When Nabil Boghos acquired Woburn-based bread-making company Jessica’s Brick Oven Inc., in 2008, he saw a business offering a high-quality product, but one whose bottom line had been a little slow to rise.
Having been in business since about 1997, Jessica’s revenue had hit a peak of around $2.5 million in 2008, said Boghos. Meanwhile, its competition in the area of hand-crafted artisan breads had increased.
“When I first took over the company, there were some really hardcore decisions to make, in terms of where we were taking this company,” said Boghos, 54. “I looked at my competition, and there are some very big reputable bread companies in the area.”
He decided he needed to add some fresh ingredients to the mix: Increase its market share by selling its product in more retail stores — and expand the physical operation itself.
The 50-employee company had previously sold its products primarily to such establishments as hotels and restaurants in New England. A smaller portion of its revenue — about 30 percent — came from selling the product in retail stores, primarily the Trader Joe’s chain, Boghos said. The latter segment, he thought, was one the company could build upon to achieve more growth.
The challenge, however, is that large retailers “are very hard to get into. They’re loyal to the people who are already there,” Boghos said.
Boghos thought he might have a couple of advantages. For one, he had experience and connections in the industry through Middle East Bakery Inc., a Lawrence-based operation started by his father in the early 1970s. Also, he planned to utilize the services of Preferred Distributors, the same Haverhill-based food-product distribution company that Middle East uses. This enabled Boghos to have his products distributed on a large scale at a discounted rate.
When Boghos acquired the business in 2008, its products were sold in 68 Trader Joe’s locations. Since then, the company has added 46 DeMoulas/Market Basket locations. It has private-label arrangements with both of those accounts. The products are also sold in a small number of specialty shops.
The company’s revenue, which Boghos expects to come in at about $5 million this year, is now derived 65 percent from retail and 35 percent from other accounts, including hotels and restaurants.
Interestingly enough, Boghos might not have had the chance to see his growth strategy come to fruition had he not been introduced to an important funding source recently.
While dabbling in the real estate business, Boghos had found out through a business contact that Jessica’s was up for sale.
“I saw a tremendous amount of upside because of the quality of the product,” he said.
When Boghos acquired the business in June 2008, the purchase was partially financed through an installment plan with David Elwell, its founder and former owner, who had named the business after his late daughter.
“I built the business from nothing, and I took it as far as I could. ... Nabil has done a very good job with the business. He’s brought the margins way up,” said Elwell, who is now retired.
After the acquisition, Boghos set about making some of his own enhancements to the operation: He leased an additional 2,500-square-foot space in the same building in Woburn, which was built out for about $30,000, increasing its total square footage to 7,500. He also spent about $60,000 on upgrades to the operation’s equipment.
Having exhausted most of his financial resources on a portion of the business acquisition cost and these operational enhancements, Boghos found himself in a bit of a cash crunch: His first note payment to Elwell, in the amount of $200,000, was due by the end of June of 2009 — and he was lacking funds.
Luckily, a business contact of Boghos’ pointed him in the direction of the Smaller Business Association of New England, which, in turn, helped Boghos secure a $600,000 capital loan from The Economic Stabilization Trust, a quasi-public lending corporation, in June.
Robert Baker, president of SBANE, said, “(Nabil’s) product is good, and he has experience in the industry. That has helped him.”
Jessica’s services about 200 customer accounts, many of which have been with the company for an extended period, Boghos said. And the company produces between 10,000 and 12,000 pieces daily, but Boghos feels it could about double that with more space. So he is scouting a larger location — the business would ultimately vacate from Woburn — and has narrowed the search to two sites in Lawrence, both about 40,000 square feet. His plan is for the company to move into the new location during the first quarter of 2010.
Boghos anticipates the expansion effort will initially cost between $700,000 and $1 million, covering a lease, build-out and equipment. He plans to utilize some of the funding left over from the Trust’s loan for the move.
“The plan is to take the same model we have here (in Woburn) and take this operation and put it on steroids,” Boghos said.