#227 - Operations Ask-Me-Anything with Jamie Valenti-Jordan

0:02A few years back when I ran a beverage company we had to launch using those plastic sleeves to put our designs on the cans. but they looked bad. The sleeves get stretched out. They don't cover the full can and overall, they just look and feel low quality. Lucky for you, digital can printing technology has come so far over the last few years that now you can launch your beverage brand or new SKUs with a fully printed look and it's at similar pricing to those plastic sleeves. Our friends at CanWorks, which is the largest US-based digital can printer, are happy to work with our community at very low minimums, even one pallet.

0:32They've got locations in the East Coast, the West Coast, Texas. Get in touch with them through our contact form. It's at canworksprinting.com slash startupcpg.

0:59Larger basket orders will allow you to buy that dry ice at a cost-effective way. Likewise, your larger styrofoam container is more cost effective when your purchase size is larger. So without getting into the thermodynamics of why, it's going to be a continuous issue with direct-to-consumer frozen. This is why we try to work frozen through the retail channel, and we've got really good supply chains to support that. Hey, ops people, if you've got a problem, yo, we'll solve it. Today, I got Jamie Valenti Jordan on the pod, one of the deepest ops heads out there. I've worked with him personally so much.

1:38Love featuring him over and over on the podcast because he just has all of the knowledge. You cannot stump this guy. So I've picked five of the most common questions from our huge Slack channel lately and teed them up for him. I can't wait for you to hear all about it. All right, here we go.

1:58All right, everybody, welcome to the Ask Me Anything. got a problem i'll help in a pickle let me know if you're stuck we're here don't you know you can ask me anything but actually you're gonna ask jamie everything jamie welcome to the show i try to have a song every time you come on what do you think i love it let's keep this tradition going all right especially the uh don't you know it's uh resonates with my midwest self now all right perfect i thought you were gonna say let's just stick to business but i'm glad that it went the other way. All right. So I am really happy to have Jamie back here.

2:33We've run this one before. And in my mind, this is just an excellent way to, in rapid fire, extract a lot of that juicy knowledge from Jamie's years and years of putting out ops fires for so many brands out there. So let's just hit it first, Jamie. Requisite intro. Can you just let everyone know what you're all about, what you do? Oh my gosh, all the hats I wear. Okay. So first of all, thanks for having I'm Alan Daniel. Jamie Valenti Jordan, CEO of Catapult Commercialization Services. I run a team of about 80 people spread across the U.S. doing all sorts of fun stuff on the areas of product development and commercialization of products through manufacturing sites, whether that's Coman or building new ones, all the way through to starting those trucks running.

3:18So in addition, I also wear a hat over at the Food Finance Institute, which is a portion of the University of Wisconsin, where my grant funded position is there specifically to help people grow their businesses in the food industry from, let's say, farmer's market on up. So we work with folks to get them into retail distribution or food service distribution and get them into that sweet spot of about eight figures where you can start paying your founder some actual salary. So yeah, always happy to take on any sort of problems that people have and help them scale in a way in which they're going to be successful in the long run.

3:55And this state alliance that you have for Wisconsin, do you just only want Wisconsin brands to succeed and just crush all those Michigander brands and Indiana brands? Or do you really root for everybody but extra hard for Wisconsin brands? Absolutely. The food industry is cutthroat. We want to take on every other... No, not at all. Of course, we want to help everybody, right? This industry is so small, we all know each other to some extent. So So shout out to all my other colleagues on the Ops channel. Great to see you guys. But also be there to help. I mean, at the end of the day, my personal mission is built around the World Health Organization's report that came out a few years ago that said by 2050, we're going to have more people on the planet than we have the ability to feed with our food systems as they exist.

4:39That's the year my son is going to turn 35. And so I'm really taking this on as a personal mission to figure out how to get as much innovation through the commercialization process and into the marketplace so that it can have an impact on the industry so that the next wave of innovation can take place. My goal in all this, my personal mission, is to make sure my son doesn't have to deal with mass starvation in his lifetime. I love that. And way to take my stupid joke and turn it into something very beautiful. So thank you for that also. That's what we do here. Let's get into it, my friend. All right.

5:13I've got a bunch of really juicy topics for us today. We're going to be talking through formulating products, shipping products, sourcing ingredients, all the good stuff. So let me just hit you with the first one right away. Okay. So, Jamie, the first question that I have for you is from Matt in the channel. And Matt asked, does anyone know any independent product developers or culinary experts? This is a very common question in the Slack. People ask it all the time. And they are trying to either improve a product that they have or create a new product line or get their product right off the ground.

5:44And they're wondering who out there in this world is best suited to help them do that, probably within their budget constraints, stuff like that. So, Jamie, when you talk to brands who are trying to find the person to create the product for them, what do you tell them? Sure. I mean, when you're making your first product, it's incredibly challenging to get somebody to take what is effectively your vision, your mission, your gold standard, and try to scale that up. So there's a whole bunch of reasons why you want to work with a product developer who can understand not only what is your goal with your product, but what your approach is with your consumer.

6:19So I would recommend definitely reach out to the Slack channel here, but you need to give a little bit of background into what you're trying to target. Those that work in beverage may not be as great at making, let's say, a frozen croissant, right? It's a completely different branch of technology. So give a little bit of introduction to kind of like what your product category is going to be so that the right people can be recommended. I'll tell you, as a food scientist, we all more or less know each other and we're not going to take on projects that we're necessarily ill-equipped to handle if we've been around the block once or twice.

6:53So what I mean by that is get recommendations from other product developers that may not specialize in your area because those folks will know who's good, right? who's going to be efficient with your time and by their extension, your money, right? So if you're looking for someone who's an independent product developer, just make sure that they've got some background in the area that you're in so that you can vet them and make them a great part of your team. Going forward, certainly that kind of contract basis is known and understood. And then definitely they can work with you all the way through the commercialization process.

7:28Just one watch out, a lot of product developers, especially younger product developers, No offense, I was one. Don't have as much experience in a production setting and production facility. So scale up can be more of a challenge. So if that's going to be your approach is to work with someone who's younger, that's great. Just bring on somebody else maybe later on to work with them when it comes time to have the rubber meet the road and scale things up for commercialization. So it's not a dig on younger developers. Hey, I was one. I get it. I still look like one. I get it. The goal in all of this is to get the product out the door the way that we want people to experience it.

8:05And so that is a handful of important considerations there. I like that a lot. And I don't know why that never actually occurred to me in that way. Of course, like ask the people who really know, ask the other food scientists, because these communities exist. Like if you go to IFT, something like that, it is all the food scientists there. They've trained there. They present their papers there. They all know each other. that is like too obvious of an answer that had never occurred to me that's a really good one i'll take you one step further there's even local chapters of ift which is the institute of food technologists and so wherever you are in the u.s there's likely a local chapter within about 100 miles of you where they get together on at least a quarterly basis kind of hang out and chat with each other you can go interview a whole bunch of product developers all at once and they'll probably just walk you up to the right person and say here you want to work with this person They're great.

8:56And so this exists. You can find them. If you need some more direction than that, reach out to us. I love it. That sounds like a great way to go. I'll also let everyone know this has not really been announced anywhere yet except right here, which is Startup CBG is creating the first ever big database of all of those freelance product developers. Because so many people ask in the Slack for help creating products, we thought, why don't we just create one master list? if you are a freelance product developer or one of the companies that does this for a living you could enter your details in this spreadsheet which we will release out to everybody for free and it will have all of the cool info like what are the product categories that they specialize in what are their capabilities where are they located because sometimes it's nice to go shoulder to shoulder with somebody as they're making your dream come true so if you check the show notes we'll have a link to where you could actually submit your entry if you are one of these people that brands need to know about and that's what we want all the information out there and then the next time we do this podcast, that'll just be the answer.

9:49I just look at that database. Perfect. All right. Another question here from the Slack that is asked all the time. So somebody says, I have been running the numbers and I'm getting stuck on shipping. I've got a frozen product and it has to stay that way during transit. The costs are adding up fast. Doing it in-house is really expensive. You need dry ice, ice packs, insulation, all that stuff. The third-party shipping looks even worse. How do I make money off doing this? What should I do, Jamie? Yeah, that's a tough one. We get this question all the time in the Slack, and so I will jump straight to an answer here.

10:20There's one significant group that's figured out how to do it, and they've been doing it for decades. That's Omaha Steaks. And one of the ways that they do that is they make such a significantly large amount of product in the order necessary for them to deliver it, that they can put all the dry ice and all the styrofoam that they need to into that large order to make it cost effective. The reason why it's so expensive is the amount of time that it takes through a supply chain for the product to get to the consumer. The consumer only receives it when they pick it up off the doorstep, not when the shipper says that it's supposed to arrive.

10:53So skimming over all of that, the amount of time that it has to sit there requires a certain amount of dry ice. Larger basket orders will allow you to buy that dry ice at a cost-effective way. Likewise, your larger styrofoam container is more cost-effective when your purchase size is larger. So without getting into the thermodynamics of why, it's going to be a continuous issue with direct-to-consumer frozen. This is why we try to work frozen through the retail channel, and we've got really good supply chains to support that. I like that answer a lot, and it, in the same way, probably says what some of the e-com marketers would say of, you need your average order value to be very high.

11:35Because you're going to have customer acquisition, your logistics cost is going to be really high. You need to be selling a lot in an actual order for this to have any chance of being successful. my guess is that it won't be if you're actually shipping frozen unless you are omaha stakes and even they run all those discounts and buy one get five free or whatever so but i don't know i guess they figure out how to make it work for them but it seems like it's hard to imagine this not being a losing proposition for anyone i would just say frozen and even things that are heavy even that don't require all the ice but maybe they're refrigerated or maybe they're just heavy products like beverage it's gonna be difficult i think once you're a much bigger brand like i know Oh, Celsius can probably figure out how to make money off Amazon, for example.

12:18But I mean, just D2C in general, even stuff that's that's heavy is going to be tricky. One tip I'll give people is we work with a company called EPG that gets you big savings off UPS rates. I use them personally anytime we're shipping our startup CPG gear around. And literally, I would get 70 to 80 % off the UPS rate doing that. And we've had some brands start to use them. I think Ilave told me they literally cried when they saw the difference because they're like, we can finally make money on D2C now. So definitely check out EPG. We'll put a link in the show notes here also. Okay, next question for Jamie is from Brenda.

12:54And she says, I manufacture cookies. I'm looking to connect with wholesalers for a lot of the raw materials that I need, like unbleached flour and sugar, that kind of stuff. Where would you typically go to find all that stuff? Sure, especially as we're getting started, you really want to leverage your local ingredient distributors So there are, in fact, local ingredient distributors all across the U.S., many of them with overlapping territories and things like that. And honestly, in some cases, they're very specific in the types of things they supply. For example, Valley Baking up here in Wisconsin supplies a lot of the baking supplies for all of our small bakeries all over.

13:32So the unbleached flour, the sugar, the salt, everything that you're going to need, they already bring in from the major require of MOQ of a single truckload or something like that. They'll bring that into a warehouse and then they will down stack it and deliver you, in some cases, two 50-pound bags off the back of their box truck whenever you call them and tell them you need them. So, yeah, definitely start there. They will be able to supply you with the information that you need from a traceability perspective to be able to use your product, your ingredients, in making cookies that can then be shipped over state lines.

14:03So, compliant with federal law. Okay, and if you're Googling around trying to find those kind of people, what would you type in for search terms? Honestly, I wouldn't. Local distributors don't always have a great web presence. Instead, I would go to, depending on where you live, you can either go into the bakery section of your local retailer and ask them who is the local distributor, because they will know they're receiving shipments from them anyway. Or if you are a little further afield, go to your local bakery. If you are looking for bakery ingredients, certainly, quote, generic type things, that works.

14:38Even, especially if you're early on, Restaurant Depot is great to get started. It's not always going to give you the documentation that you need, but cool, great, get started and get to making things so that you've got proof of concept. And on that vein, sometimes people ask in the Slack also, hey, I'm doing formulation right now and there are a lot of ingredients I just need a tiny bit of. Is that a good approach for them, again, just to go into Restaurant Depot, see what they can get there? I know you can usually get sales samples from some of these ingredient companies also, but not always.

15:07What do you guys typically do? I mean, honestly, there's hardly a sample I can't get a hold of with a phone call, but that's because I am who I am, right? No, if you're new to this, definitely calling ingredient suppliers, having them sell you on how great their ingredients are, and then turn around and say, great, can I get a five-pound sample of that? Sure, not a problem, assuming that it's a generic type thing like a flour. If it is instead something like their highly proprietary protein blend of something or other, yeah, they're not going to give you five pounds of that. They might give you 500 grams, right, which is one pound.

15:37So yeah, it's always worth asking. It is customary and typical that they would ask you to pay for the shipping yourself. So having an account code ready to go with a FedEx or UPS or something like that, so you can just hand it to them, show up on your doorstep two days later. That's a good idea. Make yourself look legit. Like, yeah, sure. Here's our number. We do this all the time. We're a big deal. I love it. All right. We are ripping through these. Okay, here's the next one. And I've seen so many questions like this. So Maxwell said, hey, I'm building out my supply chain. It's a functional carbonated beverage.

16:09I'm trying to find a co-man who can do all of this stuff. They need to have tunnel pasteurization. They need to be able to do my specific can size. They need to be low MOQs, low minimum order quantities, meaning startup friendly. They need to have some certifications. And I really want them to be open to doing pilot runs as well. So this one comes up all the time. And I'm always like, okay, I just want everyone to know out there. I mean, it's very tough to get things off the ground in this way. It may often not even be the same person who can do all these things for you. And if it is, it also probably may not be the right partner to grow it.

16:44But what do you tell people in this situation? Honestly, some of these things are people that have spent a lot of time researching. And some of these things I've recognized have actually been AI generated as far as a list of requirements. So let's talk about this one in particular, because there's an interesting caveat here. So when we're talking about low MOQ startup friendly, first of all, those are two separate things, startup friendly and low MOQ. We like to put them hand in hand. It basically means they're going to understand that I may not know everything and that they're going to be okay with that.

17:14Cool. Great. There's a lot of people that are willing to do that that aren't necessarily quote startup friendly. There's also a lot of people like that who are not low MOQ. But that said, the real thing I wanted to pick on here was low MOQ with tunnel pasteurization. So tunnel pasteurization, the way that it works is you take all of your product and you put it on a big white belt and you put it and it runs on a conveyor through what is effectively a hotbox, right? It's got an opening on each end for the product to go in and the product to come out. It has to spend a certain amount of time in there in order for it to cook and kill all the pathogens inside.

17:48Cool. Great. You can only start counting the time when the box is full. So what that means is that doing a low MOQ run through tunnel pasteurization often means that you need to run a whole bunch of extra product in there that has nothing to do with your product that they're just going to throw out, right? So they may be able to make you 1 ,000 cans, but it may take 1 ,500 cans to fill up the machine, so they're going to have to run 2 ,000 cans regardless. And so they're going to have to throw out 1 ,000 cans you're going to have to pay for anyway because of the size of what you want to pay for for your MOQ, so you're going to end up paying double for it.

18:26There's a balance here between low MOQ and some of the process technologies that exist, and that's okay. But absolutely, when you talk about doing pilot runs and process authority support, all that's really great and it's what you need in order to commercialize your product. It is going to be challenging to find all of that in the same location because of the physical infrastructure necessary to do it. That makes sense because the people who are really good at doing that stuff, it's going to be just difficult for them to do it at a very small scale. They're probably not going to want to do it, but they're the ones who are going to have the best pricing as you get to be bigger as well, which you're also going to want because everything is hard to make money in this business.

19:02Right. And I think that's one of the things we sometimes get tripped up on. It's a very minor, quick little thing. When we talk about price per unit coming out of a contract manufacturer, they're not pricing it based on a unit. They're pricing it based on a shift. That's how they actually calculate their costs, right? They have to pay people. They amortize their depreciation of their fiscal assets to a shift-wise run. They've got overhead they have to pay that they normalize as a cost adder to their shift-wise basis. at the end of the day, you're paying on a shift-wise basis for whatever they can produce.

19:33So the MOQ is really more of a representation of what can you produce in a shift because that's where they can deliver the best cost. So you can usually ask a co-man to run below their MOQ for a very short length of time, just knowing that you're going to pay a lot more for it. You may actually be negative margin out the door. Right. Yeah. You can ask them for a certain number of cans, something like that, and you'll just be paying a flat fee for the whole thing, which is not going to be your normal per can rate. So if you're okay with that, then great. When I ran a beverage company, we just hired a specific pilot facility to get our sales samples.

20:07You might feel like, oh, this is just such a good idea. I need to get our product out there and start selling it online. I think that's kind of a tough way to go. At least I'm more retail focused. Beverage in general is more retail focused. I like the approach more of just go and get those sales samples, which you can't actually sell, but you can use them to test them with retailers, take them to a trade show, get people to see if they want to actually order the product, at which case you might be ready for a full minimum order run. But those were two separate places. Also, the pilot run actually let us test out the process a little bit and see if things were working well before going right to one of those bigger runs before getting on the highway to make sure all the wheels worked.

20:46So yeah, we ended up working with the lab, which is part of BevSource just for that pilot run. I don't know what the fees are, honestly, but it feels to me like it'd be something like fiber 10k to do a run of let's say 500 cans something like that maybe a thousand i think we got to do two different flavors which was really helpful and go on site and see it and taste it and make sure it was all working right and they did a nice job and that's a higher per unit cost and anyone wants to pay but to get sales samples it let me get them six months ahead of when i would be ready to actually do the run and because the sales cycle is so long in this business where you need to be presenting it to retailers get them to say yes which then gets you set up in one of the distributors and that takes a couple months and then go ahead and try and hit all the other accounts that have different review calendars, all that stuff.

21:30So I like that approach for just trying to get the thing made, pilot run quickly, run around town with your samples. I love that you snuck that 201 level coursework there of like, hey, it's not about just getting a whole bunch of product into a warehouse and then starting the sales cycle because then you're going to be sitting on that inventory for quite some time. You can't walk into Whole Foods and start from monday and start shipping on friday it's not the way the industry works so good idea there on seeding into your sales plan a sales a sample cycle that will allow you to circumvent that because that's that's some high level business business insights there thank you jamie it always feels good coming from you we'll be right back are you gonna crush it on amazon this year it's such an important channel but it's so hard to do alone and most agencies are a total ripoff.

22:19We can't afford$5 ,000 a month and a commission on our sales. They just don't get it. That's why I love our partners at Daybreak. They are full service, meaning they do the creative work, the listings, the logistics, and of course, all the ads, all with the most reasonable retainer out there. I work with them personally. I'm so grateful we have such a good partner to recommend out to you, our community. They do evaluate your product first to see if it might be a fit. So if you want them to have a look, email them startupcpg at daybreak.agency and they'll do a free audit for you. Good luck, everyone.

22:53Last thing I'll say is one of the best hours I think that my CFO spent when I was running the beverage company was an hour with you, Jamie, where you agreed to just take him through how to reverse engineer a Coman's model because we were trying to figure out how can we get some cost savings in here. And you just sat down with him like, look, this is exactly how they do the math. And if you create this model, talk about this model with them in this way, speaking their language, you will be able to find savings together with them, trying to figure out the things that we're doing that are increasing their costs, how we could potentially bring those down.

23:24And it was just really effective. Any top two or three things that you think someone in any situation might learn from that kind of an exercise that would help them? I think that's helpful to understand what, like, at a bare minimum, understand the fractional difference input costs between your ingredients, your packaging, and the conversion of those ingredients and packaging into the finished product. Just sitting down and looking at that, I mean, 40 % of your conversion cost is usually direct labor, people working on the line. Everything else is stuff that you can't really touch when it comes down to it.