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ENTREPRENEUR PROFILES

6.2.99  
Keeping the Old Family Mustard Mill from Grinding to a Halt
No one else wanted the top job, but Nancy Raye had to persuade her male kin that she could cut the mustard

Raye's Mustard LogoNancy Raye sat in the dark, dingy office her father and grandfather had occupied in the family's century-old mustard mill in Eastport, Me. It was January, 1991 -- her first week as company president. The walls were "landlord green," she recalls, the windows smeared. The mill's financial prospects weren't much more appealing -- nor was her situation.

She was president by default. Her family didn't really want a woman at the helm, but no one else wanted to rescue the mill. Taking stock, Raye, who had spent seven years in the U.S. Merchant Marine, made her first executive decision: to get the place looking shipshape. "I took the office apart, and I painted it a nice white cream color, and I cleaned the windows and put more lights in. Finally, when I got to the point where I felt more comfortable, I opened the books," Raye recalls.

A stereotypical woman's reflex? Or a sailor's. Either way, it symbolized what Raye's Mustard Mill desperately needed: someone who could see fresh possibilities for the mill beyond its shrinking traditional business -- making mustard sauce for canned sardines -- and who would seek new, postindustrial markets. Raye, who loved cooking, knew that small-label specialty foods had become a status symbol of sorts. She was convinced the picturesque mill's future lay in the specialty market.

Her vision made plenty of sense. Yet Raye was under enormous pressure. James F. Molloy, senior associate dean for Northeastern University's college of business and a director of the Center for Family Business in Boston, says the heads of small family businesses traditionally oppose female heirs. Few such companies can absorb all the children, so the pater familias decides: "'The boys can go into the business, and I'll leave my house to my daughter,'" explains Molloy. Women who do take over are given little margin for error.

That Raye knew. "If a woman fails, she becomes almost a leper in the business community," Raye says. "Many men can fail tons of times and walk right into another high-paying job." She decided not to let the double standard scare her. "If I did not succeed, if I had to call it quits, I [would] still accept myself and go forward. I would not let that destroy me," she says.

Raye's Mustard Mill was founded in 1899 as J.W. Raye & Co. by John Wesley Raye, who had just returned from the Spanish-American War. By 1902, the sardine industry was growing so rapidly in the U.S. that the senior Raye figured he could set up a business that did nothing else but supply it with mustard sauce. At that time, about 20% of sardines processed in the U.S. were packed in mustard sauce. In the 1940s, nearly half of all sardines processed in the U.S. were processed that way, according to Stinsons Seafood Co., one of the largest sardine enterprises in the U.S.

Forty years later, the sardine business in North America was declining fast, and with it the mill's fortunes. Only about four sardine plants used Raye's sauces, down from 50 in the 1940s. "The sardine market would not support a full-scale business at that time," says Raye. By 1990, the mill barely grossed $50,000 a year. Her father was getting too old to have an active hand in it anymore. Her younger brother, Donald, the heir presumptive, also had a demanding tax-accounting business in southern Maine. Things were bad, but they couldn't bring themselves to close the mill.

Yet when Raye stepped forward, her family discouraged her. "My brother is the one who was expected to take over the business," Raye says. "My father and brother felt that the sardine industry was the last bastion of male domination. There just aren't any women in that industry."

Raye was no stranger to hard, gritty jobs -- or male-dominated professions. She had run her own tax-accounting business. Then, she joined the Merchant Marine, working for seven years on ships that serviced ocean oil rigs in California and along the coast of Maine. "I had gone into the Merchant Marine as a 180-degree turn in my life. I did not ever want to fill out another form as long as I lived," Raye says. With the family business in decline, she felt a pull to return to Eastport. There, she made a business proposal to her father: She would buy the company's stock, then worthless, in exchange for three years of salary. "I said to myself, 'If I don't step up to the plate and give it my best shot, I am going to spend the rest of my life wondering...could I have saved it?'" says Raye. She also put $50,000 in personal savings into the business.

Raye's plan to diversify the business, rooted in her own passion for cooking, was simple. She could see that the gourmet market was growing. Why not revamp the mill's sardine-sauce recipes and make table mustards as well? The mill's archives had several different recipes, Raye says. "I wanted a more spreadable mustard." She started with a grainy brown mustard that she sold to a few gourmet stores and then branched out as sales caught on. Today, the mill makes eight different gourmet varieties -- among them cranberry, beer, and brown ginger mustards, as well as a specialty yellow. They retail for $2.50 to $10.50.

Nine years after Raye took over, the mill is profitable again, with yearly revenues in excess of $500,000. Raye was determined to preserve the mill's 19th century technology for grinding mustard seeds using enormous, 150-year-old stones that her grandfather used. Her process is slow. It takes minutes or hours to make most modern mustards. Raye's varieties -- which are aged -- take several weeks.

Raye's Mustard Mill

Raye is onto something. U.S. supermarket mustard sales climbed 13% from 1994 to 1998, to about $280 million, according to the market-research firm ACNielsen. In 1998 alone, specialty mustard sales grew 23.5%, to $56.7 million, while sales of mass-market varieties stayed steady or declined. The online world is a new outlet -- Raye's is sold at such sites as mustardstore.com. Net sales of gourmet and other specialty foods items are expected to top $3.5 billion in the next three years, up from $336 million in 1999, according to Jupiter Communications Inc. in New York.

Today, Raye's revenues come through a number of channels: sales to wholesale distributors, to regional supermarket chains, and to natural food and gourmet stores around the country. Nancy Raye has also set up a retail store at the mill, offers catalog sales, and makes private-label mustards for other companies. The mill hasn't abandoned the sardine industry, which still provides 20% of revenues. The mill supplies three factories in the U.S. and two in Nova Scotia. The largest, Stinsons Seafood in Prospect Harbor, Me., has been using Raye's mustard for 40 years. Today, it buys about 45,000 gallons of Raye's mustard annually. "They have been very committed to the sardine industry forever -- that's how they built that business," says Jeff Fernald, purchasing manager for Stinsons. "We will only use Raye's mustard."

Nancy Raye's challenge -- and that of other smaller mustard makers -- is competing in stores against big, national brands such as Grey Poupon, owned by RJR Nabisco Holdings Inc., and French's, owned by the multinational conglomerate Reckitt & Colman Inc. The latter sold 77 million bottles of mustard in 1998. "It is very competitive, there is just so much shelf space, and [mustard] is not exactly a destination category," says Kurt Hoffmeyer, the chief financial officer of Plochman Inc., a midsize rival with between $10 million and $50 million a year in revenues.

Despite the company's current good fortune, its future is still uncertain. After three generations, no one stands in the wings to take over from Raye, who would like to retire in about five years to write the family's memoirs. Raye's only daughter, who lives in Florida and works for a cosmetics company, has no intention of moving North. "You would like to keep it going in the family," Raye says with a tinge of sadness. "But I've accepted it. There is only one thing worse than selling the business, and...[that] would be leaving the business to another generation that does not have the commitment and would run it into the ground." A rare rekindling of the entrepreneurial spark in the third generation kept the mill alive. It may take another family to keep it burning.

By Jeremy Quittner in New York
jeremy_quittner@businessweek.com

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