#248 - How to Work with a Formulator with Rebecca Urciuolo from BevSource (FB Solutions Group)

24:17So they brought me in and figured out a way. We did these multi-serving functional beverage concentrates, and no one had any idea about solubility and food safety and things like that. It's like, how do we cram all of this stuff into a tiny little package, make it taste good and make it safe and make it work with this technology? And that was definitely the biggest challenge I faced in my career, the most frustrating challenge I faced in my career. But I did it and we launched and it was a pretty cool journey. That's amazing. And from what I can tell, people who are formulators or ops people, they like solving problems that are interesting.

24:55I was just talking to a friend of mine. That's what R &D is all about. Yeah. Yeah, a friend of mine who's just looking at a new job and he was like, this is exciting to me because no one's ever done this before. And it's going to be a lot of work and it'll be so interesting to figure out how to put these new things together. These new machines that have never done this, for example. I mean, it's exciting. It sounds really exciting. So, Rebecca, you have this deep skill set, decades of experience putting together these kind of ingredients. I feel like any beverage company would be incredibly fortunate to get to work with you.

25:26Can you tell me a little bit about then what would you actually recommend to them when they are looking for formulators? So let's say, you know, BevSource obviously is a great option for beverage companies looking to formulate, but there are lots of product categories out there. So what advice would you have for brands as they are evaluating formulators, regardless of what product category they're in to make sure they're finding the right partner? Yeah. So first and foremost, I want to put this out there. This is not cheap. You do need to have a little bit of money in your wallet to do this. How much you can spare will partly depend upon how far you can go.

26:02Right. So as you're working with formulators, yeah, there are different types. Like you mentioned, there are some freelancers out there who will probably be a little bit more wallet friendly for a startup who's just kind of scraping things together or maybe needs to do things piecemeal, you know, as they figure out where funding is coming from. There are plenty of reputable companies out there that only do formulations. You're still going to get a fantastic formula and fantastic service, but that's only one step, right? You've got some full service companies like us, right? So formulation, you know, is only one step.

26:33It's how do you get your ingredients, how do you get your packaging, how do you get your co-packers and other things like that. So, yeah, I think it really depends on what you can do at the moment, what's going to be the best fit for you. and before you sign up for anything, definitely talk about what those deliverables are that you're getting, right? There are formulators out there who will keep the formula and own the formula even though they're making it for you. So that's something very important to talk about. Like if you're going to have a formula for your brands, I mean, I would want to own that, right?

27:04That's my baby. So just make sure that you're going to get what you need and what you want out of them, set those expectations like from the get-go. I think that's a really good overview. So that's the reality. Some brands will have to be very scrappy. Maybe it's somebody doing it as a side hustle and they have a few thousand bucks saved up to get this product to market and they don't have your skillset. And so there are so many great freelancers out there who are eager to work with you. And we really appreciate BevSource and FB Solutions because you guys partnered with us on this incredible database that we were able to build.

27:38It's the first ever database of all the product developers out there. We wanted everyone to have access to you guys and all the other options as well to make sure that people can find the right partner that really makes sense for them. Whether they have, I hope everybody has budget to do all the things that they want to do. But BevSource, which is a full service partner that you can have that has all these capabilities, obviously has a little bit of a cost profile than somebody who maybe doesn't have that overhead and is just kind of a freelancer somewhere. So we really appreciate your guys' help with that.

28:07and I mean just being honest like I think that source was too busy to work with me back in the pandemic days because we reached out and they're like you have no idea what's going on right now in this beverage world do you there's like we can work with you in six months I was like well my whole world's gonna change by then so that it was like my dream to get to work with you guys and I wasn't able to and later on I probably should have just waited because it would have I think we would have really appreciated that full service help actually in retrospect so by the way like what What is the actual process like to get to work with you guys?

28:39Like, is it, how are you going to value? Because I know like there are some projects that won't make sense for you guys the same way it might not for other people. But like when people are getting on the phone with the sales team, how are they looking at that? Are you pretty much open to all different kinds of projects or are there ones that you feel like are really going to be a good fit for you guys? Yeah, I think the sales team knows well enough where the hard no's are, but those are kind of few and far between. So basically, once they get those intake forms ready, they come to a group of us and we have a review meeting every week to go over these potential projects.

29:11And again, this back and forth with the sales team of, hey, we're missing a certain input here or we just have way too many questions. Let me talk to the customer and try to hash things out. And then if the project is approved, we'll let the sales team do their thing. They'll come back to you with pricing, talk about all the different types of services that we can offer. We do have a la carte services. If you need to do things piecemeal, that's great. If you can do a few together, we take that into account with pricing. Once all the contracts are signed, my team gets the project officially and we hit the ground running.

29:44So, okay, if I were starting another beverage company, I wouldn't even have to ask you guys the question of like, oh, have you worked on this kind of a beverage? Because you guys have worked on everything. If I'm one of the companies that's looking at freelancers, for example, like how would you recommend that I evaluate the skill set of an individual product developer to see like, do they really have the skill set to do what I'm doing? Or are they just going to say yes, and I don't even really know if they actually have the exact right background for my kind of beverage? That's tough because, again, most founders don't come with a lot of industry knowledge.

30:16So it is hard to vet if you're lucky enough to say this is not your first rodeo or you just happen to know a little bit about the industry. Like, look at their backgrounds. Not going to say, like, you know, a degree is as important as hands-on. As they said, it's a marriage or kind of both. But look at their background. Ask them about the types of products they have worked on in the past. And also ask them what their capabilities are. Like, where are they working? Like, is this just paper, you know, formula that they're giving you? Do they have a lab? You know, there are a lot of different processing methods out there.

30:48So say you're doing an oat milk latte and you need an aseptic package. People probably don't have that on the bench top. That's a really expensive piece of equipment. So your freelancers are probably not going to have something like that. But if you're just doing, say, you know, a carbonated energy drink, they can probably help you with something a little bit more simple. I gotcha. So we recently had a guest on our R &D radio, who is a product developer. And she said, look, I'm going to say something controversial here, which is, if you're creating a product, and you don't already have your co-man backup, start over.

31:21I think maybe it was more applicable to food in general, because I think there can be so much there that's different. But do you feel like that's true for beverage as well? Like, hey, once you start working on this thing, like, don't pass go, don't like collect$200, like go back and figure out who's going to make this, because that actually can be hard to find the right fit. And they are going to have a lot of specification of what they can and can't do and what kind of products they can make. And that'll impact the formulation. Yeah, it is a bit of a back and forth, right? Chicken and egg type of thing.

31:52Most comans won't accept your product until they have a finished formula and processing requirements, right? But you also might not know what your processing requirements or your package is going to be without that command. Because not every command runs the same size package, but they might have the same thermal processing, right? So yeah, it is kind of tough to decide which is more important. We do have a lot of folks that come through that just are looking for formulations for whatever reason. And as we kind of go through those reviews, because we have such an extensive co-packing network, we do kind of think about that in the back of our head.

32:29Like, okay, it's great that this person wants to do this with this process and this package, but is that feasible? Like, we don't want to give you something that you can't move forward with, right? So Tetra Pak is a great example. If you look on the Tetra Pak website, there are dozens of sizes of Tetra Pak, but only a very small segment of those are actually run at like Coman's in the United States. And that's, we get that all the time, folks that want aseptic and they're like, oh, I want this size. And we're like, no one can run that here. We guarantee you there's not one person that can run up here in the United States.

33:03So yeah, it is definitely, those two things really are married close together, but I'm not sure if one is more important than the other, they've got to work hand in hand. That's a funny point. I've been to the Tetra Pak office in Denton, Texas and seen that all of all the things that they make is wild, but you're so right. you could fall in love with some super obscure package like okay great literally no co-packer this country is going to run that just so you know and even i mean when if you take that even back to cans one question that comes up a lot in the slack is like hey oh i'm trying to do one of these mini cans i'm debating between eight and 8.4 ounce which doesn't sound like a lot to people but actually one of those the majority of comans can run and a lot of the can companies can give you and one of them they can't and if you are married to one like all right it better be worth it because you're really limiting the number of manufacturing partners that you might have in that area.

33:56So do you get brands then coming back to you like, okay, you gave us the formulation. Now that we're actually bringing it to scale, there are a couple of things we may end up needing to tweak about it. Like, are there things that you see consistently come up in that area? And if so, what are the kind of things that they might have to iron out as they scale? Yeah, I mean, most of the time it's more of a brand identity thing than anything else, right? Like they've got this formulation and there's been a bit of a lag between finishing the formulation and actually taking it to the co-packer. And their team goes back and they do some more marketing research and they decide, oh, we really wanted like these vitamins, like instead of these vitamins.

34:35Or we decided these two flavors are a little too similar to each other. So yeah, most of the time it's more kind of just that like aesthetic type of thing. I had a few like small tweaks where some co-packers do what's called a throw. So some co-packers will make concentrated syrup and then they add water to it later. Some of them make it to beverage drinks. So a 12 ounce beverage would just be a 12 ounce beverage. So sometimes we have to go back and just kind of tweak the formatting of formulas, things like that to make it easier for a co-packer. sometimes have vendors discontinue a material or just something's just out of stock, just bad supply chain that we'll have to find an alternate or maybe have to do a little bit of reformulation to kind of fix that up.

35:20Okay, that makes sense. And then now let me take you to, for me, one of the most nerve wracking parts of the entire process, which is like, okay, Rebecca and BevSource gave me the formulation that I love of my dreams, which by the way, I remember when I had a brand and we finally were doing a taste test, they would send us like five different options. Like we would taste some that were kind of competitors and some, you know, whatever. And then one of the bottles I tasted and it was like the best thing I'd ever had. I just like, was like, please let that be our one. Like one of these formulations.

35:50And it was such an incredible moment of joy. Like during tastings, you should have a poker face and there are other people on your team tasting. You shouldn't give things away. Let everyone have an unbiased sensory experience. I couldn't even contain it. It was so good. I just will never forget that moment. But then the nerve wracking part is, okay, we have our co-man and we're running this and oh boy, we're running it at high volumes now. And you have to do the sensory test there of, okay, this is what's come out. And like, first you would taste it before it is even in the cans, right? Because they're going to give you a batch sample.

36:21It comes out after they batch all ingredients and you'll taste it. You might even taste it before it's carbonated, something like that. and what your job is at that point is to approve it and say like yes this is the thing that i gave you the sample of that matches my formulation and all of that it's very high stress for someone like me because i don't have the technical background i'm just like i think so but i don't know are the temperatures different is the color exactly the same as and you know i think by and large things generally went okay there were some batches when we're working with the co-man that may end up being a little bit different and it could have to do with the freshness of a specific ingredient or sometimes they actually might have a problem at the co-man.

36:58They could have not cleaned the line or have used some kind of a cleaner and you're picking up a taste off that. So there can be problems. I guess the first question is, what is the role of the formulator at that point? Do you feel like a lot of people are coming back to you and saying like, hey, you built this beautiful thing for me. Can you just tell me, is this the thing that you built for me? Can you recognize your own baby in this product that's come out of the co-man? Do you find yourself playing that role a lot? Sometimes. I mean, first and foremost, you'll give what we call a gold standard.

37:24Right. So whatever that locked in formula is that you love, like we're going to get you a couple of samples to take to the co-man with you. Right. For that first production. And you're going to use those as a reference. You're going to take that product that came off the line and you're going to look at it. Does it look the same? You're going to smell it. Does it smell the same? You're going to taste it. Does it taste the same? It's never going to be 100 percent. Right. Because you have something made in a lab with samples of ingredients versus a big scale up. But it's going to be, you know, 99.9 percent there.

37:51Like it's going to be what you want. And from then on, the way commands work is that batch, they save samples to become the gold standard for the next batch. So you always have a reference, you know, to make sure you're getting that consistent quality. As far as kind of our role in that, it depends a bit on, you know, what kind of services that you signed up for. I mean, money talks, right? So if you only signed up for one small service, then that's kind of fulfilled. Your statement of work is completed. We do step back. Not to say like, if you called me with a problem, I'd pick up the phone and I'd talk to you and I'd try to help you.

38:24You know, will I fly to the plant? Probably not. But if you can kind of tell me what's going on, we can spitball things together. And a lot of that onus is going to be on the brand owner because, you know, we can help you find a co-packer. But at the end of the day, you have that relationship with a co-packer, right? Like this is your product and this is your money. This is your production. And, you know, we're not going to steer you to someone who doesn't have good quality checks, you know, or doesn't have GMP certification or anything like that. But you need to keep on top of them, too. Like you need to look at your quality records.

38:55you need to check those batch sheets to make sure that if you need 10 pounds of something added, that someone really did add 10 pounds and that was the correct ingredients. Check your inventory, make sure that your ingredients are not expired. That can make a big difference. And there's always problems. No matter how good a production facility is, things are breaking down, things are happening, right? Like it only goes so smoothly. And you may not fly to the plant, but some people might. And I actually kind of like that idea for early brands is like, maybe if you have somebody help you with this, it might be helpful to get them to come for the first run to really check things with you.

39:33Maybe that's a job for Bob, but somebody like it, I really like that help, especially in the first one, because they'll understand what the formulation, but they'll understand other things that might be going on there that just helps to have a trained eye. Yeah. I mean, it's a service we definitely provide, but again, it depends on what did you sign up for, right? There's only so many of us doing all the work, so got to kind of go. Yeah. I would say if brand has the money, I like that as part of the scope of services, just because you'll see, it's so interesting when you go to come and learn how the processes work, but you'll never know the things that the people who are technical know and can spot problems.

40:09And then you're just going to be sitting there a year later with a bunch of problems because you didn't have the help early on. What are some of those most common problems that you could see things going wrong for a brand at their first production? What are the kind of things that could actually take you away from the reference? Yeah, I mean, things like so much is out of your control, mechanical issues, right? These lines, and you know, you've been there, these lines are running at incredibly fast speed. They're doing hundreds of cans or bottles or whatever your package is, is like in a minute.

40:37It's just whizzing by. Something could snag. You blow a gasket. anything can happen. You run out of CO2 or nitrogen. There's a clog in your capper, right? Like little things like that. As the product sits, things can go wrong with it. If you have tunnel pasteurization, if the temperature isn't correct, or if the belt's not moving at the right speed, you can kind of overcook your products and you'll taste that. And a lot, and yeah, there's human error too. Like somebody grabs the wrong material and accidentally adds a lemon flavor when it should be a mint flavor. Like all these things just, they happen.

41:13It's a very high stress, very high paced environment. Yes. And even, I think it'll still surprise a lot of people how much of this is done on pen and paper, happy commands of like checking all the different ingredients and writing things on bags and all that stuff. So definitely things can go wrong, but hopefully they won't. Hopefully your command is very diligent in that. One thing that actually surprised me about this, I didn't understand this when I worked with the formulator, like, okay, great. Here's the gold standard. Oh, it's so good. Everyone's going to love this. The product changes over time though, much like, so I used to work at Mars, which makes M &Ms.

41:49And I remember doing the factory tour where you actually get to have the peanut M &Ms when they're coming right off the line. And even you can try them before they put the candy shell on them. And it's fantastic. And you're like, wait, I have a bunch of questions I need to ask you at this point in the tour, because I want to sit here and eat all these M &Ms right now. But then the product changes a lot over time. So for M &Ms, yeah, it's going to like harden and the peanuts aren't going to taste as fresh and stuff like that. And I just, I don't know why I never put together that that would happen to beverage too.

42:18So things can taste like, oh, the flavors that you have can like really pop. It may be even too much actually, like right off the line and they can settle over time. And so even if you have like a Coca-Cola day one off the line, it's going to taste really different than it might 18 months later or something like that. what's your experience like in that area? How do you talk to brands about it? How do you encourage them to think about how the flavor is going to evolve over time and what they should do in the formulation to protect against that, I guess? That's the chemistry part right there. So I mean, water, your beverage is going to be mostly water.

42:49Water is a solvent. So it's going to slowly break down everything in that beverage. I like to use the lasagna example. When you make a lasagna at home, it's always better the next day after you know it's sat in the fridge overnight, right? Right. It's exactly the same way with your flavors. Like things might taste great fresh, but you really kind of want to let them sit, let those flavors kind of meld and develop to get a true picture of what it's going to look like. But as far as degradation, again, there's kind of only so much you can do about that because that's where the chemistry comes in.

43:19Right. Like you cannot stop any of these chemical reactions. But when your flavor compounds are made like your flavorists are like master chemists. They understand how things are going to break down and they can make those flavors so they're protected a little bit. And then other things are going to kind of change it too, like your processing. If you take it through a heat process, that's definitely going to change your flavor. If you're distributing in Florida, where it's hot and humid all the time, being in that kind of environment on a shelf is going to accelerate the aging. So yeah, it is kind of tough to figure out at the end of your shelf life, at the end of that 12 months or whatever, what it's really going to be without actually tasting it.

44:00We'll always recommend you do what's called a shelf life study. And this is where you'll take product that hopefully was made in a commercial setting. And you're basically going to put it in different environments. You're going to keep it in the refrigerator as your best case scenario. And then you're going to throw it in an incubator and heat it up as your worst case scenario. And you're going to taste at different time points. And you'll see real time like, hey, what is happening to my beverage? Like, it doesn't taste like cherry anymore. Like, what's going on? And you'll kind of have to decide as the brand owner, it's like, oh, well, I was hoping the expiration date would be 12 months, but maybe it's really only nine months.

44:37Otherwise, it kind of starts, you know, tasting funky. That's so interesting to think through. And like, OK, or you can put more flavor in it, but then it's going to change how it tastes initially. It might be even too strong. There's so much there. Okay, last question for you, Rebecca, which is coming back to the cogs part of this. Honestly, when I did a beverage, I had no idea what a beverage would cost from an ingredient perspective. Like, I don't know until the end of this thing. Like, is it like this much or like 10 times that much? I don't know. Like either of those could be true and I would have no idea.

45:07So if you're going out to market with Rebecca's Gatorade competitor, what are you going to do to try to really understand your cogs going in? And when you're talking to the formulator, like try to keep that under control because we all know beverage is an expensive game. So what tips would you have for brands working with formulators to try to keep COGS in a manageable place, relatively speaking? Yeah, I mean, first and foremost, if you have an understanding of how much you want to spend, that's great. Like we can work with your budget. Always kind of throw like I have so many people that complain about when we get in the COGS report and I just go, hey, welcome to capitalism.

45:43Right. Like that ingredient vendor is taking a cut, your distributor is taking a cut, your co-packer is taking a cut, and then when you put it on the shelf, you're taking a cut too. So yeah, have a good idea of what you want your margin to be, of what you want to spend. And it's very difficult to tell you what's quote unquote cheap ingredient, right? But a good rule of thumb is if you're trying to use a novel ingredient, it's going to be more expensive. So, you know, we have folks who are like, oh, I see that beverages don't contain ingredient X and I want to use that. Well, there's probably a good reason that no one's using that material.

46:19So you might have only one supplier that makes this material. So demand's really high, supply chain's really tight. You might have something that is grown overseas and, you know, has to be processed and imported into the U.S. There's some extra fees right there. So I think that the best thing to do is to just want to understand it's going to be expensive. and try to think about, you know, what you want that margin to be. And we can work with that. You know, we've got like a wide network of distributors. So take sugar, for instance, right? Like we can get you to a distributor that's got a very good price on sugar based upon, you know, how much volume you're going to use.

46:58And the bigger your production, the cheaper it's going to be, like on a per unit basis, obviously. I think the thing most people don't think about on top of COGS is what's called ingredient exposure. which is basically what's your waste. So say you have a production and you need 40 pounds of this material, but you have to buy a 50 pound box of it. Like that's just the way it's packaged. So now you have that 10 pounds that might be going to waste. So you've kind of paid for that and that's money out the door. If you're doing another production, that's great. You use them in the next production, right?

47:30But there's a good chance that you're going to have materials you can use again. Juices are a great example of that. The juices are going to go bad. That's a natural product, highly perishable. You can't just hold your juices for a few months. Once they're open, you've got to get rid of those. Yes, I have left juices out. I know how that goes. I go back pretty quick. Okay, Rebecca, I just really want to say thank you. This has been such an interesting chat and really nostalgic for me also. It makes me miss the whole formulation process so much. Well, hey, if you got an idea, come back. We can help you out.

48:03I would be so lucky to get to work with you guys. Oh my gosh. I would love that. Especially I always wanted to do it in person and it was pandemic. So we never got to do it that way. But I felt like that would have been so much fun to actually formulate that way. And that was actually one of the biggest impetuses for us creating the product developer databases. People ask all the time, like, Hey, does anyone know someone who can do this? Like, what would be really ideal is if they could find the right person with the right skillset who's located near them. And so that's one of the fields that we capture in the databases, where are they located?

48:31Because it's fun and it can really cut down a lot of the feedback cycles, you know, for a lot of the reasons that you talked about. So thank you guys so much for the support to create that and all of the partnership. It's been really wonderful to get to work with you guys, especially since you're such a trusted partner to the community who I even got to work with personally and just, you know, know you by reputation and really love the people who work there. So thank you again. This will be incredibly useful to everybody out there. We really appreciate it. Thank you, Daniel. Well, my friends, we've now arrived together at the end of another episode of the Startup CPG podcast, the top globally ranked podcast in CPG.

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49:52you