintaining the quality of its products. While it could save money by substituting cheaper ingredients, it could also upset the delicate balances of its recipes, affecting color, texture or, worst of all, taste.
“We can’t compromise that to reduce costs,” says Tamayo. “We don’t want to achieve a short-term goal that, in the long run, will lose customers. Our quality is what they’ve come to expect from us; consistency is very important.”
Family first
It’s tempting to think of La Tortilla Factory as a mom-and-pop store that grew into a national company, but its origins were much more strategic than that. In his 20s, Carlos Tamayo worked in finance, first as an international banker and then in a nonprofit that arranged financial packages for minorities and veterans in his hometown of Fresno. By his late 20s, he decided he wanted to do something else with his life.
“Then I found out the tortilla industry was a growth industry,” he says. “I had a lot of friends who had factories, and who were willing to take me by the hand and help me set up a factory—as long as I didn’t do it in Fresno.”
Tamayo did market research and determined Sonoma County was the best place to locate the business, partly because there wasn’t much competition among Mexican food producers at the time, and partly because it’s a beautiful place to live. At age 30, Tamayo opened a taqueria in Santa Rosa. He worked there with his parents while his brother came up on weekends. They served a limited menu of burritos and tacos and, in the meantime, bought the equipment to begin making tortillas. After eight years, they shut down the restaurant to focus on manufacturing. “People still remember those burritos,” says Tamayo. “They stop me all the time to ask about them.”
In the years since, the company has considered moving the factory to an area with a lower cost-of-living. But in 2005, La Tortilla Factory opened its state-of-the-art operations in Santa Rosa, in part because it felt loyal to its employees and the community as a whole.
“Plus, my wife said, ‘I’m not moving,’“ laughs Tamayo.
As part of its ongoing commitment to the North Bay, La Tortilla Factory sponsors several scholarships for local students. The family believes in the importance of education, a value that comes from Carlos’ mother, Mary. The daughter of a migrant farmer in Kansas, Mary was such a good student that her teachers asked her parents to let her stay in school instead of having her work in the fields. Although they agreed for the most part, Mary did have to quit when she was a senior in high school.
“My grandmother didn’t think Latino women—or any women, really—should be educated,” says Tamayo. “It was my mother’s biggest regret. But she turned that negative into a positive and always focused on our educations. My brothers and I have all graduated from college, and our kids are close to doing the same thing. It’s the secret to everybody’s long-term success in this country.”
Sam Tamayo, who has a bachelors degree in business from the University of Phoenix and certifications from the Culinary Institute of America in St. Helena and the American Institute of Baking, grew up alongside the family business. He worked at La Tortilla Factory throughout school, learning most operational jobs at the company from the ground up; today, he’s responsible for operations, research and development. But even though he’s third generation, Sam Tamayo didn’t necessarily plan to join the family business while growing up.
“When I was a kid, I never said, ‘I have to do this,’” he says. “And it was never forced on me either. They said, ‘Here, work in the business, get to know it.’ So I mostly worked there because it was convenient. I probably didn’t really begin to feel passionate about it until I was in my early 20s.”
Recently, Sam and his wife welcomed a daughter. Sam hasn’t given too much thought to whether the 9-month-old will someday work at La Tortilla Factory—but it’s always a possibility.
“I’ll probably use the same model my father used for me,” he says. “I want it to be a family legacy—and obviously, she’s part of that fourth generation. So I want it to be there for her and to keep her part of it. But whatever she wants to do, I’ll help her and support her.
“I think what my dad did with me was fair, and I appreciate it. I didn’t have the pressure to continue the business when I grew up. It was always just there for me.”
To help keep the business strong, the Tamayos and Stan Mead will continue to focus on growing the business within its niche marketplace of healthy tortilla products. “It’s a matter of getting exposure and creating brand recognition and loyalty without breaking the bank,” says Mead. “We’re small, so we can’t buy TV time or major advertising. We have to use grassroots efforts. At the same time, we have to contend with the rising costs of ingredients.”
One area where the company is looking to expand is the food service industry (delis, restaurants and industrial use). “We believe there’s a growing marketplace for healthier products within that industry,” says Mead, who also says about 50 percent of all tortillas in the United States are used within the food service realm. He also mentions expanding into Japan and Europe, where people are “label readers” and are looking for a healthier lifestyle, “but we’re just investigating those possibilities right now.”
In the meantime, Mead says he truly enjoys coming to work each day. “I think the vast majority of our employees would say the same thing,” he says. “Carlos and Willie have created an excellent corporate family culture.”
