JEWEL TO SELL BAKERY TO NORTH BAKING

MINA WILLIAMS

MELROSE PARK, Ill. (FNS) -- Jewel Food Stores, based here, has agreed to sell its bakery operations to North Baking Co., a unit of Evansville, Ind.-based Lewis Bakeries, for an undisclosed amount.

Under the agreement, North Baking would supply all 186 Jewel and Jewel-Osco stores, as well as the 33 freestanding Osco stores, with fresh bread and bakery products. Also under the agreement, North Baking would offer employment to Jewel staff currently working at the production bakery facility.

A "seamless" transfer is expected without distribution disturbances, said Karen Ramos, spokeswoman for Jewel-Osco.

The proposed sale is part of a growing trend that is seeing more retailers shed their self-production facilities in favor of outsourcing, according to industry observers.

"Retailers are exiting from a lot of their manufacturing to put all of their investments into their retail stores," said Bill Bishop, president of Willard Bishop Consulting, Barrington, Ill. "We are seeing this particularly in private-label manufacturing and baking."

Under the terms of the agreement, North Baking would simply pick up the day-to-day operations of the production bakery in the existing facility within the Jewel-Osco complex. The purchase would include the business and the facility's production equipment, she said.

The production bakery produces the rack bakery items offered consumers in Jewel, Osco and Jewel-Osco combination units. The items produced in the facility include bread, rolls, and hamburger and hot dog buns.

Additionally, the facility produces some frozen-dough items that are sent to the chain's in-store bakeries. These items include white bread, wheat bread, rye bread and specialty rolls including Kaiser and sandwich-style rolls. The frozen-dough items are baked off within the individual unit's in-store bakery.

The production bakery also is responsible for providing the chain with angel food cakes and un-iced sheet cakes. Sheet cakes are sent to units for icing in-store.

This type of arrangement "creates an exciting opportunity for suppliers to combine private label with branded manufacturing for scale, and to focus their business on tailoring products for specific retailers," said Bishop.