How did you get into co-packing?
Allan Berliant: I'm president and CEO of Kitchen Cuisine Brands, a Chicago-based co-pack manufacturer. I spent most of my life on the other side of the coin working for a variety of corporate operations, Tyson Foods, Hudson Foods, Pure Foods, and then broke away and started into food manufacturing... I saw a trend in the marketplace, that I think is continuing and accelerating today, of higher and higher and higher demand for co-packing rather than people building and running their own plants...
Toyin Kolawole: We started in 2015 to focus on gluten-free foods, baking mixes, flour blends and snacking. We started out as creating our own manufacturing because of the unique properties of gluten-free flour to create crunchy snacks that are as competitive in taste and texture and pricing as mainstream snacks. Then we extended that to co-packing because we built an end-to-end manufacturing plant that includes dry mixing, material control and actual big snacks manufacturing.
Pete Tsudis: We operate four food production facilities, three in Pittsburgh, one in Commack, New York. TruFood specializes in better-for-you products, primarily nutrition bars, chocolate molded products and baked nutrition, granola. We really focus on emerging brands and growing brands that have some momentum and need to scale... I've been in the industry for 22 years, and I know this space exceptionally well.
Peter Cokinos: I've been with the company six years, and we got into co-packing because we had additional capacity and we also had private-label business. One of the things we have found that make us successful on the co-packing side has been speed-to-market. We have customers that come to us and have an opportunity and they need to move very, very quickly, and they need to get into the marketplace very quickly. We're a fairly large manufacturer with three facilities and we usually have manufacturing capacity... Will {Madden] and I worked together many years ago and another large co-pack business...
Mike: We are a fresh, clean label, better-for-you food and beverage contract manufacturer located about an hour west outside of Chicago. We got into co-packing primarily due to our founder. He was running his own brand and nobody else wanted to co-pack. So he rented 12,000 square feet and started doing it himself.
Sourcing the Type of Business You Want
Berliant: The honest truth is that we don't put any forth any effort towards the sourcing. People source us... We probably get two or three hundred calls a year from people looking for co-packers. We might respond to 15 or so that we would deem worthwhile moving forward with. And then we maybe get five or six that actually come to fruition....
Kolawole: We're a bit early on in the process and we focus on startup brands and smaller brands... We've been doing quite a bit of advertising or putting the word out there... Filtering through to get legitimate customers has definitely been challenge number one. Number two is we're finding a lot more involvement in the R&D process. Because we work with a lot of smaller brands, they're usually pretty early on in that R&D process... We all know it's one thing for somebody to think about a recipe that is passed down with a family recipe or maybe something they worked on in their home, it's a completely different process in thinking about how to scale that formula and make it shelf stable and make it check all of the boxes that people want...
Tsudis: I think it starts with that focus. We know our market... And to me, it's finding that right brand that can fit our lines well and fit their needs well, and we're not asking these brands to compromise... It's really having those honest conversations and getting to it quickly and making sure that the brand understands where our hurdles are, and we understand what their brand promises, and kind of meeting them both.
Cokinos: We get hundreds of phone calls, anywhere from the person who says, ‘My grandmother has the best recipe in the world, and I've been told to bring it to my grocery store as quickly as I can,’ and not having that realistic expectation of what that really means... We can do a deep dive with that customer, and help them. We become not only manufacturers, but we become consultants, as we're helping him go down that path, and helping him develop that product out there. The thing that makes things difficult is when you have someone that either doesn't understand the industry or has unrealistic expectations, either from an outcome in time or from what they're trying to achieve.
Mike: There's typically two to three hundred leads that come in annually. The challenge there is sorting through them. The majority, I would say 80 percent, right off the bat you could pretty much say hard no, that we do not have these capabilities. What helps is when a potential lead can detail with a bit more precision what exactly they need for manufacturing, and ideally without having to sign an [Non-Disclosure Agreement].
How Do You Separate Wheat from Chaff
Berliant: I'm going to break it down into into three categories. First there's large consumer packaged goods companies. They have got an existing product, they’ve got existing recipes. And a lot of times we get people who are leaving co-packers where they're unhappy... It's a well-known, established brand, and that's in the no-brainer category. The bottom category is ‘my mom has a great recipe’ kind of phone calls that we all get, which are pretty much immediate nos, or it's just a capacity that we don't do. It’s the middle categoy of developing brands that really take the time and the effort. We have to build those relationships, really understand what's going on there... Do they have their act together? Do they have the recipes? Are these recipes industrialized? Do they have experience in the space that they're going in? Is it a good product? Do we think that we can grow with them?
Kolawole: We're getting a lot of those grandma calls as well. We decided to create a pipeline process... and a checklist where we can quickly determine if that customer’s idea or product actually fits within our manufacturing capability... It then allows us, for lack of a better term, to weed out opportunities that are that are not a good fit... If a customer is pretty early on, they've got maybe a couple of steps beyond grandma's recipe, is there a menu of services we can provide them... If you have to pay for exploring that idea, then you really have to think about it... People can decide whether or not it's ‘oops, I just wanted to see if my grandma's recipe is a good idea,’ or I'm actually ready to develop this into a brand.
Tsudis: Is it a product category that we actually can manufacture? If it's not, I and our relationship managers keep a list of people we can refer, other, smaller co-mans that can do it... You support the industry you're in, and I think that's where everybody wins... Then it's understanding the brands. [Do] they have a real strong understanding of what their products are, what their finished goods specifications are, they know how their products are made, they understand their costs. And I think the last part is they actually understand what a partnership means and they also hold us accountable to be a good partner.
Cokinos: The volume, the concept, the capability needs to be a fit... What I typically try to look at when we're looking at an investment, and that's what really this is... we're making an investment for the future success of that product or that brand... Is the brand distinctive? Is it memorable? Does it stand out from the competition? Does it avoid confusion amongst their target audiences out there? You know, what's really important, especially after COVID, is the authenticity of the brand.
Mike: One of the first things we look at is, are they ready for a contract manufacturer? We get a lot of younger companies, startups, entrepreneurs. Do you have a finished formula? Are you in production? Have you worked with a co man before? Do you have an organization supporting you in some respects or is it a one-man show?... We are a public benefits corporation and the values of the company are clean label. That's extremely important to us. We don't want to put chemical preservatives in more food in the industry, we want to take them out, take out high fructose corn syrup. That's a big, big selling point for us...
On Quality Versus Speed to Market
Cokinos: Sometimes a brand has such pressure to find capacity, because of how fast their businesses growing or an internal issue. I would see sometimes that the brand has a brand promise or they have a competitive advantage. And they look at it and they say, ‘Look, I just gotta get something on the shelf, I've got this big retail community. I need to put something as close as I can get away with on the shelf.’... I know that everybody has the best of intentions when they when they go down that road... But at the end of the day, the consumer then has an experience that doesn't relate to the prior experience that they've had with that product. And ultimately that consumer votes with their dollars... They start seeing comments posted that, ‘Hey, this thing's no longer the same.’
The Magic Sauce
Tsudis: There's a couple of common denominators... Strong leadership and vision. These are leaders and entrepreneurs or families that have a very strong vision... They have a strong sense of their brand promises and they are not going to deviate. So they're not going to let a co man push them around, because they believe in what they do. So they understand the sense of partnership, the deep sense of knowing their product, that they know what ingredients go in, they know how it works, they're not going to compromise... The second part is that strong co man and that they believe in that business as well. The third one is some type of financial backing or private equity... I would say the majority of time that these strong entrepreneurs team up with a co man and a private equity firm or someone like that, it becomes explosive. It is a rocket ship.
