Based in the Bronx, New York, Just Bagels Manufacturing, Inc., is a privately owned baking company that makes bagels in a traditional manner that most large-scale producers avoid due to the cost. The bagels contain no oils, fat, cholesterol, or preservatives, and are certified as a kosher product by the Orthodox Union. In addition to using high-quality ingredients, Just Bagels makes “water bagels,” which involves refrigerating the dough for six to eight hours and then boiling the bagels (rather than steaming, a short cut taken by large producers) before baking. As a result the bagels are crunchy on the outside and chewy on the inside. The company offers one-ounce cocktail bagels, two-ounce mini bagels, and three- and four-ounce bagels, as well as bagel sticks and bialys, a Jewish delicacy similar to bagels, which are baked without being boiled first and feature an indentation rather than a hole in the middle. In addition to typical varieties–plain, poppy, sesame, onion, pumpernickel, whole wheat, and cinnamon raisin–Just Bagels offers such exotic bagels as blueberry, French toast, and sun-dried tomato, and special flavors upon request. The company supplies bagels to such national customers as Starbucks and Barnes & Noble, making its products available in all 50 states. Upscale New York City customers include hotels such as the Waldorf-Astoria and the Marriott Marquis, and gourmet food shops such as Dean & DeLuca and Citarella. Individually wrapped bagels are sold to schools, airlines, cruise ships, and convenience stores. Supermarket chains that carry Just Bagels are Stop-and-Shop, Pathmark, and ShopRite. The bagels are also sold frozen in supermarkets throughout the country, cobranded as Ray’s New York Bagels. New York City-area online grocer FreshDirect sells frozen par-baked bagels under the Just Bagels label. In addition, Just Bagels offers a private-label and co-packing program. Baking is done at a 44,000-square-foot facility located in the Hunts Point section of the Bronx, operating 24 hours a day.
Company Started in the Bronx
Just Bagels was started in the Pelham Bay neighborhood in the Bronx in 1992 by Just Bagels president, Clifford Nordquist, and a partner. Nordquist grew up in Brooklyn, where he was a talented enough football player to attract several scholarships. He settled on Southern Connecticut State University, primarily because he was told that there were seven females to every male enrolled. While admittedly enjoying his college years, he also learned how to support himself, working as a bouncer in a New Haven nightclub while earning a degree in communications. After graduating in 1990, however, he found it difficult to land a communications job in Manhattan. He tried his hand as a copier salesman and quit after spending four months without landing a single customer.
Nordquist went to work for his father’s construction company, where one of the foremen suggested that they open a bagel store together. Interested in running his own business rather than being somebody’s employee, Nordquist agreed, borrowing $50,000 from his mother to start a 1,500-square-foot bagel shop on Westchester Avenue in the Bronx, which took the name Just Bagels. Just three weeks after the doors opened, however, his partner left. Nordquist borrowed another $17,000 from his mother to buy out his partner, who a week later opened a bagel store elsewhere in the Bronx with someone else and tried to pilfer what few accounts Nordquist had managed to secure.
Needing help to run the business, Nordquist turned to a former roommate at Southern Connecticut, James O’Connell. Also an athlete, a wrestler, O’Connell had earned a degree in criminology and was on the waiting list to become a U.S. marshal, making ends meet by working as a security guard at a department store. He met with Nordquist and liked the shop and the prospects for the bagel business, which at the time was enjoying a surge of popularity across the country. Borrowing $13,000 from his mother, O’Connell bought into the business and took charge of the bakery.
Moving into Wholesale
Despite their lack of baking experience, the young partners were committed to making traditional water bagels using the best available ingredients, a decision that made the small shop a success, resulting in long lines of customers. They were able to buy a second shop to sell the bagels produced at the Westchester Avenue bakery, and when the shop of Nordquist’s former partner closed, they bought that as well. While they were doing well by some measures, with annual sales in the $800,000 range, Nordquist and O’Connell were also overwhelmed. They were making bagels around the clock to fill demand but they could make no more than 900 dozen a day and they had no plan to take the business to the next level. In 1996 they decided to sell the operation and placed a newspaper ad. The first person to respond was Charles Contreras, who had been involved in banking and the mortgage industry and was looking for a company in which to invest. The three men enjoyed an instant rapport, and rather than offering to buy the business, Contreras suggested that he buy a stake, bringing in a much-needed cash infusion. The three of them would then turn the retail bagel shop into a wholesale operation.
The roles of the three partners quickly fell into place. With his banking background Contreras was in charge of finances, O’Connell oversaw the bakery, and Nordquist took care of sales and marketing and served as the public face of Just Bagels. With the investment by Contreras, the company also had money to expand the operation to accommodate growth. Having outgrown the Westchester Avenue space, the partners took a 10-year lease on a new location on Zerega Avenue in the Bronx, 10,000 square feet in size. They also researched new equipment and made down payments on three new ovens, a flour silo, a bagel machine, a refrigerator, and office equipment.
Hunts Point Building Bought
The new Zerega Avenue bakery was able to produce 6,000 bagels a day, but the partners soon realized that they were unable to mass-produce the bagel they had perfected at their Westchester Avenue location. The hard-crusted bagel was preservative free but its shelf life was little more than three hours. To keep up with demand, the new bakery had to begin making bagels earlier in the day, resulting in a product that became stale early in the day. The problem would not be solved until 2000, when Just Bagels paid $2 million for a 10,000-square-foot building in Hunts Point to house their operation.
The move to Hunts Point was made to take advantage of tax incentives available to this designated economic development area as well as to set up the company to grow a frozen bagel business. Earlier, at the Zerega Avenue location, Just Bagels had begun to produce frozen bagels. They were frozen before being completely baked and then shipped for sale. End users could then complete the final five minutes of baking and enjoy a fresh-tasting product. The frozen bagel took Just Bagels into the food industry. Nordquist was able to seek wholesale accounts, playing up the company’s state-of-the-art plant that made it a dependable supplier of high-quality bagels.
It was also at Hunts Point that Just Bagels switched from a hard-crusted bagel to a softer texture, partly because many consumers mistook a hard-crusted bagel for a stale bagel, but also in order to mass-produce the product. The bagels continued to be boiled in the traditional manner, but a new $1 million oven was able to bake them in half the time. As a result, the bagels retained more water, making them softer. Not only did customers prefer the texture, the reduction in baking time allowed Just Bagels to begin production later in the day, thus providing a fresher product. Moreover, the new bakery was able to turn out 18,000 dozen bagels a day, allowing Just Bagels to supply the needs of wholesale customers, and if need be, Just Bagels was still capable of producing the old hard-crusted bagel as well.
Second Building Acquired
In the early years of the new century, Just Bagels was able to land several major accounts, including Starbucks, Barnes & Noble, Dean & DeLuca, Citarella, and American Airlines. Believing that demand would continue to rise, Just Bagels took out a $1 million loan in 2001 to acquire a nearby 18,000-square-foot facility in Hunts Point, where it hoped to move its baking operations. The old plant was subleased, but when the tenant backed out of the deal, Just Bagels found itself saddled with the expense of two facilities. To make matters worse, the employees were having difficulty adjusting to the new high-tech ovens. In order to scrape by during this difficult period the three partners cut their own salaries. Meanwhile, Nordquist began pitching Just Bagels to food distributors. When he succeeded in winning over one major distributor, Just Bagels was able to gain entry to several major supermarket chains, including Publix, Stop-and-Shop, Pathmark, and ShopRite. Instead of having excess capacity, Just Bagels would soon be looking for more production space.
FreshDirect Relationship a Turning Point
While a thriving company doing business with marquee-name customers the likes of Starbucks and Barnes & Noble, Just Bagels was hardly visible to the general public until 2003. It was then that area online grocer FreshDirect urged the company to put its name on its packaging. “And that,” Nordquist told Crain’s New York Business, “put us on the map in New York.” Serving the five boroughs of New York City and portions of Long Island, Westchester County, and New Jersey, FreshDirect was launched in 1999. The company did not actually position itself as an online supermarket, concentrating instead on higher margin items–fresh produce, fresh meat and seafood, baked goods, and prepared dishes–emphasizing convenience and quality over wide selection. While a typical supermarket might carry 25,000 different packaged goods and about 2,200 perishable products, FreshDirect offered 5,000 perishable products and just 3,000 packaged goods. To ensure freshness, many of its suppliers, like Just Bagels, were local. The service began to be rolled out to New York City neighborhoods in 2002 and steadily spread across the city, where it found plenty of receptive customers and began to develop something of a cult following.
Just Bagels was just one of a number of FreshDirect suppliers that benefited from the grocer’s popularity to improve their local standing. While adding luster to local suppliers, FreshDirect built its own image as a provider of high-quality goods. Not only would Just Bagels’ business with FreshDirect grow to about $500,000 a year, the suggestion to focus on branding was a watershed moment. “I learned that branding is everything,” Nordquist toldCrain’s. “In the beginning, all I wanted to do was sell [FreshDirect] my bagels.” The FreshDirect connection and the branding effort led to a large number of distribution contracts, which served to increase sales and further grow the Just Bagels brand.
To keep up with mounting demand for its product, Just Bagels acquired the building next door to its Hunts Point bakery in 2005, bringing the total amount of space in the facility to 44,000 square feet. Just Bagels posted sales of $8 million in 2005, a number that would grow to $10 million in 2006, and $12 million in 2007. The partners hoped to increase sales to $25 million by 2010. With FreshDirect interested in taking its business national, Just Bagels looked to further ride the grocer’s coattails to help meet that target. Going forward, the partners also hoped to take the company public and perhaps open stores under the Just Bagels banner. Moreover, they looked to expand internationally. A deal to sell the Just Bagels product line in Israel was in the works, and in the fall of 2007 Nordquist told his alumni magazine that China might be a potential target: “They love bagels there. Not too long ago, nobody knew about bagels.”