Lessons from 2020 with Tom Molnar, Gail's Bakery CEO

Emily Khan

Welcome to the latest episode of our business in focus podcast, I am Emily Khan, a director at PwC, and I am your host for today’s episode.

Here at PwC, we’ve spent the year talking to private and family run businesses about the transformational impact of COVID 19. Many of the changes these organisations have made, from their work environment to the way they interact with communities, looks set to remain even after the pandemic is long behind us. Our new private business report, ‘The Way Ahead,’ tells some of the stories we’ve heard from these organisations over the course of 2020, and today we are really excited to welcome a very special guest on our first podcast of 2021, to tell us about their experiences of the past year. Like many people, I have observed with interest, how the businesses local to me have adapted to the changing environment and seen those that have shown agility and creativity, and a commitment to the community that they serve.

In my neck of the woods in East London, a long socially distanced queue can be observed for most days outside of the local bakery. It really feels like the centre of the local community, with people offering each other emotional support while skewing for their bread during lockdown. That bakery is a GAIL’s bakery. Without further ado, I am absolutely delighted to introduce Tom Molnar, the CEO and cofounder of GAIL’s bakery. GAIL’s have gone from strength to strength since opening its first store in London’s Hampstead High Street in 2005. Today, they have 60 bakeries in neighbourhoods in and around London, Oxford, Brighton, and beyond.

I am also joined today by Suzi Woolfson. Suzi leads our private business practice, which focusses on privately owned businesses and their stakeholders, and who spends her days helping private business owners, like Tom, to adapt to change and perform in the world around them. As we are recording this during lockdown, we are all at home today, so hello to both of you and I hope you are both safe and well.

Hi Tom, are you there?

Tom Molnar

Yeah, I am here, I am well, bit chilli and its raining this morning, so it is a wet start.

Emily

Glad to hear you’re well, and really pleased to have you with us.

Are you there, Suzi?

Suzi Woolfson

Yes, I am really delighted to be joining you, and like Tom, it is pretty miserable here too, but we will fill you with health and happiness.

Emily

Brilliant, thank you, I am looking forward to that, very warm welcome to both of you.

Suzi, I would like to come to you first, if I may, just to set a bit of the scene for our discussion. I mentioned there in my introduction that our private business practice has been having some fascinating conversations with organisations over the last few months, which are included in our report, ‘The Way Ahead.’ Give us a feel for that bigger picture, tell us about some of the themes you’ve noticed in those conversations that set the scene for our conversation today, if you will.

Suzi

Of course, Emily, I’d be delighted. ‘The Way Ahead’ report came up with a number of themes. The first one was talking about the great pandemic pivot. Businesses had to transform the way they worked pretty quickly, while wresting with the fundamental shifts in demand for both their products and their services. We saw quite a lot of digital transformation. This was accelerated as the world moved online. We saw one restaurant group, who accelerated their plans by four years, to move their brand actually to an online delivery service. Whilst we saw rising sales figures for those people that could go online and these businesses welcomed that, it also then saw the capacity to process these requests quite difficult, they had to thing about housing the stock, and actually delivering it promptly was actually a real challenge. We also saw, as I’ve just already chatted a little bit about, it was the time for innovation. The pandemic caused businesses to think about how did they streamline their business operations and drive both efficiency and maximise productivity. We then also saw businesses quickly move their attention to their workforce, and whether it was organisations looking at how they reassess the necessary skills, or they thought about investing in a different flexible workforce, also brought some rewards.

Businesses also moved to protect their people. They thought about hand sanitising stations, they thought about creating partitions, so people were safe, and also the social distancing became really important. I am sure, as you stood in the queue at GAIL’s, the pavements were already marked to help that.

Emily

Absolutely.

Suzi

The key thing was it was also about being beyond the financials. I have spent my life working with the private businesses and they have always put value, purpose, and sustainability at the centre of everything they’ve done. Across those different sectors, we saw leaders, during that pandemic, taking a bit of a pause, and thinking as much about the people that they worked with, their customers, but the legacy that they wanted to be remembered. I suppose, I think about myself and PwC, and we spent an awful lot of time caring about our staff and caring about the people around us.

Emily

Thanks Suzi, that’s a fantastic introduction to our conversation. I really want to come back to purpose later on, because I’ve seen that too, and I know that’s a shared passion between you and I.

First, Tom, it would be really interesting to hear from you, about your experiences at GAIL’s during 2020, whether some of those themes Suzi just took us through, resonate for you? As I just told you, I am a customer of yours, I’ve seen some of those first-hand, but I would love to your hear your perspective on how you’ve adapted to all this change during the last year?

Tom

Sure, well Suzi was spot on, on a number of things. Perhaps it has been a long journey, 2020. We all started with it in March-April, when we had the really big shock. For us, our places, they are freshly baked, open displays, crowded spaces, and that’s the opposite of where the world was going. You had to look through that and see, what’s our role going forward. There is a big health crisis, none of us have gone through this kind of health crisis before. We had to ask, currently what is our role, and what would our space looked like in the future. It was clear to us that we were bakers, I make that sound simple, but. We’ve been doing this for 30 years, serving chefs, and then serving the public for the last 15-16 years. Deep in our DNA, and the thing that GAIL really started with was this commitment to making quality food. When you got past all the crazy announcements and the sanity, that experience that you hadn’t really put into your business plan for the year, or even your strategic plan, you said, ‘okay, everything is off the table, what are we going to do?’ We clearly came down into, this is our time, very fundamental thing is that people need to eat, and eating well is super important to us.

It was our opportunity to step up, not shutdown. That was not just a decision of mine, that basically went back to the heart of our business, which is the bakers. That was our collective reaction to all this uncertainty and pain.

Its like your parents hugging you, feeding you with the chicken soup, and we had this little bit when we get a sense of humour on the whole thing, we would say, basically the world needs chicken soup, metaphorically, needs to have good food that keeps us healthy, and makes us feel good. Of course, there were lots of discussions about, are we upholding our commitment to our employees, which is something Suzi mentioned, how do you do that safely, is it fair to put them out there when there is a risk, how big is that risk? Our community, which needs to stay safe, but it also needs to stay fed, what’s the right balance, how essential is a coffee and a brownie, that was also big discussions we had.

Overall, we needed to stay baking and stay feeding people. There needed to be alternatives and good alternatives to just grocery stores.

Emily

I really resonate, as my personal experience of COVID, that I know my first priority absolutely was feeding my family. I looked to food for comfort and reassurance during those periods of uncertainty. You can see, to some extent, when you used the phrase there, about this was your time, and the time to step up, and actually you’ve grown in 2020, you’ve opened several new sites, I’ve seen. What was it like, expanding and growing the business, and going into new places during this period of such change?

Tom

It was a bit scary, so we had almost finished two sites when the pandemic, in the end of March 2020, when there was the initial shutdown, and we were just too scared to open them, of course. In fact, we were shutting shops. We had about 60 bakeries, and we reduced to down to 11. We had to do that, because we were faced with this big challenge about how do you transform your business so that its safe, but still serves its purpose. That meant we had to reduce the range, we had to wrap things, so that people can get in and out. We didn’t want people to decide too much, spend too much time deciding. The key thing was not to create beauty, but to feed people, which is a different thing. We packed things, wasn’t beautiful, but it got people in and out, reduced the range, the choices smaller. We needed to get our people, some of whom were quite scared, and rightly so, who was available to work, and so that wanted people to walk or bike to work.

Emily

It is really fascinating hear you talk about the factors that revolved in making those decisions, and it all coming back to what you were there to do, and the fundamentals of your business. I work in our risk business here at PwC and we talk a lot about decision making at those moments that matter, and the confidence it requires from leaders to charter pathway through for people. Tell us a little bit about your personal experience of making those decisions and how you’ve taken people with you in that balancing act, and finding the pathway through, what’s it been like?

Tom

You mentioned confidence, it is really important to have, I think about my children and the youth of today, you always want to make sure that they have confidence. One thing that’s really underrated in that decision-making process is humility. Humility gets you to the point where you are genuinely seeking help and assistance from the people around you. You are listening actively to what do they have to say. You got to have so much confidence that you just believe yourself and you just drive something through, you are almost like a salesman. Well that’s necessary, we have to make a decision, we can’t wait forever to make it. Do think, big decisions also need little bit of time, and they need little bit of, they need contribution from thoughtful people. I was really keen to make sure that we had thoughtful people amongst us that really said, what is it, we have enough confidence to move forward, but before we have the confidence, lets have the humility to listen to each other, and to listen to what the world is trying to say to us.

Emily

That’s fascinating, and lovely to hear real life example of how you’ve done that.

Suzi, can I bring you in a bit here, and I am sure the story that Tom has just told us will resonate with you around values and purpose being at the centre of that business story. You referenced many businesses transforming the way they work with that at the centre, and their employees, and their communities, front of mind. Share with us a few other examples you’ve heard of businesses, who have been doing that, and what that look like, if you will?

Suzi

Thanks Emily, I will. I was just actually picking up on Tom’s point. All of my founders and chief executives, and management teams said the hardest thing was the decisions that no textbook had helped them with this, and actually no life experience had actually helped them with these decisions. Like Tom, it was about listening, and it was about consulting and communicating. From that, businesses have taken different decisions depending on what their key purpose and values were. I’ve seen a number of retailers, who hastened their move towards recyclable and compostable packaging in response to consumers during this pandemic, saying this is really important to us. I’ve seen, again, across the construction industry, they’ve also started to think about, how do we make more sustainable products and how do we use more renewable energy. Actually, interestingly I’ve worked with one property company, who, they termed it putting place making. They’ve redesigned one of their sites to ensure that it now encompasses community, so that there is an awful lot more green space, that there is a lot more hubs where communities can get together. For construction, the pandemic has made them thing what does their customer actually really need, and what do people want.

For other CEOs, we’ve seen different. We’ve seen think about, well, how do we keep the legacy of our business, and the only way we are going to do that is by cutting our own pay, and making management cut their own pay as well, so ensuring that some of the other staff can have jobs for longer, which I think has also been fascinating. The other thing is, it’s not just about the things that you can see. The external factors that you can see, like Tom has done, and actually picking up on some retailers, the other thing they’ve done is helped their community at the heart of what they do, which like GAIL’s what they did was allowed other suppliers to sell their product in GAIL’s, because they couldn’t get it to the customer in the other way. We’ve seen some innovation there. But we’ve also seen the impact on staff, and the impact on mental health, and the impact on being locked down and stuck at your dining room table.

Some of us are fortunate that actually we live around green space, but there are a lot of other staff members don’t. I look at what PwC have done, supporting staff. A lot of this you don’t see, but one of the things that we did, and I know a lot of other businesses have done, we invited psychiatrist on our webcast, to help people realise that they weren’t alone. Again, for me the biggest tip from one of our psychiatrist was to, in the good old days, you walked between meetings, so you had time to reflect and to think, whereas I just sit at my dining room table, so I was making space 5 or 10 minutes to walk outside.

The other thing we’ve done is give all our staff subscription to the meditation app Headspace, which is helpful. There is lots of other things that businesses have done, that you don’t actually see externally.

Emily

Yes, some lovely examples there, really inspiring, thanks Suzi. We talked on a number of episodes of this podcast about some of the steps PwC has taken. As an employee, I’ve certainly felt the impact of our purpose in that regard, as a constant, during this sea of change.

Tom, Suzi mentioned some other things that you’ve been doing at GAIL’s there, and I know that your stated purpose is about making good food go further, giving back to communities, and doing business in a sustainable way. Tell us a bit more about what that means to you, and how that’s affected how you responded to events over the last year?

Tom

There is two parts, one is waste, anytime you are making something, there is potential to waste. If you are buying good ingredients like us, you can’t even afford to waste things, and you’ve to think about how you can double use things. We came up with a whole line of things that were off cuts of some of the products that we are making. We also ended up developing this bread over about a year, to really take old stale bread and then use that as an ingredient into the next generation bread. That’s called our wasteless bread.

The packaging, Suzi was talking about some packaging, so that material side is changing quite a bit. There is the, talking about the workforce. I was surprised we ‘ve seen good go further. We have customers that come in, and they are paying customers every day, and we bake for them, but at the end of the day we will always have something left, because its for all fresh. Our guys, it was so important for the people in our business, and I was amazed how much this made a difference to them feeling good about going to work and about the businesses, is we did like 15,000 meals to the NHS. The end of the day stuff, we would bring to the hospitals. We have like 95% of our days full with end of day charity. It just became a much bigger thing, because people wanted to help people. That was just a great sign of how these things that aren’t great, it can show how the world is a better place than sometimes we give it credit for.

Emily

Yeah, I completely agree and recognise that, and it is lovely to her the way for your teams to engage with that and through the things you are doing at GAIL’s.

I am sad to say we are heading towards the end of our time together today; time is going very quickly.

I would like us to turn our eyes to the future a little bit before we wrap up. As, we record, we are making steady progress on the vaccinations, looks like there is a round out of the pandemic, will be a long one. We’ve heard about few changes here that I get the sense, some of which are quite likely to stay.

Suzi, perhaps you can start yourself, tell us a little bit about your thoughts on what the road ahead looks like for private business in 2021, and then, Tom, I am going to come to you for your vision for the future too.

Suzi

Emily, thank you, and actually we’ve concentrated a lot on this podcase on COVID 19, and actually the one thing we haven’t mentioned is the B word, Brexit, and actually that is one of the things that leaders are telling us that 2021, that is what they are focussing on. They are looking at their supply chains. Because there will be some increased cost, they are looking at perhaps creating Irish subsidiaries in a bit to secure that access to the EU. They do remain concerned about the increased costs, and equally recruiting staff into London. But again, I always find with entrepreneurial businesses, where there is a challenge there is an opportunity and they will find a way to get through that.

Liquidity, interesting enough, as we look into 2021, there is an awful amount of liquidity still in the market, which I am hoping will suggest the bounce back from COVID will be quicker than we saw in the 2008 financial crisis. We are seeing lots of opportunities emerging from Brexit and we anticipate that some of that short-term disruption we believe will be a benefit for some of our businesses. Elsewhere, there is lots of optimism, because the pandemic has created some opportunity, and I’ve certainly seen myself, my local high street has had a resurgence. Lots more people are not going to shopping centres, they are shopping local, and therefore the independent shopkeeper is having increased activity and also increased activity online.

We have asked a lot of businesses, what’s your outlook, and mostly those are bullish about the prospects. Given all that have been achieved during this pandemic, they are just looking to be better, swifter, and more productive.

Emily

Thank you, Suzi, and are there some things that you think we can take from 2020 that will help them to do that, what do you think some of the key takeaways are that they can use to achieve that?

Suzi

It’s about taking the best of what you’ve learned from COVID and not leaving it at home. Certainly, if we look about home working, all of us are sitting at home today and that is definitely here to stay. There will definitely be a mix in the home working. We are lucky, for those of us that can use technology and don’t need to be in an office, we will probably split our time. But equally going forward, for Tom and GAIL’s, people have to be in stores, but will work that out, will take the positives from COVID and make sure we carry that forward, and keep carrying those communities.

We did ask in April 2020, as half our staff were employed around the UK were working from home, 86% of our CEOs thought that going forward that would be about collaboration, that we would never go back to the way we were. We think equally the best of thinking about that the future is digital. The 59% of our UK CEOs said transforming their business is top priority. We’ve started to see some people transforming their businesses already. That will go further as we come out of the pandemic. We will see more digitisation and simple things, but we will see more of that.

Equally we will also see a focus on nurturing, attracting, and looking after our talented people, because people are at the heart of everything that businesses need and developing those skills will be important in keeping that commercial edge for businesses.

Also, the pandemic has made us think about we are responsible for building a better tomorrow. It is a difficult environment. We’ve got to start continuing to act sustainably and responsibly and support our local economies as well as using the advantage that business have to create brand and loyalty to our customers, but we need to do that in a sustainable way. We are only at the start of that journey, 2021 and beyond, sustainability will be an important part.

Emily

Thanks so much Suzi, and that sets out great context for my final question to Tom, and Tom, 30 years as bakers, 15 serving the public, what we want to know, is what you are going to do next?

Tom

Pretty optimistic about how this disruption has taken us out of our comfort zone, and accelerated an interest, it has been happening probably the last 20 or 30 years, but a longer number of dynamics. We are prioritising food in our lives a little bit more, what’s interesting is qualities of food for me, it’s ephemeral, it’s not a product, it’s really, your meal something you have, and then it disappears, and then you create another one, so it’s not just an object that just sits around. Also, you prioritise food, you connect more to nature and to seasons, in the end the food is our future selves, it is basically what we become. For me, I have always believed that the society is built more around food, it is going to be a healthier society, not just at a cellular level, but also at a spiritual and emotional level, because it is something that we all share, it’s something that shouldn’t be driven to the lowest cost, because it is just too important, it needs to be well thought out, it’s not a widget.

It was interesting to hear, Suzi said, it was a move to digital, but this disruption should get us to think a little bit more, and it has, made us think a little bit more about what our connection is to nature as well. While we may be pushing and accelerating digital, I also think we are realising a little bit more the importance of nature and how food sits in that natural world and how we seat in that natural world.

Emily

Thank you, that’s such a fascinating answer, if I think of what I will personally take out in lockdown one of the things I want to hold on to is the fact that we’ve been eating better as a family than we ever have, because I have had time, and its somewhere I have channelled my energy, so what you’ve said really resonates with me.

Thank you both, I have really enjoyed today’s discussion and of course thank you to everyone for listening. If you would like to find out more about the conversations, we’ve had with private businesses about the lessons that they have learned during the coronavirus pandemic, please do visit our website at pwc.co.uk/privatebusiness.

Of course, don’t forget to subscribe to keep up to date with our business in focus podcast series.

Thank you everyone, stay safe and well, see you next time.

Participants

• Emily Khan, Director, PwC
• Suzi Woolfson, Private business leader, PwC
• Tom Molnar, Gail's Bakery CEO and co-founder