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Death of a donut

Published January 29. 2011 09:00AM

Somewhere at the Philadelphia Naval Yards and in the highest state government office, millions of dollars are being haggled in private negotiations.

But it's not the Department of Defense working on contracts for some sort of Stealth fighter jet.

Instead, it's the Pennsylvania governor's office trying for a potential bail out of donuts and lemon pies.

Turns out, Tastykake has baked itself to a turn and is facing bankruptcy. It almost seems impossible. For almost 100 years, Tastykake was the quintessential American success story, the sweet rise of a humble company that never left its Philadelphia roots.

The firm began in 1914 when Pittsburgh baker Philip J. Baur and Boston egg salesman Herbert T. Morris went into business in the City of Brotherly Love. Their goal was to produce baked goods each day using fresh ingredients. The two insisted on farm fresh eggs, Grade A creamery butter, real milk, cocoa, spices, and assorted natural flavorings from abroad.

On their first day, they sold $28 in cakes, in their first week, $222, and by the end of the year had grossed $300,000, a staggering sum in those days.

By the 1930s, Tastykake Baking Co. revolutionized hand-carried lunch boxes with their individually packaged pies for just a nickel apiece. First apple, then peach, then lemon, then blueberry, and then you name it, each as yummy as can be.

The beloved pies, cakes, donuts and goodies were a hit along the Mid-Atlantic region.

But Tastykake never traveled west. That's because Tastykakes have a shelf life of only two weeks. In order for the company to sell baked goods across the country, more plants would be needed. That never happened, and so Tastykake stayed a successful, regional delight, with annual sales reportedly exceeding $280 million.

So what went wrong? What made Tastykake fall on its buns?

The baker blames most of the trouble on the economy and the failure of the A&P chain, a major customer, along with other bankruptcies.

But some observers say the company's problems are within and the company must not sugar coat reality. For years, something was missing, and it was more than the hole in the center of the donut. They say Tastykake strayed from its original philosophy. Corners were cut, quality was compromised, and the products shrank in size. Once known for being large and generous, Krimpets turned into shrimplets.

"That's the way the cookie crumbles," said one analyst. "They strayed from their original recipes and now they're in trouble."

Some say the flavors suffered. The richness declined. Previously loyal customers began calling the products Tasteless Kakes. Just too many changes, say critics.

"They never should have spent time and money developing new products that no one is interested in; they never should have redesigned logos and graphics of the packaging - including little tin pans for the pies," said one consumer.

Plus, the company recently spent $78 million to move into a new plant in the Naval Yard. That's a lot of dough.

Today, the baker is looking at financing options and loan payment deferrals totaling millions in order to stay afloat.

If that doesn't happen, there could be a major confectionery crisis. Tastykake could go out of business or be sold. Anything is possible. Tastykake has plenty of competition Little Debbie, Hostess, Entenmann's, and others.

Always loyal to Philly, Governor Rendell left office Tuesday, but not before expressing his idea for a banana creme bailout of his favorite hometown baker. It's unclear if new Governor Corbett of the Pittsburgh area feels any special fondness for Philly sweets.

Many local customers say they want the baker to keep the ovens burning. Tastykake is as American as apple pie. Actually, Tastykake IS apple pie.

But right now it's anyone's guess as to whether Tastykake can perfect the ultimate turnover.

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