2055 – Mastering the Art of Pharma and Nutraceutical Growth with Operio Group’s Alastair Sanderson

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1:05With us right now, it's Alistair Sanderson. Alistair, you are the CEO of Operio Group. You're found on the web at operiogroup.com. Alistair, it's great to have you. Thank you very much, Josh. It's really great to join you. Well, you have been through some exceptional growth over the past few years. And would you mind maybe just sharing a little bit about who Operio Group is, what you do, and how you've experienced this rapid growth? yeah so um aperio group uh it's actually latin to cover and we really feel that we cover the pharmaceutical and nutraceutical manufacturing industry um the moment a tablet is made is a really magical dance it's this dance between the chemical and the mechanical and um when that dance goes wrong uh there often becomes a finger pointing issue you know the mechanical guys are pointing at the chemical guys and the chemical guys are pointing back at the mechanical guys And what we like to do at Aperio is bring everybody under the same roof, because oftentimes we find that when our customer has a challenge, they don't really care where that problem is coming from.

2:10They only care that we're able to address it for them. And so by bringing those different disciplines in-house, we've really positioned ourselves to be the market leader and the market expert on that moment in time. Yeah. Well, what is, tell me a little bit about your industry and kind of how you stepped into that work. Yeah, it's a really interesting industry, actually. About 50 % of Americans wake up every day and take a daily med or a daily supplement. And so we're able to provide a lot of people a lot of benefits, right? A lot of those people take lifesaving meds. And we're really kind of the backbone of that.

2:49What we do is we provide the machinery predominantly, but also the tooling and sometimes the ingredients to help in that manufacturing process. So when you take a look at the pharmaceutical or nutraceutical industries, there'll be those big names that you're very familiar of, right? The Pfizer's and the GlaxoSmithKline's. They'll do some of their own manufacturing. but then there's also a massive plethora of contract manufacturers, co-packers, co-manufacturers, generic manufacturers, and they actually make up the bulk of the industry in the background. Yeah, well, what has been going on in your world?

3:24So for those of us who are not in the kind of the pharmaceutical, nutraceutical manufacturing space, which is the vast majority of us, tell us what's been going on in your world over the past couple of years, and what have been the headlines this year and what do you see coming down the pike? Yeah, I think when we take a look at our industry in general, we just see a really consistent growth, like a 4 % CAGR year over year, year in, year out. We've obviously got an aging demographic, not just in the United States, but kind of globally. And we see that really kind of driving demand, right? As people age, they tend to want to take care of their health a little bit better or they start moving on to those daily meds.

4:02And so we just kind of see this really kind of consistent growth. Obviously, some of the really big things that have happened recently are around some of the kind of hormone replacement stuff. So the wee groovy or that kind of those things for weight loss. That's not really inside our space because we're really solid dose manufacturing. So tablets and capsules, although we are starting to work on a number of products to bring those into a tablet, because let's be honest, who likes having to do a weekly injection, right? It must be much easier to wake up and take a tablet. And so I think that's kind of some of the big things that are going on in our market.

4:37Like I said, just really kind of consistent, solid growth with the demographics changing as they are. But then these new and interesting things, kind of what I would describe as lifestyle drugs coming to the market, particularly over the last. Yeah. So as I understand, so a company, do you mind maybe just sharing a little bit about how this works? So, right, they may have a formula and they are going to go to you and say, right, so we want to bring this to market. Here's our formula. And then they supply you with the raw ingredients and then you make it. We will not manufacture a tablet. Actually, there are a bunch of people that have to come together to deliver a tablet to market.

5:17So the first team that you have is the R &D, the development team. They'll tend to be embedded inside a large pharmaceutical company or inside a university. and they'll come up with a drug or a concept, right? And then they take that into an R &D situation where they can start doing their trials. And at that point, they'll make the first tablet. And that's where we'll start to engage with them because we'll start looking at tablet design, shape. We can do some really interesting things with tablets. Like we can put a tablet inside another tablet so we can get it to break down at the exact moment you want it to inside the body.

5:52So we might start engaging with the R &D guys at that stage to have those kind of conversations. And then it goes quiet for about three to five years for us. Well, they work through their clinical trials, phase one, phase two, phase three, and ultimately phase four, which is where we'll start to re-engage again because that's when they're getting ready to scale up and really go to manufacturing. From that point, there are really kind of two paths that a farmer might take. They'll go in-house or they might go with a contract manufacturer. And so we have relationships on both sides. We provide the machinery predominantly, but also sometimes the ingredients either to the pharmaceutical company so that they can manufacture it in-house or to the co-manufacturer or co-packer so that they can manufacture it on their behalf obviously all of the regulations around manufacturing pharmaceuticals and to a lesser extent nutraceuticals so vitamins minerals those kind of things yeah it's a lot of paperwork a lot of traceability a lot of kind of human power so we kind of stand back from that and really just support those individuals on executing on that drug manufacturing or that nutraceutical manufacturing.

6:57Yeah. So I'm curious about these similarities and differences when we're talking about pharmaceuticals versus nutraceuticals, because my suspicion would have been that those are going to be two very different standards, but I don't know. Yeah, yeah, completely different standards. So the same kind of licensing that you need to open a restaurant will actually get you there on nutraceuticals which can be shocking because i'm sure you're aware of some of the restaurants that you've walked into and just gone i'm not going to eat here but obviously you don't often see that online right a nutra company is able to present themselves in a really kind of clean fashion if you're buying nutraceuticals my one top tip would be really look for an accreditation like an nsf or a british retail consortium or an iso 22 000 that's accredited by SGS, like you're looking for like some form of UCAS accreditation that goes with that nutraceutical supplement, that really shows that what they're doing is to a standard above and beyond like that minimum threshold, because a lot of nutraceutical stuff is just dumped in with food when the FDA and the DEA and those kind of bodies take a look at it, right?

8:08Yeah. And so Alistair, obviously, I think one of the big headlines with the Perio group is is your growth. So you've gone to a couple of hundred employees very quickly. Looks like obviously some of that is done through acquisition, but you mind maybe just sharing a little bit about what the past couple of years have been like for you? Yeah. So the majority of it's actually been done through acquisition, you know, and I think what the best phase to describe us in at the moment is that digestion phase where we're really starting to get everything to work together. So my brother and I started a company, LFA Machines, and we found ourselves inside this space, this really interesting space.

8:51And what we realized was this relationship, like I said earlier, between the mechanical and the chemical. And so we started trying to bring different parts of that equation in under one group. And that's really how a perio group formed. We did three really quick acquisitions. We actually executed three acquisitions in 12 months, which is fairly rapid considering we're not PE backed, we're not venture capital backed. We kind of did a lot of that internally, which was a significant list. I would not recommend it unless you dislike sleep. So we kind of got those acquisitions done. And now we feel like we've got all of the pieces together.

9:31So we're going through what I, again, what I would describe as a digestion phase. Like about 24 months ago, we had 13 P &Ls on nine different ERP systems. Now we're down to two ERP systems. So we're slowly starting to consolidate the back office, really try and get those efficiencies, drive efficiencies and learnings from different departments to each other to just kind of be the best version of ourselves we can be. Yeah. So, you know, obviously when you bring together that many people, I mean, that's, that's got to create some operational stress, you know, especially if you've got a smaller team that's been working together for many years.

10:12Now they're kind of slammed together with another team. And I know that that can sometimes, you know, again, create some turbulence. Do you, what advice would you give those of us who are in that process right now, either we're getting gobbled up by a bigger fish or there's an opportunity to kind of grow through acquisition ourselves? I think it needs to be really considered, right? I think that growth through acquisition can be right, but it's not always right. And I've certainly seen right and wrong on some of my transactions, right? A lot of people say, hey, look for cultural fit, look for cultural fit, look for cultural fit.

10:54My experience has been a little bit different. Well, cultural alignment helps. what you'll find is that there might be a rapid turnover of headcount anyway who aren't aligned with that culture i would make sure that your initial culture the culture that you want to keep is very very strong otherwise it can be diluted right like as you start to bring in those head counts so we had a 30 headcount team we brought in a 50 headcount team it was a closer it was a close culture but it was not quite as dynamic you know and so we saw some attrition we saw some initial attrition like maybe a 10 headcount attrition or 15 headcount attrition out of that 50 people which equates to about a 30 percent we kind of target a headcount turnover inside our organization of sub 20 right and at the moment we're trending at about 15 so we had that initial kind of burst of turnover and that wasn't necessarily a negative thing it's something that i kind of quite embrace we need to be ready for it because it's a lot of work for the hr to find people and replace people so i would say that i would say really stick to your guns and stay genuine you know not everybody's going to agree with you all of the time some people won't like the changes that you're making to their organization especially some of the organizations with more history so we did an acquisition of a company that had 57 years of history we did an acquisition of a company that had 120 years of history and then we did an acquisition of a company that had about 75 years of history.

12:22And so kind of on different scales, they all had things that they'd been doing for a very, very long time. But those things were where we saw some of our opportunities to make changes and really bring people together. And so not everybody's going to agree with it. But I think there are amicable ways to go through that when you notice that somebody is not necessarily agreeing. My personal way of dealing with it, my personal preferences to sit down and have that really candid conversation. Hey, this is where we want to take the organization. This is why we think it's a good thing to do with this organization.

12:54It looks like you might not be aligned with that. That's okay. What does transition look like? Does it look like severance? Do you just want to call it quits now and we'll give you some runway to go find your next opportunity? Or does it look like a collaboration where you start to look for your next opportunity, but you help keep some of that institutional knowledge about for the next two or three months, well, we find somebody to come in and backfill. So I would say embrace the change, embrace the challenge. Don't always look for 100 % cultural fit. And then when it is rubbing, be really quick to have that very candid, very honest conversation with the individual.

13:28Yeah, right, right. Well, and I would imagine, again, you know, stepping into it with a bit of empathy. We have certainly lots of things that we want to advocate for. Obviously, you know, making sure that we've got the right people who are, you know, culturally aligned. And, you know, and those, sometimes those are probably going to be difficult conversations. But again, I agree with you, it's better to have those difficult conversations quickly, you know, and at least kind of figure out a direction for everybody and decide, you know, hey, either this is an alignment or, you know, you know, working out severance or something like that.

14:06Yeah, Yeah, it doesn't, you know, not every separation has to be a negative one. It can be. No, right. Because, right. Because it should be in alignment. You know, obviously we don't like it when people have to lose their job and stuff. So again, I would hope that, you know, for the right folks where there is that alignment, that there's that opportunity. Okay. That's actually one of the things that I do straight off of the bat. I come into, and I'm sorry to cut you off, but I come into the organization and I really like to say, hey guys, everybody's job's protected, right? finance, HR, marketing.

14:35But we do have a head office in Fort Worth. And as we see that natural turnover, we're probably only going to rehire in Fort Worth. Yeah, right. And that's how I drive integration. Because like I said, you're going to see that on average, people spend about five years in a job nowadays, right? And so over the next three to four years, you're likely going to see a majority of your head to head count turnover in a regional office happen anyway. So if you're trying to do something like bring two divisions together or centralize in the location, it doesn't have to be so violent. 12 months will pass so quickly, you'll do your acquisition and you'll look up and it'll be 12 months later, right?

15:16And so for me, it's about letting that time happen and trying not to be too disruptive during that moment. But knowing where you want to take the organization and having a firm kind of consistent force behind that to drive it to that. Yeah. uh alistair what does growth look like for you at this point um with uh operio so you know in terms of like market share um landing new clients um i looks like you have some good leadership on that side of things um but but where does growth come for for operio yeah so um really we see the machinery upside very limited i mean we're about 55 of the tablet press market as it stands at the moment, right across all of our brands.

15:57And that data is kind of available from government entities. So we're really confident about that number. The place where we know that there's a lot of growth is on the ingredient side. Just in North America, the ingredients market for nutraceutical and pharmaceutical is about a$52 billion market. And at the moment, we're a rounding error inside that number, right? And so I think what you're going to start to see is now that we know where all of the machinery is. We understand what our customers are using that machinery for, really trying to drive to be part of that value proposition for the customer where we're not just machinery, we're machinery and ingredients.

16:35And as I said before, we're that problem solver, right? And so by bringing it all to us, you make sure that you get success rather than finger pointing when things go wrong. I really think the future growth, I think we're talking five to 10 years is all on the ingredients. Yeah. All right. So I'm curious if there's anyone that happens to be listening right now that might make a great connection or, you know, maybe our friend that's listening right now might know someone that could potentially be a great client introduction, you know, in terms of like who they might know that might make a valuable connection, or maybe they're researching you.

17:14And this listening to this podcast episode is part of, you know, kind of that research. So what does engagement with Operio look like? And, you know, who is like just really well primed to be, you know, to align with Operio? Yeah, I mean, I think it depends where you're approaching from. If you're looking to launch a supplement business or a supplement brand and you're entrepreneurial, I'd definitely direct you towards LFA. It's really set up to kind of handle that. If you're in that mid-tier manufacturing, so you're already very well established, then Stokes and Index are probably. So we have different almost tiers of machinery.

17:57If you think like the VW group, they have VW, but they also have Audi and then they have Porsche. At Aperio, we have the same thing going on with our machinery. We have LFA machines, which is unashamedly the Chevy Malibu. You know, you can start a business on one of the tablet presses, but it definitely doesn't have the bells and whistles that our Audi A5 or our Stokes machines have. And then we have Elizabeth that does all of that really technical stuff. They're more like our Porsche, right? So I think it kind of depends where you are inside the market segmentation. But honestly, I didn't come on your podcast today for a sales pitch.

18:32I kind of told you that just before we kicked off. For me, really, it's about paying it forward. So I've been really blessed over my life to have a couple of very solid coaches and a couple of very solid mentors. And I really think that the entrepreneurial journey is one that can provide some individuals a fantastic amount of reward. Right. But it's lonely and it's difficult and it's hard. Right. And so I think the person that I'm trying to speak to today is that entrepreneur who's out on that journey. And this is a very genuine offer. You can go to my LinkedIn page. You can shoot me a message.

19:08And if I think I have an answer or if I think I have an idea, I would be happy to share it with you because so many people have done that for me in the past. Yeah. And, you know, obviously with Operio, it looks as though you may have, you know, again, I'd encourage someone to check out job openings, you know, when you're going through that much, much growth. with, you know, yeah, I think we've, we've got a number of, well, we always, I don't know when you might be listening to this, but we always have positions open and we're really always looking for those A players, right? Those people that want to grow and learn, and we like investing in them.

19:43So that would be a great shout out. If you're an A player that's particularly in the Dallas Fort Worth area, which is where our head office is, I would love to hear from you because we're, we're always looking to add great people to our team. Yeah. Operiogroup.com. He can Can I ask you, Alistair, just because you have a huge library of books behind you, are there any books that you've read over the past year that you think are just maybe either flying under the radar or just something that you've read that the insights you found were of particular value given kind of what we've been talking about today?

20:21Yeah, I think it really depends at what stage you're at in your business life, right? I like to roughly break up business growth into like sub 10 headcount, 10 to 30 headcount, 30 to 100, and then 100 plus. So I'll try and give a book for each one of those categories if it's okay. I think if you're sub 10 headcount, books around productivity like Tim Ferriss' 4-Hour Workweek, super helpful. Because you're just trying to turbocharge and make the maximum of every bit of your time. when you move into that 10 to 30 I tend to see businesses get like product drift they want to do everything still they're still in that entrepreneurial stage so they're trying to grab shiny things at that point I would move on to a couple of books like the one thing or essentialism right and really understand what it is that you're good at and how you're going to do like more of it and that will actually drive in that in that space between 10 and 30 headcount doing less is definitely doing more but it can be really hard for the entrepreneur that started at 10 to like shift that gear right um and then when i'm going from probably 30 to 100 uh i'd be looking at two books potentially scaling up uh or crossing the chasm uh two really good books but then also another one that i think definitely flies under the radar loads is uh andy grove's high output management because at this point you're having to manage teams and potentially teams of teams like Like once you go from 30 to say 50 or 30 to say 100, you'll have a layer or maybe even two layers below you.

21:55So it's how do you build out processes to manage teams and teams of teams? And you'll really get that from Andy Grove's books. And then at 100 headcount plus, now I think the CEO role changes again and it becomes more about organizational culture. right and so then i would be back to because i think oftentimes at sub 10 people read simon senec start with y right and actually i feel like it's way more applicable once you get like above 100 headcount because that's the point of which yeah no longer can have a personal relationship with everyone inside your organization i didn't have to explain to 10 people why we were doing something yeah right yeah exactly right like but but when you get to plus 100 you're going to be doing town halls you're going to be doing off-site you're going to be leading in a very different way and so books like like i said simon sinek start with why or um uh ben horowitz i forget the name of his uh ben horowitz what's it ben horowitz's books called oh you've got me very much on the spot no no yeah no no no that's okay well at the hard thing about hard things yes the hard thing about hard things.

23:09Yeah. Thank you, Google. I would recommend books around that, which is much more around like organizational culture and that large headcount leadership kind of stuff. Ah, great, great, great, great. Okay. Alistair, sorry, your LinkedIn, Alistair Sanderson, again, CEO. Sorry, I was looking at your LinkedIn and you keep the last name abbreviated. Again, and CEO of Operio Group, your website, operiogroup.com. Thank you so much for sharing your insights. Alistair, congratulations on your success. Thanks very much, Josh. It's been great hanging out with you.

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