The Philadelphia Navy Yard is among the sites Tasty Baking Co. is considering for a new bakery, according to people familiar with negotiations.

The Philadelphia company said last May that it would look for ways to upgrade its manufacturing operations, raising the possibility that it would close its 85-year-old facility in the Nicetown section of Philadelphia.

The company is still reviewing alternatives, company spokeswoman Mary Borneman said. "We haven't made any decision, and our preference is to remain in Philadelphia," she said.

Tasty Baking's bakery on Hunting Park Avenue is relatively inefficient because ingredients must be moved to the top of the six-story building, where they are mixed, and then the Peanut Butter Kandykakes and other treats must follow a twisted path before leaving the building. In modern bakeries, such as the company's facility in Oxford, raw materials come in one end, and finished products go out the other.

Mitchell B. Pinheiro, an equity analyst with Janney Montgomery Scott L.L.C., said in a research report last year that Tasty Baking was limited in product development by the inflexibility of its aged bakery.

For example, Pinheiro said, the company might be able to sell smaller pies and individually wrapped Krimpets and cupcakes to meet the trend toward smaller portions in some packaged foods. But equipment in the Nicetown bakery is not flexible enough to produce and package additional sizes.

Pinheiro, who envisions a new Tastykake bakery built to also accommodate tour groups, called the former Navy base one of the more attractive sites in the city. The site Tasty Baking is considering would give it a high profile along Interstate 95.

Much of the Navy Yard is in a Keystone Opportunity Improvement Zone, where qualified companies are exempt from many state and city business taxes for up to 15 years, according to the Philadelphia Industrial Development Corp. Even if they are not moving into a special tax zone, businesses looking for new locations often receive subsidized loans through the Pennsylvania Industrial Development Authority.

It would also bring another high-profile user to the former base, which the city has renamed Philadelphia Navy Yard, and boost the city's efforts to replace the 11,000 jobs that existed there in 1991, when the Pentagon announced plans to close it.

The Navy Yard is already home to the Aker Philadelphia Shipyard; a pharmaceutical laboratory, AppTec Laboratory Services Inc.; the headquarters of retailer Urban Outfitters Inc.; a logistics company, Barthco International Inc.; and Vitetta Group Inc., the architectural firm.

Tasty Baking has between 1,000 and 1,100 employees. About half of them work at the main bakery in Philadelphia. If Tasty Baking settled on a site in Philadelphia, it would help slow the loss of manufacturing jobs in the city.

In November, Philadelphia had 30,000 workers in manufacturing, down 7,000 since 2002, according to the federal Bureau of Labor Statistics.

Contact staff writer Harold Brubaker at 215-854-4651 or hbrubaker@phillynews.com.