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Business

Jenny Lee Bakery cooks up a new strategy in difficult times

| Saturday, April 16, 2005

When Scott Baker became the fifth generation of his family to enter the baking business in 1996, sales at two of three remaining retail outlets operated by McKees Rocks-based Jenny Lee Bakery had already gone stale.

The company -- which has been in business since 1938 -- was treading water.

Ten years ago, his parents, Bernie and Beverly Baker, stopped relying on retail sales for the bulk of the company's business, establishing a wholesale business providing fresh baked goods to Shop 'n Save, Foodland and other supermarkets, restaurants and community markets in the region. And they closed all but the three outlets, down from 14.

Other locally owned bakeries across the region have either closed or been forced to develop new strategies for survival -- with baked goods more available at in-store bakeries at supermarkets and other outlets.

John Walsh, president of the Western Pennsylvania Baker's Association, said the wide availability of baked goods in outlets from convenience stores to Wal-Mart is thinning the ranks of retail bakeries. Walsh's family owns Bethel Bakery in Bethel Park, which turns 50 this year.

"It's hard to get good turnout at our meetings," Walsh said. Baker's Association membership has declined steadily to about 100 members.

"Customers are more limited time-wise in how far they are willing to travel for baked goods," Walsh said. "Our job is to differentiate what we make so that people are willing to make that special stop."

The problem is illustrated at Jenny Lee's Market Square store, Downtown, where there has been a steady erosion of sales. In the Easter week of 1995, the store had $40,286 in sales. By 1998 that figure had fallen to $30,260. This year, with an early Easter and cold weather, the store did $21,843 in sales.

Efforts to inject life into Jenny Lee's retail business upon Scott Baker's arrival as head of sales and marketing stemmed the revenue decline, but did not stop it. So Scott, 33 -- combining his business administration degree from the University of Pittsburgh with his degree in the science and technology of baking from the American Institute of Baking -- began kneading the numbers to come up with a solution.

A new business plan now being implemented aims to complete the transformation that his parents started, but with a French bread twist. Scott Baker intends before the decade is complete to derive 90 percent of Jenny Lee's revenue from frozen wholesale baked goods -- with a limited fresh baked goods business that could result in further reduction in its store base.

The process has already begun with the introduction of a frozen cylindrical cinnamon and cinammon-raisin bread loaf for which the company has invested $250,000 for a new production line.

Shop 'n Save's corporate parent and wholesale supplier, Supervalu Inc., has begun offering the bread through its New Stanton warehouse. About 20 corporate-owned and some of the 58 independent Shop 'n Save stores also have begun selling the frozen bread.

Baker said the product's inclusion this week in Shop 'n Save's S&H Greenstamps promotional program will likely mean more independents will order shipments. Additionally, the bread included in this week's weekly circular for Supervalu-supplied Foodland stores, means more of those independents are also likely to give it a try.

Baker said the goal is to expand the cinnamon bread products deeper into SuperValu's distribution network, first in the Northeast and Midwest, and later, nationwide. If this strategy is successful, more frozen products can be introduced, either under the Jenny Lee brand name, or as a store brand.

Jenny Lee currently relies on its retail stores for 50 percent of its nearly $5 million in annual sales, and wholesale for 50 percent. Only 5 percent of wholesale sales currently comes from the frozen cinnamon bread.

If the plan works, the current McKees Rocks production facility will be maxed out by 2008. The Bakers have begun preliminary searches for a new facility. A prime candidate is a vacant lot behind their current facility, where the healthiest of their three remaining retail outlets is located.

Baker is reluctant to give up the company's Downtown retail outlet in Market Square, where a Jenny Lee bakery has operated since 1938.

"There is a different type of pride you get from running a retail operation," Baker said.

Meanwhile, rent and other overhead costs, including transportation, are all up.

He said he would like to keep a Downtown presence for its marketing value and for sentimental reasons, but admitted that closing both that location and the outlet in the Crafton-Ingram Shopping Center remain real possibilities in the future.

Baker said no employees will lose their jobs if any of the retail outlets shut down. They will be relocated to the production facility as the business there grows. Jenny Lee currently employs about 80, and the business plan calls for adding 20 production workers within the next three years.

Although scaling back its retail business would be a change for Jenny Lee, the Baker family's heritage is just as strong as a wholesaler. Jenny Lee was formed by Scott Baker's grandfather, Paul Baker, who opened the Market Square (then known as Diamond Market) outlet, initially selling products of the Seven Baker Brothers wholesale bakery in the West End.

Seven Baker Brothers was the business of Paul's father and his father's six brothers, hence the name. At its height, it had 120 delivery trucks and distributed goods as far away as Erie.

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