Maturing Your Manufacturing While Making The Cash Last

0:00Why food brands are pushing pumpkin spice, what were some of the trends spotted at IFT? why Perfect Day has decided to focus on B2B, and how chubby snacks evolved from scratch-made to a novel automated process.

0:25Hi everyone, I'm your host, Carol Ortenberg. On the NOSH podcast, we go inside the business of natural, organic, sustainable, and healthy food. Today, we'll discuss the proliferation of pumpkin spice, what trends were spotted at IFT first, and then the recent news of layoffs and strategy changes at food tech company Perfect Day. Then, in an interview with the co-founder and CEO of Chubby Snacks, Dylan Siglio, we'll hear lessons from developing and evolving the company's in-house manufacturing and how it has benefited the business's trajectory. Joining us today are reporters, Adrienne DeLuca. Adrienne DeLuca Hello, Carol.

1:07Adrienne DeLuca Hi, Adrienne and Lucas Southerd. Lucas Southerd Ciao. Adrienne DeLuca Ciao, Lucas. And then we've got editor in chief Jeff Kleinman. Jeff Kleinman Hello, Carol. Adrienne DeLuca Hi. I need to discuss a serious issue. we'll get to the news. But I need to understand why we're getting pitched pumpkin spice products in July. You know, I've heard of Christmas in July. I have not heard of fall in July. So far, I've gotten two bar pitches, protein powder just today, and pumpkin hummus. And it's not just the announcement that they'll launch this product in the fall, because I get there's lead time.

1:46It's also due to popular demand. We're launching this product in July. I also saw actually just last night on Instagram, Carol, by a popular vegan food account that there's a lot of pumpkin spice products already on the shelf at Target, including Sweet Lauren's pumpkin spice cookies. And I think Starbucks launched like a oat milk pumpkin spice creamer because why not? I would offer to say that maybe we should just have pumpkin spice year round. And that way we don't all have to have this conversation every year come. I mean, usually you're right. It's like September, maybe even August. We start to have this conversation.

2:28But like if people have pumpkin spice so much, me, I don't. I actually paid it, but just keep it on the market all the time. There's there's obviously enough people that want it. It's like the Christmas tree store or something that sells Christmas stuff all year round. They're doing it or they did it. I love pumpkins. I just want to make that clear. Why can't we separate the pumpkin from the pumpkin spice? No discrimination against pumpkins. Why must it always be pumpkin spice? Why can't we just have pumpkin? Pumpkin is delicious. Also, we have every other fruit and vegetable year round in this place nowadays anyways.

3:08It's not like it's seasonal. We could get pumpkins year round. Pumpkin spice should not be just like fall themed. I don't like pumpkin spice, but you know. Also like cinnamon and nutmeg. These are not exclusive to pumpkin. There are many other products made with cinnamon and nutmeg. So I, Lucas, to your point, I don't know why they just don't call it like spiced lattes or something like that. Cause it is strange. It's not like people get excited about and crave, you know, a peppermint flavored bar in July. Clearly pumpkin spice has something going for it. Let's free the pumpkin spice. It's just a plot dreamed up by Big Nutmeg to get in the wake of pumpkin's popularity and eventually take over our entire spice cabinets, winter, spring, fall, summer.

4:03soon we will all be in the thrall of big nutmeg. From a business standpoint, I don't really understand pumpkin spice anymore because the whole idea is like, we're going to release something. It's just going to be in the market for a super short period of time. And it's going to force our fans to go out and buy it. If it's on the market for like five months, I don't know how much urgency there is to go out and buy something. Then I'm hooked on it and I'm just annoyed when it's gone. On the other hand, everyone, it was a long few years and if people are are comforted by by pumpkin spice or if marketers are comforted by bringing back pumpkin spice again and again who are we to yuck their yum i've said it before though jeff i am i am solely on this podcast to yuck yums all day long well and we're glad to have you here, Lucas.

5:00I see this is my sole purpose in this endeavor is to just yuck other people's yums. We're glad you're following your path. All right, I think I'm going to move on from this pumpkin discussion. Sounds like we're all kind of in agreement. Folks listening, weigh in on your thoughts on pumpkin spice. But sticking to flavors and ingredients, Adrian, last week you attended IFT First in Chicago. This is a big gathering of flavor houses, ingredient suppliers. What were some trends or news that you spotted at the show? I'd say first up on the ingredient wavelength was ancient grains were just being talked about from anyone who wasn't talking about sweeteners, pretty much.

5:47Buckwheat, millet, sorghum, amaranth popped up a few times. Sometimes those were, I'd say, the key ones. There was also, you know, the people who are really diehard about Kernza. There was a few different Kernza people at the show. Where do you fit in that spectrum, Adrian? I'm, you know, I'm. Kernza or die? I'm a little less Kernza or die, more just like, OK, good, good for Kernza. Is that a camp? I mean, I understand there's, you know, diversifying our food supply, but were there any nutritional or other environmental benefits of ancient grains? Like, what's the push if you're a brand to switch or start using an ancient grain?

6:28I'd say one of the main pushes is just a lot of these crops are naturally used as cover crops. So farmers that have been doing or even just dabbling in regenerative practices for years are already growing them. So there's a supply there. The processing capabilities for all of these grains are getting a little bit more advanced at this stage in the game, especially with, you know, regen ag being a focus of a lot of companies nowadays or a lot of companies saying they want to somehow support regenerative practices. I think ancient grains are kind of just something that makes sense in that case, because for a baked good, a bar, a cookie, it is going to be a large portion of your ingredients.

7:12So if you can sub in something like buckwheat or millets, whatnot, there's a great bonus for a CPG brand. But yeah, like I said, I talked to Ardent Mills for a while, who's going really deep into Regen, and they actually were the ones that were kind of behind the Nestle and DiGiorno regenerative pizza news that came out a few weeks ago. So they are there. That we covered in the NOSH newsletter. The new and improved NOSH newsletter, may I remind our listeners. What emoji accompanied the story? I believe there's like a wheat kind of grain emoji. i think i use pizza sorry i think i use pizza really carol i mean that's the natural that's the you know naturally go with pizza with the journo guys i know we get really excited by emojis adrian i'm gonna let you keep geeking out over grains and i have t well i have a i have a quick question so like what are some of the formats that they were talking about some of these grains use Well, at IFT, a lot of the booths were ingredient suppliers.

8:17So a lot of the formats were things like flowers and powders. What's your take on how deeply into the market many of these flowers are penetrating? I mean, is there a sort of growing category? Is there a growing shelf set? Or is it still, for most of them, people are just kind of sniffing around what can be used? We're somewhere between sniffing around and seeing them on shelf currently. I don't think they're super well penetrated on like the consumer facing end of things. I think definitely from what I heard, at least from the ingredient people, that CPG brands are really looking to start incorporating them at least to sub out a portion or all of their wheat based conventionally grown flours.

9:04But as far as I know, I've never seen, you know, buckwheat flour in a bag on shelf. I think it's still early. I know we see it in culinary a little bit, the use of things like amaranth flour. And certainly we're seeing pastas that are using a lot of this stuff. But what's your take on the home? I'm not a baker, right? But what's your take on whether, you know, home baking is a good way to get these things into the marketplace? You know, as someone who is a bit of a novice baker, and I was actually shopping for flour yesterday, and I ended up with a general all-purpose, unfortunately. Oh, I thought you were going to drop that.

9:55You were like, I went all sorghum, sorghum all day. I was, you know, I spent a lot of time. And there was a new giant store that opened up near me. So I had to, of course, go peruse. I spent a lot of time. We made some rye bread this weekend. Does that count? Rye? No, it does not count. Okay, fine. But back to Jeff's question. I've never heard of this miracle grain. I mean, I thought it's like an older grain. It's not. Sure, Carol. All right, fine. I'm not cool with the grains. I think, back to Jeff's question, I feel like maybe if it were in, say, a banana bread mix or a cupcake mix or something where it's you're taking away that scratch made fully.

10:36Someone has to go find a recipe and figure out how to use amaranth flour. I think that might be the intermediary step before we see, you know, a bag of sorghum flour on a grocery store shelf, just because I don't think the average consumer is super familiar with exactly how to use these. Like, as I mentioned, that's why a lot of these ingredient suppliers are even coming it with blends because for food scientists, it's even kind of difficult to get them to work as a one-to-one substitution for your typical all-purpose type flours. I do think one of the problems though with these baked goods is they're often positioned as like special diet baking products.

11:16And the average consumer sees that it is like, you know, oh, do I really want gluten-free pancakes? I'm going to go for the one I want. So I do think there's a little bit of a positioning, you know, point of view that needs to be refined in order to get the average shopper to start using it. Otherwise it becomes, wow, that tastes really good for an amaranth pancake, not, you know, that tastes really good for a pancake. You know, baking is so succeed or fail. And if you have, if you rack up a couple of losses with your sorghum, you're probably not going back. Jeff, you were a big fan of a lot of these grains coming into the chip aisle, I remember, advocating that this was a unique way to get consumers introduced to them.

12:04What made this an appealing section of the store to you? Well, I think, again, it's sort of a training wheels exercise, right? So if you can take lentils and fry them up and make them salty and fatty, it's more likely that people are going to enjoy them. I think it's been a place where a lot of these things have come in. I think a lot of the inclusion type products like the mosaics or other ones made with a big mix of grains have not been as successful. I believe even late July is now largely a corn chip, although I could be mistaken. But this is something that was really dependent on a big mix of grains.

12:55And I think their best seller now are just these giant bags of white corn tortilla chips. So there's still brands trying to do it. I think with a lot of these things, if you get a taste for them, you start to want to see them in other places. Adrienne, when we started this conversation about IFT, you also mentioned alt sugars. I don't want to cut off anyone's joy over ancient grains, but what did you see in terms of this category of ingredients as well? I'd say most alt sugar conversations I had started with aspartame and then a kind of funny look and a not looking good over there kind of signal.

13:36But I'd say overall, Stevia seems to be still the winning alt sugar of choice from ingredient suppliers to brands. As far as everyone I consulted on the floor, still the lowest cost option. It still has the best reputation and it is the easiest to source as well as a lot of these ingredient and flavor houses are constantly innovating around stevia and extracting. I'm not a science person, so I'm sorry to all the R &D folks I talked to, but extracting the molecules in various ways to create new forms of stevia that remove that aftertaste some people don't like, some of the side effects. So it seems like a lot of people are putting their weight behind that one.

14:24Or putting their weight loss behind that one. you might say, huh? Sorry to all you monk fruit heads out there. Adrienne, a few years back, there was a lot of discussion around allulose. I think we even wrote about this on Nosh and BevNet. How's that kind of doing in the ingredient space as far as you observed from IFT? It had its presence on the floor. I wouldn't say it was dominating many discussions I had when we were discussing what these ingredient suppliers were seeing in terms of alt sugar and demand from a lot of their customers. It seemed to be just like, you know, allulose is out there.

15:04People know what it is. They know how to generally use it. But if I'm comparing it to Stevia, it didn't seem like people were trying to make a better form of allulose. It was kind of, it's popular, it's being used, but that was about it. So it may have hit its plateau. So sorry, allulose. It's my favorite old sweetener. I'm going to I'm going to just go out there and say that. Yeah, I have nothing against allulose, but I think, you know, people that like it, they like it. And that's that's it. It's also, I think, more expensive than stevia is what I've heard a lot. It did come up in the conversations around because monk fruit was one of the more expensive.

15:44Allulose was definitely more expensive. A lot of these fruit juice and fruit concentrate derived sugars are definitely high on the it's going to cost you a lot of money chart. So Stevia, once again, just there's a lot of it and it's very easy for companies to use. I think you met with Incredo Sugar as well, right? I met with Blommer Chocolate who launched a new line of chocolate made with Incredo Sugar. And I did spend quite a while. We did a whole blind taste testing. We went through basically how they figured out how to use Incredo Sugar. For those of you who do not know, it is a cane sugar based alt sugar, but it reduces the sugar contents by up to 50%.

16:34I think it makes you taste more of the sugar molecules so you can use less of it and get the same sweetness is how I understand it. That is the best way to describe it. like indirectly lowers the glycemic level because you're having to use less is what you're saying yeah it does that and yeah i can't they walked me through the process on how they make the sugar a few times and i'm gonna try to butcher that but i've i've heard it too and yeah i i'm like there's half the sugar but it still tastes like as much sugar they were they were doing that with salt for a while like they changed the shape of the salt crystal i remember at uh at frito-lay so that they could reduce the amount of sodium they were using but it's just sort of a sensory impact of the the different faces of the salt crystal on your tongue pretty amazing stuff I agree.

17:32I don't know how easy it is to commercialize or, you know, how, how uniform the reaction to that kind of thing is. But all this, all this advancement around the core product is, is interesting. It's like people continuing to lightweight plastic bottles or just getting a little bit more bang for the buck out of all of these things and hopefully reducing calories is not a bad way to go. I think it is a little confusing though sometimes to the consumer because they flip it around and they see cane sugar and they're like, oh, I'm trying to avoid cane sugar. So there's a little bit more explanation that has to happen there.

18:24Maybe as the use of these new technologies expand in the market, that story will get a little easier to tell. But I will add that when talking to Blommer, they did explain that from their surveys, 70 % of consumers are still more willing to have cane sugar than a lot of sugar alcohols and alt sugars. They'd rather go towards something that they at least can identify and they can visualize what that ingredient was at some point. Adrienne, you also saw Perfect Day there, which we've covered recently. What was their booth like? I did see Perfect Day Carol, and I was shocked and excited to see their full slate of consumer products on display and being sampled still, including Hello Dairy, which I believe they haven't even ever, I guess, technically launched.

19:17That's what they were going to rebrand Modern Kitchen as. I got you. Okay, well, the packaging looks beautiful. Unfortunately, it sounds like I believe you covered some news that that might not be happening. Yeah. Yeah, it sounds like all of the consumer brands under Perfect Day that were using their animal-free dairy are now up for sale. They no longer want to be in the consumer business. They want to focus all of their energies on being an ingredient supplier. I would assume maybe they were sampling those products to drum up excitement for their alt-way options. But yeah, Hello Dairy was a casualty of that.

20:00it was a new brand they were going to launch if you look at the trademark filing it was going to be cream cheeses and milks i believe um and unless somebody picks up that brand and all the work they did apparently as you described it has great packaging um it will it will not make it to market it's very fun and whimsical goodbye hello dairy goodbye before we even said hello dairy Mm-hmm. Jeff, we've certainly seen this strategy shift from B2C to B2B from other companies. What were your takes on this announcement or just why companies might make this decision? Well, I think they're making it to really concentrate on the place that they think can make money.

20:47None of these brands were turning into runaway hits for them. And when you have an ingredient that people see a lot of use for, you'd rather not have a product that might be imperfect sink an ingredient that can really work. On the other hand, you're trying to sometimes build a category and someone's got to be the first one through the door. And if you have a novel ingredient, you can sort of get your own product out there before someone else is going to catch on to it. Sometimes they're looking for the best use case and try and understand how consumers might see a particular ingredient. I don't know that that was the case in this particular situation, given the fact that they were buying, you know, a couple of slightly more mature brands to try and plug their all dairy into.

21:54And it just didn't work out. I think that I would like to know how my product works in a format where most of the other potential variables aren't in play. If I have a great ingredient, but it's in a branded product, which might have crappy packaging, and that's why it doesn't sell, I don't want to throw my alt baby out with my alt bathwater.

22:33Well, I think there are a few companies that are making this multi-pronged strategy work for them, especially the upcycling folks as well, have also pivoted largely into being both branded and ingredient suppliers, both Renewal Mill and Upcycled Ink, which goes under the regrained branding, were both actually at IFT and both showing off lines of private label products that they created with Kroger, Whole Foods, as well as their own branded mixes. They see it as, you know, especially partnering with retailers for private label products, Getting that support behind their ingredient is really key.

23:18Speaking with Renewal Mel, she said, you know, Whole Foods has been a great supporter of that product line in the past. But in order to have the most impact and, you know, continue to build a market for these ingredients, having a retail relationship versus even just a CPG brand that may not have as much money and resources behind it, supporting that ingredient and its growth in the market is what they see as going to be their key to success. Speaking of a key to success, I want to continue with this ingredient and supply chain side of things. Adrienne, you recently spoke to Chubby Snacks about one of their keys to success, manufacturing.

23:59And we're going to hear more about that in our featured interview today. Tell me a little bit about what you discussed with Dylan. I did speak with Chubby's all about their self-manufacturing and how it's grown from making PB &Js in their kitchen to now a multi-million dollar automated production process, including a move into their first actual manufacturing facility beyond their commercial facility so yeah as i said you know they've developed and evolved this product which started with scratch made ingredients including all the puzzle pieces the pb peanut butter the jam and the bread they each individually make those and then assemble the sandwich as sort of a puzzle, they say.

24:46And, you know, over the years, they've learned how to streamline each piece. And they recently designed a brand new machine so they can significantly increase their output. I think he said they're going to be able to make about 2 million sandwiches a month with this new machine. Can it put bananas into them? I did not ask. I'm so sorry. So beyond, you know, earning some engineering degrees from honorary engineering degrees from creating this whole manufacturing process. From PB &J University, it sounds like. Exactly. They call themselves the Einsteins of PB &J. So, you know, just take that. And then they also shared how, you know, owning and managing all aspects of this business, including creating each ingredient, really, help them think outside of the box.

25:42We certainly talked about how self-manufacturing can be an asset with Ari from Coconut Cult. Jeff, what have you seen from your time in the industry when self-manufacturing can benefit a brand? There are brands that have done well with self-manufacturing, particularly during the pandemic. I think a lot of self-manufactured brands were able to control increases or decreases in demand pretty well and also keep track of where all their ingredients were maybe better than their those that were co-packing. I really though feel like it fits more just with the character of the business that you're creating.

26:32If you have a unique supply chain, if you have a specific manufacturing challenge, owning that process can be beneficial. It, you know, may be something that a potential acquirer doesn't want, though, which can be can be something of a problem. Well, Adrienne, I'm excited to hear more about that. Let's get to that interview. Today, I am joined by Dylan Seglio, co-founder and CEO of Chubby Snacks. Chubby's has been self-producing its peanut butter and jelly sandwiches for about three years now, and he's learned some lessons along the way. So Dylan's here to walk us through all of the trials and tribulations of self-manufacturing.

27:21I know you guys, you know, you started making these things by hand, And up until fairly recently, we're still operating out of your original commercial kitchen. Could you give us a bit of an overview of how and I guess why your production process has evolved over the past three years? Absolutely. Obviously, there's not a lot of manufacturers out there that produce crustless peanut butter and jelly sandwiches. I know we all know the big one out there, but outside of them, there aren't many co-packers that ultimately have the machinery or the technology to be able to produce, you know, say 50 ,000 crustless peanut butter and jelly sandwiches in a month.

27:57Because of that, we were forced to self-manufacture at first. And so when I was first coming up with the idea, we were pretty much just utilizing my kitchen to make these things and selling them at like farmers markets and mostly just handing them out around Los Angeles. But once we got serious about the business, we opened up a commercial kitchen in downtown Los Angeles. I think it was like about a 500 square foot facility at first. And we really just started throwing tables in there and started putting bodies around those tables. And we really were making these sandwiches as if you would in your own kitchen.

28:27Obviously, that's not sustainable, nor did we expect it to be. But it was the only place we could start really to just start proving the concept. And so from there, it was just really, you know, kind of going to the drawing board and starting to think, How could we optimize the process to get more output for our input? I think we cracked the code a couple of times over where we're able to get 1x, 2x, 3x, up to 5x our production output compared to the amount of people that we had in the kitchen. And we always joke and say we're the Einsteins of peanut butter and jelly manufacturing. And I do truly think that's the case in some sense because we have tried 100 times over how to produce these things faster and cheaper.

29:03And so we ultimately, as I mentioned, cracked the code. were able to kind of get to a point where I could, you know, put our process into a PowerPoint and go to all those different manufacturers that I spoke to earlier in the process about potentially bringing us on. And I think we did a good job at, you know, again, proving concept through our direct consumer business, as well as getting interest from grocery stores, which led to a lot more opportunities where we wouldn't necessarily always have to self-manufacture. Gotcha. Very interesting. You know, as you guys have worked to really ramp up that production and output, my brain, you know, it might still be off in formulation and machine land.

29:41I was at IFT first in Chicago the past weekend. But, you know, when we spoke last week, you also walked me through a process that your dad had actually helped come up with while he was helping you guys out and helping the PB &Js really scale in that process. You know, as you guys have faced challenges along the way, how do you go about sorting those out? Is it your dad you call? Who do you call when you can't get the jam right? I mean, what's kind of cool is like Brett and I were really managing the kitchen, mostly Brett too, when we first started this thing, John was out in New York. So he, we like to joke and say he has the easy job, but you know, we grew up in blue collar families.