Shirley bakery thrives in the Zone

http://www.newsday.com/business/technology/shirley-bakery-thrives-in-the-zone-1.607339

from Newsday
By Keiko Morris

Shirley bakery thrives in the Zone
Government grants, utility discounts, tax rebates help muffin company remain on LI – at least for now

BY KEIKO MORRIS

From his perch above the baking operation, Michael Petrucelli narrated the unrelenting march of banana nut muffins, as thousands of the bumpy brown spheres emerged in a steadily moving phalanx from imposing steel freezers.

“It’s like going from the steam room to the shower,” Petrucelli said, referring to the muffins’ passage from the ovens, through cooling chambers and then the spiral freezer. “These muffins do a lot of traveling.”

As chief financial officer of Uncle Wally’s, the Shirley-based muffin company, Petrucelli is effusive about the company’s beloved muffins and its recent successes. Uncle Wally’s story – it’s baked hundreds of millions of muffins – runs contrary, at least for now, to the usual fate of manufacturers pressured off Long Island by high energy and transportation expenses.

This week, Uncle Wally’s will celebrate a $3-million expansion of its Shirley bakery from 44,000 to 60,000 square feet and the introduction of yet another product the company says is a first – muffin dough in a tube, called Uncle Wally’s Oven Luv’n Muffins. And although Entenmann’s, now owned by conglomerate George Weston Bakeries Inc., recently announced that its Bay Shore plant will stop baking crumb cake and cookies and cut 350 of its almost 1,100 employees in an 18-month period, Uncle Wally’s said it plans to hire between 20 and 30 workers this year and add a total of 100 in the next two to three years.

Benefits of Empire Zone

Uncle Wally’s – whose co-founder is Wally Amos, formerly of Famous Amos Cookies – faces many of the same hurdles other manufacturers on Long Island do, said Lou Avignone, Uncle Wally’s chief executive and co-founder. But Avignone noted that the company’s size and culture allow for a nimbleness and an innovative approach that get lost in the bulk of larger corporations. Designation as a qualified Empire Zone enterprise, as well as working with the town, county and utility companies to reduce costs, have helped it thrive and remain on Long Island.

Certain businesses that are within an area the state has designated as an Empire Zone can apply to the program, which offers various tax credits for 10 years. It was designed to attract new businesses and enable existing ones to expand and create more jobs.

“We are very efficient and can produce a tremendous amount of product in a very small footprint,” Avignone said. “And we have significant benefits being a part of an economic development zone.”

But he added that high energy costs remain a challenge.

“Even with credits, we are significantly higher than the rest of the country,” he said.

For the recent expansion, the state’s Empire State Development Corp. has provided the company with $1.5 million, including a $250,000 grant for this expansion and a $1.08-million loan for machinery and equipment. These funds are tied to goals, including the creation and retention of jobs, the company must meet.

The Shirley bakery, built in 2001, has received discounted rates from Long Island Power Authority and the addition will get rate discounts because the company expanded within the Empire Zone, according to LIPA. The company also received rebates from LIPA for installing high-efficiency lighting and a high-efficiency freezer in which the muffins are frozen during a 40-minute journey up and down a spiral path. KeySpan has discounted 35 percent of the transportation charges on Uncle Wally’s gas bill, saving the company $20,406 in 2006, said Robert Wong, KeySpan’s regional director of economic development.

Working past obstacles

Suffolk County Executive Steve Levy said the county worked out a creative deal when Uncle Wally’s encountered an unexpected and particularly onerous expense that probably would have forced the growing company to look beyond the Island to expand.

The company had planned on hooking into a sewage treatment system that was to be completed when it built the Shirley facility in 2001, Levy said. But the treatment system was delayed and isn’t expected to be completed for another two years, so under the county’s requirements, Uncle Wally’s would have had to buy two acres of undeveloped land worth about $250,000 to offset the amount of sewage that would have exceeded set limits.

Instead, under a deal with the county, the company is renting the two undeveloped parcels of land for $10,000 a year.

“They felt they needed this expansion and if we weren’t innovative in working with them, they would have packed their bags and jobs and moved off the Island,” Levy said. “We’re trying to show that we’re a business-friendly county, accommodating business growth while still maintaining our environmental standards.”

The company’s designation as an Empire Zone enterprise expires in 2011, as will many of the benefits that come with the classification. When that time comes and the company needs to expand, Avignone said he and the company will have to consider their options.

“As we continue to look at expanding and growing the business, we would obviously consider options that might be out of state or Long Island,” he said.

Rebates and discounts, however, can take a company only so far, some observers have noted.

“Our incentives are important, but I frankly think they don’t give themselves enough credit,” said Ray Donnelly, Brookhaven’s director of economic development. “They’re pretty clever guys.”

Savvy focus

Uncle Wally’s early history, like many new companies’, was bumpy. The company has its roots in Uncle Noname Cookies, which Amos created in 1992 after he was pushed out of the Famous Amos Cookie Co.

Avignone joined him in 1994. They had little success in the cookie market after two years, ran up significant debt and eventually were forced into bankruptcy by one of their backers. But Avignone and Amos already had begun exploring fat-free muffins, a niche that would prove successful. They eventually named their company Uncle Noname Gourmet Muffins and then, in 1999, Uncle Wally’s Muffin Co.

“We came out of bankruptcy unassisted,” said Amos, who lives in Hawaii. “We grew the business and two years later financed the construction of a new bakery. The mere fact that we were able to do that is a testament to a great team of people who were dedicated, skilled and worked their butts off to grow and prosper [the business].”

JoAnn O’Hagen, Chase president of the Long Island and Queens Middle Market and a lender to Uncle Wally’s, said the company was savvy about its focus on muffins and the development of its subsequent product lines.

“Identifying a niche is the key to success,” said O’Hagen, who said Chase has been working with the company since the 1990s. “They just expanded and altered the product line to reflect the world around them. It’s that kind of flexibility to see things that others don’t and capitalize on them quickly that makes this business successful.”

Uncle Wally’s now has a fat-free line of gourmet muffins, sugar-free muffins, its regular muffins or its Rich and Moist line and an All Natural line, free of artificial flavors, colorings and preservatives. The company recently has added a “smart portions” whole grain muffin as well. And this week Amos will be touting the company’s latest Oven Luv’n muffins – dough in a tube designed to be baked at home without the mess of batter.

The newest product will “revolutionize the whole baking industry,” Amos said. Or, at the very least, he promises it will be delicious.

MONDAY FOCUS

The Empire Zone edge

Companies such as Uncle Wally’s, with Empire Zone designations, can benefit from the following:

Sales tax exemptions: An exemption from the state portion of the sales tax at the point of purchase is available for most goods and services used in the zone. An exemption from local sales tax may also be available. The exemptions last for 10 years, provided the business continues to meet the employment test each year.

Real property tax credit: A credit for real property taxes paid based on a formula that considers job creation, wages and benefits or investments made in the zone. This credit is also available for 10 years.

Tax reduction credit: A credit against tax equal to a percentage of income taxes attributable to the zone enterprise. This credit, based on the business’ employment growth in the zone, is also available for 10 years and can reduce a company’s tax liability to zero.

Local benefits: Municipalities designated as Empire Zones may offer sales tax refunds and tax abatements for property improvements. Many utility companies (including gas, electric and telephone services) also offer rate reductions to certified Empire Zone businesses.

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