00:00One company that has a first-hand perspective on all this is Levain Bakery.
00:05It started out as a small bread shop on the Upper West Side of Manhattan,
00:08and it now has expanded over the past 30 years to 16 bakery locations and counting across the U.S.,
00:15and now I'm told you can actually find some of their products in grocery stores.
00:18I'm pleased to say that the founders of Levain join us right now, Pam Weeks and Connie McDonald.
00:23Great to meet you guys both here.
00:25I feel like I've eaten there so much, I feel like I already know you,
00:27even though I've never actually met you.
00:30First, I want to just start talking about just the dynamics of a bakery business overall,
00:34because I was always under the understanding that the margins in that business were already relatively tight.
00:39Is that true?
00:41That's pretty true.
00:42Yeah.
00:42Yeah, but one thing we've always been really conscious of is sort of managing our costs,
00:48and we've been really thoughtful on how we pick our real estate and things like that to keep things under control.
00:53And how do you do that?
00:54So we talk about real estate.
00:55Obviously, you have labor costs, and then, of course, you obviously have the food costs
00:58to make the final products here.
01:00Right.
01:00So as Pam was saying, it's a really great point, because the food costs and the labor costs are things
01:05that you really, there's no way that you can not deal with the fact of the reality of what they are.
01:10However, your rent, you really do have a choice of where you can decide to be.
01:15And we've always subscribed to the idea that we love being a little bit off the avenue, just a little,
01:22for a couple reasons.
01:24Yes, the rent is much more affordable, and it also has that kind of neighborhood feel to it.
01:29So it's kind of, like, super on brand for us.
01:32But when we're not, like, working every day to kind of cover our rent, because you're right,
01:39the prices, the egg prices, they're constantly changing.
01:43But if we can keep that rent.
01:46You can't control the prices of your ingredients at all, but the things you can control, you try to control.
01:50So it's rent.
01:51So we're not going to see a living on, like, Fifth Avenue or at the airport or one of the high-rent districts.
01:54We did just open in Flatiron just off Fifth Avenue on 18th Street, and it's great.
02:00Okay.
02:00That's the lower rent part of Fifth Avenue.
02:02That's the side of the, you know, you have the really luxury part and then the slightly less luxury part of Fifth Avenue, far over yours.
02:08I do want to, though, talk about the actual ingredient cost itself, because, I mean, obviously everyone, you know,
02:13eggs have kind of become a barometer for inflation in this nation, because for most consumers,
02:17that's kind of what we know when we go to the grocery store.
02:19We see the price of eggs or see the fact they're not even on the shelves.
02:22And I just wonder, I mean, I immediately think of a bakery, and I think you guys are getting hit by everything, right?
02:27I mean, cocoa prices are up, sugar prices, eggs.
02:30I mean, basically kind of the three staples that go into a good chunk of what you bake, right?
02:34Yeah.
02:35Well, we've been doing this for 30 years now, and over the 30 years, we've seen a lot of price fluctuations.
02:41There was actually one holiday season where the price of butter more than doubled and just really killed us.
02:46I don't think we made any money that season, but we held steady with what we were doing.
02:50We're not going to change our ingredients or raise our prices, and, you know, we try to be aware of what's going on,
02:55but you can't control things like that.
02:56Are you able to stockpile any of those?
02:58Because I know eggs won't keep, but what about some of those?
03:00Well, I was going to say, you know, we do have an incredibly talented team that does work on procurement and, you know,
03:06having, you know, when you're purchasing things so far in advance and you've got, like, some things locked in,
03:11where we are fortunate with that regard.
03:14So it's a really important part of what we do.
03:17I mean, given your size, I mean, you're still a small business, but given your size and the expansion,
03:20do you have a little bit more power to negotiate on pricing now than maybe what you would have had, I don't know, 20 years ago?
03:25Yes.
03:25For sure.
03:25We have a lot more.
03:26For sure.
03:26Yeah, which is really helpful.
03:28So they're willing to work with you sometimes in some cases or another.
03:31It's interesting, too.
03:32And then on the flip side is sort of the price to the consumer.
03:35And you just said, Pam, that you had no intention of raising your prices for the consumer.
03:38Why not?
03:39We want to keep our – what we make is an affordable luxury.
03:43And we really want it to be accessible to everybody.
03:47So we'll do whatever we can to hold our prices.
03:50That's good.
03:51I mean, so – but even if you do see any kind of margin pressure, you think it's worth keeping the prices where they are in the interest, I guess,
03:57of just keeping your customers happy?
03:58Is that the idea?
03:59I think so.
04:00I think, you know, of course, if things got absolutely insane, we might have to, like, take a step back and reevaluate things.
04:07But as it stands now, we can still deliver the same product that people have come to depend on us for and, like, really love.
04:15And so we – you know, our plan is to stay the course with that.
04:19As I say, we didn't open a bakery to make a lot of money.
04:21We opened it because we wanted to do something we love.
04:24So as long as we're covering our costs, we're not concerned.
04:27And that's interesting, too, because if we do – there's been a lot of talk about maybe potential economic softness
04:32and consumers making a lot of hard choices about what they are willing to spend on.
04:36And, you know, let's face it, I don't take offense, but no one needs a cookie, right?
04:40I mean, it is a discretionary item.
04:42You know, and I know you bake other things like bread and things that maybe are a little bit more of staples.
04:46But is the idea that even if there is an economic slowdown, people will still spend on those types of items?
04:51We believe that they will.
04:52I mean, we've seen –
04:53I mean, you've been around long enough to go do the economic –
04:55Yeah, we've seen a lot of different things happen.
04:57And people come in for our cookies to bring as gifts, to comfort people as a congratulations.
05:04They bring them in with their friends and family and come in for themselves.
05:08So what's next for this company?
05:11I mean, you guys – I mean, I think about that little tiny little shop.
05:14I don't know if it's still there on –
05:15It is still there, yes.
05:16You know, this little, you know, basically shoebox of a store, and now you guys are everywhere.
05:20And you've kept your store footprints relatively small.
05:23I've been in several of them.
05:24They've all been pretty small, which you have to do in this city if you want to make a living.
05:27But what is the plan for expansion?
05:29Like, how big do you want to get?
05:31Not too big.
05:32We're trying to focus on remaining who we are.
05:35We want to bring what we started on 74th Street to any new place that we open.
05:40We want to be your neighborhood bakery, and we want to become part of the neighborhood.
05:44I have to ask you just real quickly – we only have about a minute left for either of you here – about the expansion into grocery stores.
05:50There was a lot of backlash online when people said, oh, they're selling it in the grocery – oh, Levain has jumped the shark now that, you know, I can get them in the grocery stores instead of having to go to the bakery.
05:58I mean, what do you say to people like that?
06:01Well, I think –
06:01Pam, do you want to take it?
06:02Connie looked at you like –
06:04Well, actually, they're not in the grocery stores right now.
06:09We had to take a pause because –
06:11This is one place where pricing actually did affect us.
06:14Yes.
06:14Oh, really?
06:14It did.
06:15Okay.
06:16Right after lockdown when supply chain prices were just going and really to the point where we could no longer afford to produce that product at the level at which we wanted to produce it at a price that we thought was fair.
06:33We thought we'd take a pause from it.
06:34So that is one place where we did do that.
06:36Interesting.
06:37Do you think you may try to reenter that space sometime soon?
06:40Not soon, but sometime in the future.
06:43I would love to.
06:44Yeah.
06:44It was a hugely successful product, and I would not be surprised if we saw it again sometime.
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