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“It Takes An Army” 5 Leadership Lessons With Andrew Ly, CEO of Sugar Bowl Bakery

“It takes an army — I remember taking on pretty much everything when starting this company. I was baking, delivering, managing payroll, calling on customers and working out the finances. This was largely due to the fact that I had a business degree and was the only one in my family that could speak English well, but I needed more assistance. After some trial and error, I found myself putting others in charge of specific tasks. I hired a professional baker to help perfect our products and sent my nephew to a local culinary school which really helped us to develop new products, hired sales people to call on customers so I could focus on growth.”
I had the pleasure of interviewing Andrew Ly, President and CEO of Ly Brothers Corporation and Sugar Bowl Bakery. Started by the five Ly brothers in 1984, Sugar Bowl Bakery is one of the nation’s largest minority-owned bakery manufacturers yet continues to operate as a family-run business. Currently, Andrew serves as a Board Chair of the Asian Pacific Fund, a philanthropic non-profit dedicated to serving vulnerable API populations with a focus on community building, and as a board member of an insurance company.

Thank you so much for doing this with us! What is your “backstory”?

In 1979, my four brothers and I emigrated from Vietnam to start a new life in America. After years of working odd jobs and saving nearly every dollar we made, we finally had enough money to pool our savings and start our own business. We bought a local coffee shop named Sugar Bowl Bakery and loved the name so much we kept it. What made our shop so different was our pastries and the way we cared so much about serving customers — our customers began coming to our coffee shop for our treats! We listened to the demand for pastries and decided to expand our distribution. By 1986, we opened our second location and by 1998 we had a total of seven storefronts. After realizing that the success was coming from our desserts selling to retailers, we made the leap to become a bakery manufacturer instead. Sugar Bowl Bakery is now a national minority certified bakery manufacturer and one of America’s largest family-owned bakeries. Our products, including our Brownie Bites, Madeleines, Petite Palmiers, Duets and Apple Fritters are sold in retailers across the nation.

Can you share the funniest or most interesting story that happened to you since you started your company?

I would have to say the most interesting thing I’ve done since starting Sugar Bowl Bakery was when I went dumpster diving for ingredient ideas. In the pastry industry we have a lot of competition and it is my job to listen to our customers and to ensure we do everything we can to make our products the best on the market. When a customer mentioned to me that our croissants were not as crispy as the French Bakery down the street, we decided to switch our recipe to make them crispier rather than soft. I listened to our customer because I knew that we were there to serve their needs. I went to buy croissants from that French Bakery to taste and noticed how delicious that bakery’s treats were, I knew I had to get to the bottom of it. One night, I decided to find out for myself — so one of my brothers and I went through their dumpster to find out what ingredients/flour they were using. I fell short on my discoveries, so this wasn’t a successful dumpster dive. However, we were relentless in improving our pastries, so we hired a French trained baker to help us. While it was rough at the time, it’s funny to think about now.

What do you think makes your company stand out? Can you share a story?

The products we offer are not your traditional treats. The Madeleines and Petite Palmiers are delectable French pastries with the high concentration of grade AA butter. The brownie bites are crunchy outside but moist inside. When you bite into it, you feel the texture like that of a See’s Candy — which is an idea that originally stemmed from one of our biggest customers. The Apple Fritters are a baked goods with notes of apple and cinnamon — our spin here is that we’ve used all-natural ingredients wherever it is possible. The ingredient lists are simple to read, the quality of the pastries are high, and the value is affordable so that these treats universally cater to everyone. These unique products are not as easy to come around as your typical chocolate chip or sugar cookie, and I think our customers appreciate that. We also offer individually wrapped versions of our products, which parents greatly appreciate since they can just throw them right into their kid’s lunch boxes for a grab-and-go treat. They can also bring them to picnics, events, and office meeting without the hassle of getting their hands sticky.

At Sugar Bowl Bakery, we aim to bring families to the table to enjoy these treats and have a great time together. For that reason, our baked goods can even be eaten for breakfast with a cup of coffee or tea. Our Madeleines and Apple Fritters are delicious without being too sweet — a great way to get everyone in the family to sit down and enjoy breakfast together.

None of us are able to achieve success without some help along the way. Is there a person who you are grateful towards who helped get you to where you are? Can you share a story?

Along the way, I have been extremely eager to learn from being out there networking. I have found that, by far, most Americans are very kind. I can give you examples of these three group/people below:

1. An act of kindness that mattered — my family did not come to the United States of America at the same time but rather in three or four different time intervals. My youngest brother came at the end of 1978 and went to Texas working in a bomb factory. My oldest brother and his family came to San Francisco in early 1979. My parents and I were sponsored by USCC (United States Catholic Charity) and came to America on August 19, 1979 going through the Fairfield Airport Base in California. I remember when we stepped off that DC military airplane, I realized that I had only one dollar in my pocket. After a long admission process on a cold night, I wanted to make a phone call to my brother in San Francisco, but I realized that I did not have any coins to call him. I went to the payphone and just stared at it. There was a middle-aged lady (must have been working there) who looked at me from a distance, approached me and asked if she could help me with anything. I could not speak English at the time, so I handed her the phone number and she helped me call my brother who later met us at the SF airport. We were scheduled to go to Texas with my youngest brother, but my oldest brother asked the USCC representative to allow us to stay in San Francisco. The USCC granted us permission and we have lived in San Francisco ever since. With this small act of kindness, it has the biggest impact of how I value an act of kindness — regardless how small it is.

2. At the time we started our first store, none of us in the family spoke English well but I managed to speak better English than my brothers. I went to the local health department trying to get an approval to open our store. I got in line and the receptionist did not care to understand me and tried to send me away from her desk. There was an older Japanese American, I still remember his first name being Sam, who came out from his desk behind the receptionist asking me to stay. He then tried to understand me and granted me an appointment to get our space inspected so we could open. One day he drove on Capp Street in San Francisco, the district I used to live in (one of the toughest districts in San Francisco), and he saw me walking down the street. He stopped and asked me where I was heading. I told him I was heading to our future store location and he offered to give me a ride. During the ride, he taught me how to follow the health code and what it should take to run a small store. It was that extra motivation that gave me so much courage and appreciation to work harder and better.

3. Even though our business was growing, we were still very small in the year 2000. We continuously tried to make weekly improvements, so I called national retailers around the San Francisco Bay Area. The regional buyers of Costco were the first retailer to give us the opportunity to bring our products to sell at their stores. I came to know their people and eventually the founders, the Chairman, the CEO and their VPs. They have a huge business to run, but they embrace the philosophy of being fair and inclusive. They are very tough in standard, but they are extremely fair to every vendor, big or small equally. They are the best class act humans on earth. A few years later I decided to call on Safeway and the Safeway people have also conducted their business dealing in such a way that is in my mind, fair and meaningful to small businesses like us and others. They also gave us the opportunity to compete with other vendors fairly.

I truly believe that the vast and clear majority of Americans are great people with fair-minded and kind toward others.

Without the small acts of kindness, these fair-minded people like the health executive at the City and County of San Francisco, the Costco organization, the Safeway people and many others I came to know along the way, our family would not have been here today.

How have you used your success to bring goodness to the world?

People, Products and Planet: I truly believe that we are in the people’s business and we must treat people well. Start with our employees — we bring goodness to our employees with good pay, good benefits and training such as English as a second language and continuous training. These opportunities make our employees happier and help us to retain the best workers. We also have a brownie point award program to encourage our employees to stay safe and be healthy by exercising, taking a walk after lunch to win a gift certificate or even an iPad. We have always been socially conscious about what we do as a company. Therefore, we have been very fortunate to be able to bring goodness to the planet in the form of having both our buildings powered by solar, having solar power stations for our employees who drive electric cars, trying to develop our compostable packaging that reduces the greenhouse gases associated with our packaging. And to be honest, we think that providing people with these treats spreads goodness, because who doesn’t love to share a high quality sweet baked good with their friends and family?

Do you have a favorite book that made a deep impact on your life? Can you share a story?

There is no question about it. I developed a love for reading when I was at a very young age. I remember having to quit school due to the war before graduating sixth grade. My dad biked miles away on a muddy road to buy groceries for our neighborhood stores and he also bought newspapers and books for me to read. A book that impacted me was –

1. An Art of Wars by Sun Tzu. I like this book the most because this book talked about using strategy to win rather than just fighting to win. Always be prepared, be proactive, so we can determine what kind of future we want; that is using strategy. If we take the fight to the street all the time, it is reactive, and we cannot win by just engaging in fighting. Using psychological coupled with tactic and strategy are the keys. “Appear weak when you are strong, and strong when you are weak.” “The supreme art of war is to subdue the enemy without fighting.” “If you know the enemy and know yourself, you need not fear the result of a hundred battles.”

Later on, I was a recipient of many books from many great individuals and institutions. These are the two I also liked the most.

2. Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne. It was a gift sent to me long ago by someone at Harvard Business School and I love it. The context of the book is also about using strategy. How to Create Uncontested Market Space and Make The Competition Irrelevant…. “The natural strategic orientation of many companies is toward retaining existing customers and seeking further segmentation opportunities.” I have always asked my people not to talk or react too much to our competitors. Instead try to make our customers happy by innovating great products and bringing good value and service them with all our ability. This is one of the excerpts from the book. ~ “Value innovation is the cornerstone of blue ocean strategy. We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.”

3. Winning, by Jack Welch, given to me by Doctor Rueben Chen — this book talks about how important relationship are between an employer and employee. The book explains that this relationship is like a relationship between a pair of shoes and your feet. This book also underlines how important effective communication is and how to use it to be a great leader.

What are your “5 things I wish someone told me before I started my company” and why. Please share a story or example for each.

1) Respond to market trends quickly — This is something I learned throughout my time in business. It is important you know your market to stay relevant and be able to acclimate to industry changes. Since we started as a coffee shop, Sugar Bowl Bakery maintained several retail locations even after we expanded to become a large-scale distributor. Managing these two different business models was extremely challenging. It was not until 2008 when the economy collapsed that we sold our retail operations and the food service division. We went from 750 product lines with 4,000 SKUs to three product lines with 90 SKUs, so we were able to really lower our costs and achieve a higher margin.

2) Know your customers’ needs — You need to know your customers inside and out, so you can anticipate their needs and wants. When we first started the business, we didn’t have the proper training for making these pastries. One time I brought a Chinese cake to one chef who laughed at me and said he couldn’t sell Chinese cakes to his clients. At that point, I wasn’t anticipating the needs of the clients, I was just baking what I thought would be good.

3) It takes an army — I remember taking on pretty much everything when starting this company. I was baking, delivering, managing payroll, calling on customers and working out the finances. This was largely due to the fact that I had a business degree and was the only one in my family that could speak English well, but I needed more assistance. After some trial and error, I found myself putting others in charge of specific tasks. I hired a professional baker to help perfect our products and sent my nephew to a local culinary school which really helped us to develop new products, hired sales people to call on customers so I could focus on growth.

4) Being a leader is a lonely wolf, everyone tries to avoid you — in my situation, I brought up the idea of expanding to many retail stores (and later to manufacturing products to hospitality and retailers like Costco, Safeway and others), but my brothers thought it was too risky for the family. They were very comfortable with a couple, husband and wife, running a small store to serve the neighborhood patrons. I had to go solo and whatever we did and wherever we expanded became my ownership. Anytime I encountered setbacks, I had to deal with the setbacks myself, alone. It was the longest period of my life that I felt loneliest. I stayed in the office late at night or during the weekends to write, to read or to think, all by myself. It was always work, no work-life balance for me. However, I was lucky that even though they did not offer me great support, they went along without causing me any problems. Therefore, having a good family is important to the life of an entrepreneur like me.

5) Managing Cash — Cash is King — it was very difficult to handle finance when we were experiencing fast growth without support from big financial institutions. We did not have any outside investors, we had to self-finance ourselves during the fast growth with reinvesting our profits back into our business. Almost every year we added more product lines, which meant we needed more equipment, plants, and support from the families. We depended only on the small traditional bank loan and lines to support our growth. I often joke that t the mailman was my favorite person for a good 15 years, the one I loved to see when he showed up at the door — and as a matter of fact, I was by the door waiting for him to show up. For example, we usually ran short of cash after payroll, so I paid our employees first, I then issued all checks to pay our vendors when they were due, but I made notes of which ones I would put in the mail first after I received the payments from our customers from the mailman. That made the mailman my favorite person at that time. This also taught me how important it is to be financially disciplined.

Some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US whom you would love to have a private breakfast or lunch with, and why? He or she might see this. :-)

Howard Schultz of Starbucks — I love his story. I read his two books “Pour Your Heart Into It” and “Onward.” He had a very humbled beginning growing up in a very tough neighborhood. He was poor, worked as a grocery bagger and with a simple concept, he founded Starbucks and grew it to the biggest coffee chain in the world. It also became one of the biggest foodservices of its kind internationally. It was the only store outside of China that was allowed to open in the Forbidden City of China. Starbucks is loved by many not because of only selling coffee but because Howard is a great man with a very kind heart. I respect what he has done for his employees. In his book “Pour Your Heart Into It” he said — “Treating employees benevolently shouldn’t be viewed as an added cost that cuts into profits, but as a powerful energizer that can grow the enterprise into something far greater than one leader could envision.”

This was very inspiring. Thank you so much for joining us!

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