Penzeys Spices, Inc.

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Penzeys Spices, Inc.

P.O. Box 924
Brookfield, Wisconsin 53045
U.S.A.
Telephone: (262) 785-7676
Toll Free: (800) 741-7787
Fax: (262) 860-1777
Web site: http://www.penzeys.com

Private Company
Incorporated: 1988 as Penzeys Spice House, Ltd.
Employees: 250
Sales: $22 million (2005 est.)
NAIC: 311942 Spice and Extract Manufacturing; 445299 All Other Specialty Food Stores

With stores in 18 states and headquarters in Brookfield, Wisconsin, Penzeys Spices, Inc. grinds, blends, packs, and ships spices to customers nationwide, and sells it aromatic wares at 30 retail locations around the country. The company imports cooking ingredients that are available as dried leaves or whole seeds, coarsely ground or finely powdered, from growers around the world.

1957–86: FROM LOCAL SPICE STORE TO MAIL-ORDER SPICE BUSINESS

In 1957, Ruth and Bill Penzey, Sr., started a coffee and spice business in Milwaukee, Wisconsin. Their son, Bill Penzey, joined the business when he was ten, working in the family store. Later on, the Penzeys narrowed their business to focus solely on herbs and spices, calling it the Spice House. While definitions vary, generally speaking, a spice is a root or seed, and an herb is a leaf.

In 1986, the younger Penzey spun off the mail-order aspect of the company as Penzeys Spice House, Ltd. He refused to take out a bank loan, and instead put all profits back into the business, surviving at first on a weekly budget of about $8. Armed with an Acer personal computer and a daisy wheel printer, the 22-year-old Penzey published his own spice catalog. For the first three years, he was the company's sole employee, living on about $10,000 per year. Penzey, Jr., also began traveling to such places as Bali and Turkey for four months of each year to establish contacts with new suppliers and to inspect the quality of spices coming in from existing suppliers. While overseas, he liked to photograph spices growing in the fields for use in the company's sales catalog.

Fortunately for Penzey, the late 1980s were a time when, inspired by travel, nostalgia, and an interest in culinary roots, Americans were taking more of an interest in ethnic cooking and wanted to learn the recipes of their grandmothers. "Our grandmothers knew more about spices than our mothers," Penzey said in a 2005 Oregonian article, going on to explain that, up until the 1930s, Americans used a fair amount of spices. But in the 1940s, ships were diverted from importing spices to transport war supplies, and sales of spices slacked off for the rest of the decade. In the 1950s, processed foods became more popular, and the general interest in spices declined still further.

1990–99: STEADY GROWTH AND THE DEBUT OF STORES IN WISCONSIN

In 1987, Penzey moved his mail-order business to an 8,000-square-foot building in Oak Creek, Wisconsin, and, in 1990, moved it again to a new 25,000-squarefoot facility in Waukesha, Wisconsin. Throughout the 1990s, the mail-order business grew steadily, mostly by word of mouth. In 1994, the company branched out, opening the first Penzeys Spices store in Milwaukee, Wisconsin. "With spices you want to be able to compare things, smell things to see which ones you like," Penzey explained about opening the store, looking back in a 2005 Boston Globe article. "It's a very sensory sort of experience you can't exactly get with a catalog."

By 1997, there were two retail Penzeys stores, one on Blue Mound Road in Brookfield, Wisconsin, and one on University Avenue in Madison, Wisconsin, which together did about 10 percent of the company's business. Penzeys Spice House, Ltd. had grown to a point where the warehouse in Waukesha, Wisconsin, was cramped and chaotic. Warehouse shelves contained more than 250 different herbs and spices that were ground and packaged for shipping at small work stations scattered throughout the building. The firm employed about 40 people, having grown from 13 people in 1992. "For the past three years, we've been growing at a rate of about 50 percent annually," announced Penzey in a 1997 Milwaukee Journal Sentinel article.

By the late 1990s, nationally, per capita consumption of herbs and spices had increased from two decades earlier by more than 50 percent annually, from two pounds to more than three pounds, according to the American Spice Trade Association. The then current trend in spices was hot spices, which as a group accounted for 41 percent of Americans' spice consumption. Consumption of white pepper and of mustard seed had increased 58 percent since 1980, while consumption of red pepper was up 125 percent.

2000–06: NATIONAL EXPANSION VIA COMPANY-OWNED OUTLETS

In 1999 Penzeys Spices, Ltd. opened a sister business, Penzeys Spices, Inc., to take charge of its outlet operations. These stores, which began to appear in 2000 under the name Penzeys (without the apostrophe), allowed the company to sell a fresh, high-quality product less expensively than in grocery stores where shelf space was very expensive. The outlet stores were designed to have an old-fashioned, homey atmosphere. Wooden crates formed the aisles, with containers of blends, herbs, and spices of all sizes arranged alphabetically by category. There was a special section of flavors for baking, including multiple varieties of cinnamon. Large jars contained samples of products for sniffing with labels that explained the origin and use of each spice or herb. A year later, the company moved production to another new 90,000-square-foot facility in Brookfield, Wisconsin.

In January 2002, the company opened stores in Pittsburgh, Pennsylvania, and Columbus, Ohio, locations chosen because of the large number of mail-order customers in the area. Between 2002 and 2004, Penzeys opened a total of 11 more stores. At first, the company brought people in to open the new outlets, but soon switched to hiring people rooted in the community. All stores closed at 5:30 so employees could go home and have a home-cooked meal with family.

Toward the end of 2004, Penzeys debuted PenzeysOne, a bimonthly magazine that was a natural outgrowth of the company's catalog, which by then had garnered a cult following, in large part because of the dozen or so recipes included in each issue. It sold to Penzeys' 300,000 mail-order customers at a subscription cost of $19.95 per year. Penzey was optimistic about the future of PenzeysOne, despite the fact that other cataloguers had failed in similar publishing attempts. "We have a great relationship with our customers. We hear great stories, get cooking tips in our call center and stores, and we're going to focus more on the content we're already creating," he said in a 2004 Catalog Age article. In keeping with the company's "everyman" philosophy, PenzeysOne 's motto became "The food magazine by and for everyone," and shared stories, recipes, and photographs of ordinary American home cooks. "People see spices and think we must only be for gourmets. But we have plenty of things for the everyday cook," Penzey further explained in a 2005 Boston Globe article.

COMPANY PERSPECTIVES

We have tried to build our business on these feelings of caring that we see every day in our customers. We know that if you want to get people to cook you have to show them the value in it and we are pretty convinced the real value is in the lifetime of relationships it creates.

In early 2005, having launched one or two stores every year since 1994, the company, by now called Penzeys Spices, Inc., opened its 22nd store in Boston after more customers from the Boston area lobbied for an outlet than anywhere else in the United States. Penzeys decided upon this unique approach to expansion after noticing that it took a year or two for word of mouth to advertise the presence of a new store and to bring customers in after it opened. In light of this phenomenon, the company decided to try to create the buzz of publicity in advance of each new opening. Ten more new stores were planned by the end of the year, also in places "picked" by Penzeys customers.

Despite reaching revenues of $22 million in 2005, and operating 27 retail stores in 18 states, most of the employees at Penzeys' headquarters still wore several different hats. The people who did packaging would rotate in to take phone orders and also worked in the store outlet. The reason for this was that Penzey believed it was important for all employees to know the company's customers and how they used its products.

With plans in the works to move operations from the company's 90,000-square-foot building in Brookfield to a larger facility in Wauwatosa in 2006, and confirmed leases on stores in Torrance, California; Grand Central Terminal, New York; Philadelphia, Pennsylvania; and Alexandria, Virginia, Penzey was optimistic, but also reflective about the future of his company. Regarding what it meant to have a growing enterprise, he said in a 2005 Star Tribune article, "I know there is a time limit on all of this … so I have to continually remind myself that I might as well do something fun with the time that I'm given. I don't know how many people have as much fun as I have, doing what I do."

PRINCIPAL COMPETITORS

McCormick & Company, Incorporated.

KEY DATES

1957:: Ruth and Bill Penzey, Sr., start a coffee and spice business in Milwaukee, Wisconsin.
1986:: Bill Penzey, Jr., spins off the mail-order aspect of the company.
1987:: Penzey moves his mail-order business to Oak Creek, Wisconsin.
1990:: The business moves again to a new facility in Waukesha, Wisconsin.
1994:: The company opens the first Penzeys Spices store in Milwaukee, Wisconsin.
1999:: Penzeys Spice House, Ltd. adds a sister company, Penzeys Spices, Inc., for its outlet business.
2001:: The company moves to a new production facility in Brookfield, Wisconsin.
2004:: Penzeys debuts PenzeysOne, a bimonthly magazine.
2006:: The company purchases a new 300,000-square-foot warehouse in Wauwatosa, Wisconsin, with a projected moving date of January 2007.