Behind the Plate - Bonus Episode - Silver State Foods - Pat Aiello

Pat Aiello, former owner of Silver State Foods, discussed the evolution of his family's business, which began in 1940 as a bar and restaurant supply business. By 1950, they entered the food business with barbecued beef, later adding spaghetti sauce and pasta in the 1950s. The business primarily sold to grocery stores until the 1980s when they shifted focus to restaurants to counteract declining retail sales. Aiello took over in the 1970s, building their own facility in 1971. He highlighted the challenges of price controls in the 1970s, the impact of regulations, and the difficulty of increasing prices in today's market.

Transcript

Antonio Howell  0:00  
Hey everyone, welcome to Behind the Plate. I'm your host, Antonio, and this is the podcast where we go behind the scenes of the restaurant world, from day to day operations to challenges of running a business. We'll hear first hand stories from the people who bring the favorite meals to life. Whether you're dreaming of opening your own spot or just curious about what it takes, you're in the right place. Let's get started. 

Antonio Howell  0:43  
All right, so I look back on the website said your family started the business back in 1947?

Pat Aiello  0:49  
Um, probably, probably closer to 1940 well, about 49 I guess. Yeah, my dad, my dad did,

Antonio Howell  1:01  
Yeah, and do you have, like, any information about that, like starting the business?

Pat Aiello  1:06  
It began as a bar and restaurant supply business. He was, he would deliver or sell to bars and restaurants things like that bars would use, like olives and toothpicks and, 

Antonio Howell  1:22  
Okay, 

Pat Aiello  1:23  
Anything that a bar would use. and that's how it started. He wasn't really in the manufacturing business until probably about 1950 he bought, he bought a or took over a bar and restaurant supplier, much as himself, who did barbecued beef, and that's how we got into the food business. He, he was, he would, they would make the barbecue beef and prepare it and sell it to restaurants and other people who did food service, restaurants, drive in theaters, things like that.

Antonio Howell  2:09  
Okay, well, that's interesting.

Pat Aiello  2:11  
And then from there, it evolved as as time went on, and you tell me if we if I'm getting off track, but I'll try to give you the evolution of of the of the business into a food operation. He started to make spaghetti sauce just so that it would, it would take up the time when they weren't, when they weren't cooking barbecued beef, and he put it in a can, and then he would have to go to the local stores and sell it to him, sell them other stuff in the local grocery stores would put it on their shelf and market it.

Antonio Howell  3:01  
Okay, yeah,

Pat Aiello  3:04  
From that point he did the spaghetti sauce, probably from the early 50s until when we sold it. He did it forever. I mean, the whole the whole time that the business was was operating, and then I'm going to say probably in the middle 50s, he branched out into the pasta business and started to make pasta and spaghetti sauce. He it was just another addition to the to the mix, and it he was selling it mostly to to grocery stores. He wasn't doing too much business with with restaurant. I mean, yeah, with restaurants at that time, he just would continue to grow the the grocery store items.

Antonio Howell  4:08  
That's cool.

Pat Aiello  4:09  
In the, while that was going on, the bar and restaurant. Just bar and restaurant, distributing business kind of disappeared. He didn't do any more with bars and restaurants. He was primarily selling to retail customers, customers like grocery stores and that sort of thing.

Antonio Howell  4:35  
Okay, okay,

Pat Aiello  4:37  
So I, I don't, do you want to bring it all up into to the present, or What? What? What else do you how? What other things are you looking for?

Antonio Howell  4:53  
Yeah, so I just got a few other questions. It will eventually get there. So I guess right here. Um. Um, so you went to the Navy, and to get to get away from the food business, is that,

Pat Aiello  5:07  
No, I went into the Navy because it was probably a more of a of a just because I had no, no real direction at the time, and I wasn't advancing myself very well. I I was work. I had worked in a rest in a restaurant for probably two, two or three years while I was still in high school, and then things weren't, weren't progressing in my to my way of thinking. So I did join the Navy, and I spent four years there, and when and when I came back, I came back to work for my dad in in the middle 60s. 

Antonio Howell  6:04  
So the middle 60s you started working for your dad. When was the time you started to take over and lead the business on your own? 

Pat Aiello  6:11  
I'm gonna say probably not until the probably the middle 70s, we've been, we we moved out of the rental facility. We were, we had always been renting our our manufacturing facilities, all our buildings, and we built a new building in 1971 and I still, my dad was calling most of the shots. I did sort of I would I was managing the plant from the everyday for all the everyday responsibilities, but as far as making decisions on which way the business would grow or or activate. My dad was still, still calling those shots, until probably, I'm going to say the middle 80s, and then I I probably started to impose my thoughts in on on how we would grow.

Antonio Howell  7:24  
Okay, that's interesting. Um, so what do you know about like, like, selling to businesses? So what was that like? How did you get out there? How did you reach out?

Pat Aiello  7:39  
Well, in the in the middle 80s, when I, I started to run be more in the decision making of the company we were, we had not, we had not been prepared to, compete against large retail competition, people like Ragu Prego, those kinds of spaghetti sauce people, yeah, we were not prepared for that. And so consequently, our retail grocery business started to decline fairly substantially. It really started to go away. So by the middle 80s, we had to find a new way to to grow, and that's when we took the pasta and went to the restaurant community and started to sell our pasta and sauce to restaurants. And that was a that was a lifesaver, that got us back into a growth pattern, and we started to grow from that point, but our retail business suffered tremendously. 

Antonio Howell  9:06  
Oh, dang. 

Pat Aiello  9:09  
And there's very, there's still, we still have some products in the retail stores, but not nearly to the extent that we had in the in the 60s and 70s. 

Antonio Howell  9:25  
Okay, and I don't know if you know this or anything, could be a long time, but like, what was pricing like around the time? Like purchasing ingredients and maybe selling?

Pat Aiello  9:37  
Well, I guess actually, it hasn't our our raw materials have, of course, they increased every year, but not terribly, until there was a, in this. 70s, when they when Nixon was the president, they put price controls, and that was a real fiasco. There was all kinds of ways to get around that, and it never really worked, because inflation was starting to be really, really crazy. I mean, it was 10 or 12% and it was just nuts. And so they they thought the best way to combat that was be to control the pricing. Well, it did not work. So that went away pretty quickly. It did only lasted a few years of maybe two or three years, and the pricing on our products. We we never could we never worried about increasing the price because of the cost of ingredients and cost of production. We just raised the price because we needed to do it. And we never, we had a quality product, and those folks that were buying it understood that, and they they would, they would pay the price. Now, today, things are a lot different you have to jump through a lot of hoops to in order to get a price increase at at the wholesale level, like when they're trying to sell to King Soopers or to any of the Kroger outlets or Safeway or any of those people. You have to give them a heads up way ahead of time. And it's just the the big guys, the the General Mills and and the Conagras, those kinds of people, they they can do that, they because they have the personnel to do it. But little companies like Silver State foods just have to do it on their own, and it's a difficult process to increase your prices today, although it it still has to happen, otherwise you go out of business. 

Antonio Howell  12:04  
Okay, yeah, Just, just a couple more here. So looking back, what is your most like? Proud moment from Silver State foods.

Pat Aiello  12:17  
Well, I guess when we finally were able to build our own building and pay for it. We paid for it in a pretty short period of time, and we in the fact that we could keep it going through some pretty tough times as as if the thing that affected us more than anything was all the insane regulations that have started to become part of what you have to deal with every day. When my father started it, there were not these goofy regulations. You could start started your business on a very small amount of money. Today, it can't be done. You need somebody's got to have some money in order for you to start a business. And that's why Silver State Foods today, produces products for other people. Their their business is, are the the actual brands that, that I sold to them are, are very small part of their business today, and they're they're doing. They're producing products that other people can't afford to produce, but they had an idea for a good product, maybe a well, even a spaghetti sauce or a salsa or a hot sauce. And so they come to a guy like Silver State Foods, and they've got all the equipment already. So they asked Silver State Foods to produce the product and and they can do it for a price, but at least they they don't have to come up with all the money that it takes to to get all the hardware and machinery that it takes to to produce all these things and listen and deal with all the regulations that have come about in the last 30 years. It's just that's that's the killer for the for the small businessman, is the is the unneeded regulations that only the big companies can can handle.

Antonio Howell  14:44  
Okay, yeah, no, I get that. So with the transition process with the next owner, what was that like for you? Giving it all to one of the workers at Silver State Foods, yeah? 

Pat Aiello  15:00  
Yes, well, it was pretty difficult. It didn't Silver State foods didn't realize a lot of money for the business itself. When we sold it, all we really got was it covered the cost of the of all the machinery that was in there, and it covered the cost of all the the inventory we had. But there was no profit, profit in in over and above that he I and and I was the actually the the lender in that. I let the the person that bought it that worked for me, pay him off in time, and he was a very capable person, so he paid all of his his notes, and then when it was time for him to buy our building, that's where we finally made some money. We made a little bit of money when we sold the building, because real estate had gone nuts by then. 

Antonio Howell  15:00  
Yeah 

Pat Aiello  15:47  
And that's, that's what's happened to Denver. The the all the the residential housing increases in Denver have just run the the cost of of real estate right through the roof. And it's just, it's, it's a mess and but they didn't stop the the regulations, the regulations are, are horrendous, just absolutely horrendous. 

Antonio Howell  16:30  
Wow, okay

Antonio Howell  16:34  
Just one last question to finish it all up. Besides all the factors of, like, just borrowing money and everything. What do you have, like, any crucial advice for starting a business like Silver State foods today? 

Pat Aiello  16:49  
Well, you really have to, have to be able to, if you go to start a business and actually do the manufacturing, you have to have a lot of money. I mean, horrendous amounts of money and the the if you, if you're talking about a business that is going to sell to the public. 

Antonio Howell  17:12  
Yeah

Pat Aiello  17:12  
Say a grocery business, you've got to have a tremendous amount of capital to do the advertising and promotions that you need to get the end user to, to buy the buy the product. You can't just put a building up and start making anything, whatever it is, if it's a spaghetti sauce or noodles or whatever, that isn't enough. You got to be able to spend the money to promote it, and we the guy that bought my business, if I didn't, if I didn't carry his loan, he couldn't have done it because he didn't have the money to do that. But I was getting to the age I was probably 63, 64 I wasn't quite 65 yet, but I had I was the his banker. I let him, I let him pay off the loan to me personally, because a bank would never give him the money to but do that because he had no he had no equity or no no way to guarantee it, and I have faith in him, and faith in the business that I could afford to carry his loans.