Roberto Lee Class of '04
Having His Cake
His entrepreneurship professors at the USC Marshall School of Business drilled him on financial plans and feasibility studies, but no one prepared Roberto Lee MBA‘04 for what it would take to run a company in the wild, wild East.
“A lot of people who come to China don’t understand the culture or speak the language,“ says Lee. “You have to be able to schmooze and tap into the local network.”
The 36-year-old native Angeleno founded Fresh Bread and grew the company to become one of the largest wholesale bakeries in eastern China. He’s now in the process of negotiating a merger with a multinational corporation. Based in Shanghai with two factories and 1,000 employees, Fresh Bread currently supplies Starbucks, Häagen-Dazs, 7-Eleven and the British grocery giant Tesco, among others. It also runs a small chain of retail bakeries in Shanghai.
At its inception, Fresh Bread was a 50-50 joint venture with an “800-pound gorilla” - a Chinese state-owned food manufacturer that had the biggest flourmill in eastern China, says Lee. The manufacturer promised to provide Fresh Bread with key raw ingredients as well as open up the local distribution channels. In turn, Fresh Bread would import global expertise in bread and dessert making. Soon, Lee was rethinking the arrangement. “We should have demanded a 51-49 joint venture,” recalls Lee. “We were deadlocked on everything.” Eventually, Fresh Bread bought out the manufacturer’s share.
In 2006, when he noticed that the company’s shipping and delivery costs were unusually high,Lee audited the logistics department. He found that his drivers were filing bogus repairs and selling the company’s prepaid gas cards for cash. Lee gave them a stern warning, but nothing changed. One morning, he announced that all 30 drivers would be let go, and Fresh Bread would outsource its logistics in the future. By the afternoon, his factory was surrounded. The drivers contacted their friends, who brought more friends and formed a human wall. Lee called the police, the labor department, even the foreign investment bureau, but he was told the same thing everywhere: This was the company’s internal problem, and they couldn’t help him.
That night, Lee sat down with three representatives in a teahouse to resolve the matter. The drivers demanded two years’ salary as severance. Lee responded that that would only force him to close the company and no one would get anything. After four hours of difficult negotiation, the two sides agreed on a severance payment of one year’s salary to the drivers.
Looking back, Lee says that having previous work experience in China was a big help. Born to Taiwanese parents in Los Angeles, Lee first visited China in 1995. After graduating from the University of California, Riverside, in 1996, he moved to Shanghai to work for a real estate developer in 2000. He chose to return to California and attend USC’s entrepreneurship program “because all the professors are entrepreneurs themselves,” he says.
Lee understands the importance of entertaining officials with fancy dinners on holidays and weekends, even helping their kids find a job, to make business run smoothly. “You have to keep up the relationships,” he says.
When he steps down as Fresh Bread’s CEO, Lee sees himself leading another company or starting something new in China. His feet are firmly planted in the world’s biggest marketplace.