Bagels no longer rolling in the dough

Publication Date: Wednesday May 31, 2000

Bagels no longer rolling in the dough

Local retailers confident despite Noah's woes

Jennifer Kavanaugh

Remember the bagel? In the mid-1990s, the round food item was the darling of the retail food industry, inspiring would-be entrepreneurs to open up shops and mimic the ambience of New York delicatessens. But now, the bagel's days as a fad food are gone, and it has faded into the background as other foods bask in the display-case glow. But local retailers say bagels are still a favored breakfast staple and have more staying power than say, croissants, because they're healthy. It's just that people don't get as excited about the round curves of a bagel as they once did.

"Yeah, the bagel market has gone soft," said Steve Stivala, manager of House of Bagels on University Avenue. "But it's still pretty good."

The bagel industry has undergone several shifts in the past decade, going from an ethnic breakfast food to an all-purpose, must-have treat, and then back to a breakfast--and maybe lunch--item. Many of the businesses that rushed in to capture the bagel craze are gone, leaving the survivors to innovate and find ways to maintain their share of the market.

Perhaps the biggest bagel casualty has been the Colorado-based Einstein/Noah Bagel Company, which once seemed poised to be the McDonald's of bagels but has seen its company deflated in recent years. In April, the company that owns Noah's New York Bagels and Einstein Bros. Bagels filed for Chapter 11 bankruptcy protection to reorganize its debt. The company has also closed 74 of its stores nationwide, including the store on California Avenue in Palo Alto.

Noah's New York Bagels started out as a local Berkeley chain, until owner Noah Alper sold the company to Einstein Bros., which was in the process of becoming the country's biggest bagel conglomeration. But several years ago, the company decided to buy back all of its franchises, which piled on the debt.

Stivala of House of Bagels said Noah's was a formidable competitor when it first started moving into neighborhoods in the the late 1980s.

"They were as stiff (a competitor) as it could be," Stivala said, adding that the image outweighed the actual bagel. "People thought they were the best because Noah's told them it was the best. Budweiser isn't the best-selling beer because it's the best beer."

Stivala said that after Alper sold the Noah's chain, the quality of the products and customer service suffered. "They had a really good thing going and they mismanaged it," Stivala said.

Anita Marie Hill, a spokesperson for Einstein/Noah, said the company is still doing well despite filing for bankruptcy protection and closing down more than six dozen stores. She said the company decided to close down only the stores it felt were underperforming or had poor lease arrangements that made them unprofitable.

According to Hill, the company still has 465 stores nationwide and doesn't plan on closing any more. She dismissed rumors that the Noah's stores on University Avenue and Santa Cruz Avenue in Menlo Park are going to close. And as for complaints about quality,, Hill said, that's just sour grapes among competitors.

"Everyone, of course, has their own opinions," Hill said. "But our stores are operating quite well. Based on the e-mails we get from customers every day, they're really happy."

Noah's financial problems haven't exactly inspired sympathy among current and former competitors.

"As far as I'm concerned, Noah's got its just desserts," said Karim Tahir, whose father, Ravil, ran The Bagel Works shop on Ramona Street up until a few months ago. "Noah was more concerned with making money, as opposed to my father, who loved making bagels."

The Bagel Works, which opened in the mid-1970s, has been called Palo Alto's original bagel store. Ravil Tahir, who closed the store recently to retire, was dishing out the round bread products long before they became hip.

"I remember when I would go help out with the store, there would be a line around the corner that wouldn't let up for hours," Tahir said, adding that customers would travel from as far as Daly City to get bagels at the store.

Tahir said his father had "a great run for about 10 years" when he was the only bagel maker on the block, and perhaps even in the city. But then too many people rushed in to capitalize on the craze, Tahir said, ignoring one basic truth: People can eat only so many bagels.

"I think what happened is that is that (the industry) became oversaturated," Tahir said. "With Noah's, it became bagels on every block. The market can only take so much. But it's still a very good, healthy food."

For the bagel sellers that remain, the key is improving on the basic formula of selling bagels with cream cheese from a retail shop. Most bagel stores don't just sell bagels--they also offer a whole array of bagel spreads, sandwiches, coffee, and fruit salad, to name a few items. Einstein/Noah said only about 40 percent of its revenues come from actual bagels. The rest comes from other products.

Some bagel stores look for other ways to sell their product.

The Posh Bagel, a local bagel chain that started in 1992 with its first store in Los Altos, does an increasing amount of its business through wholesale deals, said President Jeffrey Ottoveggio. The Posh Bagel sells its bagels through high-end grocery stores such as Whole Foods and Andronico's Market. Ottoveggio said the mixture of revenue sources has helped the company weather industry changes. "We were diversified, housing wholesale, retail and franchises," he said.

Ottoveggio and other bagel makers say they're confident that they'll be around in the future, because enough people still love the bagel.

"The bagel's going to be around basically forever," Ottoveggio said. 

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