January 14, 2019

Stepping Up To A Co-Packer (PODCAST)

If you’ve thought about or have plans to work with a co-packer in the coming year, this is the podcast you need to hear. There’s a lot of steps and complexity in taking your food product idea or the product you’re currently making in a commercial kitchen and transferring that to a co-packer. Which is why I invited Ernie Beckman, Vice President of Business Development for National Foodworks Services, to share with us how small food entrepreneurs can make that step up to a co-packer without going broke.

Jennifer: Hi, and welcome to the Small Food Biz podcast. I’m Jennifer Lewis, and in this podcast series, we’re focusing on the issues food entrepreneurs face and the questions you have as you work to accelerate your business’s growth.

Jennifer: We are talking with Ernie Beckman in today’s podcast. He is the Vice President of business development for National Foodworks Services. Ernie will tell us more about it in the podcast, but essentially, National Foodworks Services helps small food entrepreneurs scale up to a co-packing facility, including helping with R&D, proof of concept, to doing pilot runs and smaller batch runs in production.

Jennifer: Knowing that working with a co-packer can often seem overwhelming to food entrepreneurs, I thought it would be great to talk with Ernie about how small food businesses can make that next step up in production as seamless as possible. Welcome, thank you so much for joining us today.

Ernie: Well, thanks for having me.

Jennifer: Absolutely. I would love if you could start by just telling our audience a little bit about National Foodworks Services.

Ernie: Sure. National Foodworks Services is a development, pilot production, and production facility located in beautiful central Illinois. So when I say development, pilot production, and production, really the unique position that we fill in this space is that we can bring industry resources to bear for food entrepreneurs, help them kind of figure out final formulation questions they might have. If they’re making something on a bench top or in their kitchen, then pilot production is where we try to scale that recipe up to see if it can run through sort of a mass production type of environment, and then kind of graduating up into full on production helps somebody fulfill market needs.

Jennifer: So backing up for a second, and I hesitate as I ask this question because I know that a lot of the listeners already know what the benefits of working with a co-packer are, but just in case there is somebody who’s perhaps newer to the food industry, can you tell us what are some of these benefits? Why might a food entrepreneur look to work with a co-manufacturer or co-packer at some point in time?

Ernie: Sure, and this is a great question, it’s something that we’ve had to kind of try and figure out from the beginning as to how we build out our value proposition in the marketplace at large. And really, the biggest thing is that when you are transitioning from, hey I’m trying to figure out my recipe, I got great feedback, now I think I have a viable product. How do I get it into 10, 20, 50, 100 retail locations when I’m trying to make all this stuff in my kitchen? And the reality of it is, what a co-packer allows somebody, specifically a food entrepreneur that’s trying to get a business off the ground, it allows them to get into a production-sized facility without having to put a whole ton of capital out of pocket.

Ernie: So nobody wants to go out and buy the kind of equipment that we have purchased that sits in our production floor, the expertise to write food safety plans, quality management plans, et cetera et cetera, and in my perspective that’s really where the big benefit of the co-packer is for somebody that’s trying to get a food business off the ground is that it allows them to leverage all of the capital investment and expertise that we have on our team and really plug it into their business model so they can focus on growing their business.

Jennifer: You just brought up a great point, because oftentimes when I think of working with a co-packer, I’m thinking from the production standpoint. That they can help streamline that, that they can kind of take that off of my shoulders. But you brought up that point of a food safety plan, and that is huge right now, and I hadn’t even thought about that but that’s a very valuable component.

Ernie: Yeah, we have a safety team or a quality team that really focuses on making sure that we have plans in place to manage our production process and make sure that finished product is tested before it goes out into the marketplace at large. And I can’t stress enough how important that is in the current regulatory environment that we’re producing safe food to go out for distribution.

Jennifer: Absolutely. One thing that I hear when I talk with food entrepreneurs, and it’s understandable, is that this taking a step from self-production, whether it’s in kind of a shared kitchen space or home kitchen, wherever it may be, to working with a co-packer, that’s a big, scary step. In your experience, when is a company or when is a food entrepreneur ready to take that step?

Ernie: Yeah, this is like the million dollar question in the marketplace, and I’m probably going to say quite a few times today that my answer is, it depends. The reality of it is, if you’re trying to get a food business off the ground, it really depends on when the demand for your product exceeds your ability to keep up with that demand from a production perspective. So if I take down, let’s say, in my small local grocery chain wants to place a standing order for 10,000 ready to eat bars a month, are you really going to be able to produce that much product in your kitchen?

Ernie: Now, it’s kind of a double-edged sword, right? Which comes first, the product is ready to go to this larger distribution base, or I have to have the orders before I’m ready to produce them? And unfortunately, we can help guide a food entrepreneur through some of those questionable areas, but ultimately that’s a business decision that the food entrepreneur has to make for themselves.

Jennifer: I laughed, because I feel like in the food industry, and maybe this is all industries but the food industry’s the one I know. I feel like so many times, the answer is, “Well, it depends.” There’s no concrete in our industry.

Ernie: That’s absolutely true.

Jennifer: So for those folks, when taking the next step, how can that be a little less scary for them? What should they be looking for and asking about as they potentially look to work with co-packers?

Ernie: Yeah, and the reality of the situation is from my perspective, that to take away some of that scariness, number one, make sure that you’re protected when you get into a conversation. So make sure that you have, or the co-packer has, a good nondisclosure agreement to protect any confidential information that you share with them, and be prepared to ask a ton of questions. So Natural Foodworks Services, we have a very specific process that we follow. We make sure that we get a nondisclosure in place so that both parties are protected, and then we send out a request for information where we ask the person that’s trying to find out whether we’re a good co-packing fit or not, give us as much information as possible. Let me take all that information to our development team, to our production team, to our quality team, and figure out if we’re going to be able to help out.

Ernie: Now, generally that involves National Foodworks asking a lot of questions, but at the same time, from a collaborative perspective we very much feel that the food entrepreneur needs to be asking us questions as well to figure out if we’re a good fit for them. So really to shorten up that answer a little bit more, it’s number one, make sure you’re protected with a nondisclosure, and then number two, ask for all the information you can gather.

Jennifer: One thing that I was wondering about is how important of a role does geography play? Like if I’m here in Seattle and you’re in Illinois, would that be a feasible working situation, or would it be better to have someone who is “next door?”

Ernie: The best answer to that that I can give I think is that it is no longer a problem. 30 or 40 years ago, it probably would’ve been very important to have somebody close to you from a geographic perspective so that you can go see them, you can sit down face to face. With the technology that we can now leverage with video meetings, with conference calls, emails, as we go through the development, pilot production, production kind of cycle of our business, there needs to be a face to face visit at some point where somebody can come in and see how we operate. Once we get past that, producing samples, overnights back and forth, video conferences, it’s not as important of a point as it would’ve been in the past to be within a two hour drive let’s say.

Jennifer: Oh, that’s excellent. That opens up, for food entrepreneurs that gives them a lot more options.

Ernie: Absolutely.

Jennifer: So you had mentioned the idea of, it’s that chicken or egg. Do I wait til I have the orders and then look to work with a co-packer, or do I get the product ready and then try and find the sales channels for it? And so to that end, I’m curious about … and I know that part of this answer is going to be it depends, but I’m curious about how long, if somebody started looking tomorrow, how long before they would necessarily have a finished product that they could take into sales meetings? Just, I know that’s such a huge-

Ernie: It depends. It really is a question that we would have to address on a case by case basis, and let me give you an example of that. If somebody calls us and says, “I have this great idea for product A. I have no idea how to put it together, how to ramp it up, or where to go with it from even just a basic, here’s my recipe, perspective.” We could bring some food scientists in, help create that formula from scratch, do some bench testing of our own, ramp it up to a pilot production phase, and see if we can make it work. That could take three to six months when you’re talking starting from scratch.

Ernie: If somebody has a formula or a recipe that they have proven viable in their own kitchen or in a commercial kitchen, then it really shortens that production cycle significantly. So at that point, if somebody comes in and says, “I’m producing these at this rate with this recipe,” we could be as quick as a couple of months before we can get their samples in, do some analysis, figure out if we can ramp it up to run through one of our production lines, and then get them into production.

Ernie: Now, there is one other thing that’s really important, and that is if somebody is sourcing ingredients, one thing that is out of our control entirely is where their ingredients come from and how long it takes to get there. So we might be able to figure out super quick, like in two weeks, that this is going to work on our ready to eat bar line. They say, “Okay, that’s great. For me to get ingredient A, it’s a 12 week lead time,” because it comes from some random spot that can’t get it to us any quicker. So we may be ready to go but not be able to get ingredients in house and ready to do production, so a lot of this once again is out of our control.

Ernie: Our goal is to be as agile as we can, be able to change directions and help folks figure out how to get to production in the quickest fashion that they can, but a lot of it is out of our control.

Jennifer: And so let’s say as you’re starting to work with somebody and running through a lot of these pieces, is there ever advice that you give to the entrepreneurs that you’re working with or the small businesses that you’re working with and saying, “Hey, okay, we’re working on our end with this, here’s some stuff you could be doing, let’s say back at your office, to kind of start getting … ” I don’t want to say getting the ground running, but starting to get things moving so that when we are ready with this finished product, you’re not necessarily sitting on a ton of inventory for six months trying to get it into retailers hands. Is there things that they could be doing?

Ernie: Absolutely. The reality of it is … as we look at what I would call the business cycle and we’re trying to help somebody get ready to take their product out to the market in a little bit of a bigger scenario, it does require some projections and some participation on the food entrepreneur side to say, “Look, my goal over the next six months is to get into 10 locations selling 1,000 bars each, so that would be 10,000 bars every six months,” and that allows us to try to focus on a production schedule from our side so that they are prepared with regards to, hey, how early do I need to order ingredients to make sure that they’re there on time, we know the production schedule is booked out 30, 60, 90 days in advance, and that gives them the chance to work through, run number one’s inventory with whoever their client base is so that we’re trying to figure out where that ideal point of inventory coming off the line versus inventory going to their retailers.

Jennifer: So I’m thinking, we’re talking now, it’s the beginning of a new year. For somebody who might be thinking, “Okay, I’m going to be ready either to start my brand new business and I plan to work with a co-packer from the get go,” or, “I’m planning to take my existing product or product line and move it to a co-packer in this next year or in this next two years.” Do you have any words of advice for those folks who are … they’re thinking about doing it, they’re getting ready to do it, but they haven’t done it yet?

Ernie: I guess my words of advice in that perspective would be to utilize the tools that you have at your disposal, right? The internet is a wonderful tool that as business people, we can use it to condense what would’ve formerly taken hours and days and weeks of research. You can spend a couple hours with Google at your desktop and a cup of coffee and have access to so much information. So there are tons of co-packers across the country. A lot of them have different specialties. Some people do sauces and dressing in bottles, some people do ready to eat bars, some people may do cookies and brownies. Really try and get as much information as you can and give yourself a realistic timeframe to make that transition.

Ernie: So if somebody’s calling me the first week of January after we get back from the holidays asking for a February 1 go live date, that’s going to be virtually impossible to hit. But if you’re starting your due diligence in January with a goal of going live in June or July, that’s very, very achievable. So make sure you give yourself plenty of time, make sure you utilize the tools that you have at your disposal.

Jennifer: Well Ernie, thank you so much. Like I said, this is a topic that I get asked about a lot and that’s not an area of expertise of mine, so I was really excited to be able to bring you on and share some of your expertise for folks who are looking to take that next step up and work with a co-packer as they work to grow their business.
Ernie: Yeah, it’s my pleasure to have been on with you today, and this is something that I think that everybody at National Foodworks enjoys doing. And when I say that, what I mean is from the entrepreneurial side, not everybody that we talk to is going to choose to work with us, and we totally get that, and that’s the way that the business world works. But we’re just happy to be a part of somebody’s due diligence process in trying to figure out where they’re going to land with regards to co-packing. So if anybody ever wants to talk about any of this stuff, even if there’s no expectation of ever doing business like you have a product line that we can’t do, I’m totally happy to talk to you and help you find somebody in the food industry that can be your co-packer.

Jennifer: That’s really generous, thank you. And as always for folks who are listening, I’ll include a link in the transcript that will be on the Small Food Business website, I’ll include a link to National Foodworks Services so you can easily click over and find it.

Ernie: Excellent.

Jennifer: Well Ernie, thank you again. I really appreciate it.

Ernie: No, thank you for having me, I had a lot of fun.

Jennifer: Thanks. As a reminder, a transcript of this podcast is available on the Small Food Business site at smallfoodbiz.com. There, you’ll also find a host of other informative podcasts and articles to help you start and grow your business. I also invite you to check out our private Facebook group titled “Food Entrepreneurs and Business Owners Group” where you can talk with other food entrepreneurs, ask questions, and share ideas. It’s a great way to connect with other small food businesses who may be facing the same challenges you are.

Jennifer: As always, if you found this podcast informative, I’d love it if you could leave a review on iTunes, as that helps other food entrepreneurs find the podcast as well. Until next time, thanks.

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