Why startups should choose their manufacturing partners wisely

SAN DIEGO — Emerging brands should not overlook the importance of finding the right manufacturing partner to create consistent-quality products for the consumer market, especially if those products require precise ingredient specifications, said industry executives at the recent Winter FancyFaire tradeshow in San Diego.  

“You need to know the realities of commercial manufacturing,” said Dana Peck, chief executive officer, Pilot R&D, during a panel discussion called Beyond the Plate: Transforming Culinary Concepts into Consumer Products. “There’s tons of work that needs to be done. Cooking for foodservice (or for a farmers market) versus manufacturing for CPG is like comparing apples to oranges. You need a (consistent) set of ingredients for CPG scaling and the process must be streamlined.”

Peck interviewed the two co-owners — Steve Cook and Michael Solomonov — of Zahav and  CooknSolo Restaurants, Philadelphia. They discussed the challenges in bringing a restaurant concept to retail, which Cook and Solomonov did with Zahav Restaurant Recipe Hummus.

Up front, the partners agreed on, “If we are going to do this, we need help,” Cook said. They established lines that they would not cross in terms of formulation, such as not including preservatives or adding fillers.

Solomonov said you can have the “best recipe” that everyone raves about and encourages you to take it to retail, but it’s not that easy.

“We did not think we could do it,” Solomonov said “We needed to find the right partner. It had to meet our restaurant’s quality. The CPG recipe is the same as the restaurant except for the addition of lemon juice.”

The right partner Cook referred to is often a commercial kitchen or co-packer, depending on scale. Currently, there is a lot of open capacity in co-packing, said Oisin Hanrahan, co-founder and CEO, Keychain, New York, during a separate session at Winter FancyFaire.   

“More capacity is leading to more innovation,” Hanrahan said.

More capacity can provide an advantage for emerging brands. Entrepreneurs can find the partner that works for them and their product without making any capital investment.

The companies that are losing right now own the legacy CPG brands, Hanrahan said.

“The pillars that were built by big CPG no longer support their growth,” Hanrahan said. “It’s no longer advantageous to have your own manufacturing. They also locked up distribution (by paying slotting fees) years ago. That’s been eroded with online and going direct to the consumer.”

With social media, television commercial buys no longer help legacy brands sell. Social media also allows emerging brands to build their target customer “bubble” and speak directly to them. This is something legacy CPG has not been able to do, or at least do well, Hanrahan said.

“The biggest temptation in big CPG is to look at a product line that is doing well, and create a line extension,” Hanrahan said, adding that this does nothing more than dilute the value of the original product.

The advantage for legacy CPG is brand recognition and getting noticed. Cook explained how it was a hard reality when the hummus did not initially sell fast off the shelves.

“With the restaurant, consumers came to us,” Cook said. “In retail, we need to go to them. You have to get them to notice the product and the product has to exceed expectations.”