Episode 5: The Commercilization Process and Working with Manufacturers

Welcome to Food Products FAQ, a podcast where it discuss how we make food products and steps of takes to make yours. I'm Adam Yee, and I'm Brian Chow. And we're both independent food consultants who've been through the food industry for over a decade and we're here to share with you how we make great food products that have been sold in thousands of stores. All right, I think we're on the halfway point. Yes, yes we are. And speaking of halfway point, I think that gets the topic of commercialization, which I do feel is this milestone for any food product, especially like when we work in it as a, yeah, I think a lot of people don't think of a food product as like a step, at least the CPC industry has a hard time discovering that like, yes, the first product is the first step and it's a really important step, of course, but this podcast is mainly about the intricacies of doing this and commercialization is one of those intricacies or one of those touch points to know that we're on the right track. Yeah, I think the, we'll discuss a little in the marketing elements about front end innovation, but there's not a lot of discussion around back end innovation and commercialization is part of this back end innovation and of itself. I think people overlook a lot of that components of just how do you launch and they expect things to kind of rent smoothly, especially when you've gone to a point where you've completed the R&D process. But this is a pretty critical point because up until now, the R&D process is only trying to get you to a golden standard. You still need to be able to figure out how can you actually scale because we're actually using larger pieces of equipment and we're petting a lot of money down in tying up your working capital to see if there's feasibility in scale up. Yeah, didn't you just describe the audience? I think this is a word we throw on a lot, commercialization, but can you just tell the audience what your definition of commercialization is? Yeah, it's the first time you're in production. It's essentially testing for feasibility. You're not looking at full efficiency. How do you scale from bench top or what you've done in the kitchen at a manufacturing facility, whether it's a pilot plant, your own manufacturing facility or a contract manufacturing facility? Yeah, I don't think we mentioned this in the previous episodes, but the things we're all talking about in the last four episodes was a progress stage in the industry we call bench top, which is in regular corporate terms. It's where scientists literally work in a test kitchen to make a viable product in hopes to get to the next stage commercialization. If you're listening to this, you probably don't have an expensive corporate R&D lab. If you do great, you are probably doing as your kitchen or a commercial kitchen. It is the same thing. Yeah, exactly. And bench top is synonymous with the kitchen countertop and things of that nature. There may be some extra lab equipment for pH, refractile, more for bricks and things like that, but it's essentially just trying to mimic commercial viability. Yeah, I wonder if a bench top appears by the origin of the word, is it from the lab situation or is it from a kitchen situation? That is a good question. I think when I was looking into woodworking and things of that nature, they do mention bench top as well. I'm wondering if it's a craft artisan type of word of origin. Well, that is what we kind of do in the bench top stage, right? We make a craft and artisan piece of work and the commercialization kind of optimizes that to make it especially commercially viable. Yeah. So Adam, you've done a lot of commercialization trials as a vi. But you've been intimately involved with growing companies from zero to one. Walk us through your thought process when you go through commercialization. How do you prepare for commercialization? This is actually my favorite part of the process. I think it's a beauty to take something that you literally handcrafted and put so much time and effort into it and then essentially train it off to a most likely another facility with another team and communicate clearly this formula that you made into a mass-producible thing. And that takes a lot of work. So I've had a lot of experience with this, not only in the factory, my first job was taking formulas from our corporate lab and turning them into factory made formulas and testing those out. And then just the two companies I started, they've all were able to jump through this process of commercializing through a contract manufacturer. Mainly, you have to find a contract manufacturer who can do it. And depending on what they have, you then have to make these trade-offs with your formula you made on the bench top. Your product won't be the same though great food formulators, I would say, have the ability to kind of think in the end of mine. I always say this to people that whenever I make food products, I have an end in mind. For example, dumplings are generally handmade, but I knew that there will be eventually a way to mass-many factories. So I've prepared mainly the filling to be able to be mass-many-factorable. And I think the thing to really chisel down is that if you do want this product to be commercially viable, if you wanted to be easy to make, if you wanted to be, which is a synonymous to commercially viable, this is kind of how you would do it. You would have to think of ways to make it easier for yourself. And if you don't have the technical expertise to do that, that's kind of why we're here. So for me, it's all about one understanding the contract manufacturer and understanding if it's a line or if we can make our product, our bench top product. And once we kind of communicate there and understand what they have or don't have, we kind of go from there. So the co-packer may not have all of your processes or it may have a different way of doing your processes. And one common one is that for a protein bar for instance, the bench top form of that is putting a sheet pan and rolling out with a rolling pin. I tell you to get to the right thickness and then cutting, hand cutting them for a manufacturing line. They're going to slab it out. They're going to literally have this conveyor belt and throw a bunch of dough in there and then make a huge slab of bar and then cut it automatically. And there's a lot of nuances in that one, but generally the mechanics are still the same. I'll finish up with just say like communicating with the co-packer and your formula is all about just understanding what they have and what you have and what are you willing to change with the formula or what are they willing to add on to achieve your formula success. Definitely. I will say that we are going to cover contract manufacturing searches and how to start the conversation with the contract manufacturing factor in another episode. Essentially what we want to speak about here is when you have already achieved the point of signing off that contract with the contract manufacturer or the pile plant at say university level or an extension program or even if you have your own manufacturing process outside of a commercial kitchen, there is a lot that's at stake. It's a skill that a lot of people need to learn and understand as they are developing products that are commercially viable that are intended to go through specific machines and processes. And the beauty of it is a lot of it is engineering. If you have that mindset of kind of tweaking in mind with a machine, you'd be able to arguably outperform that of any just regular product developer or any culinary specialist because most of the time they're focused on how do you replicate when you have more hands, more literally hands, people with hands that are able to do multiple things in a kitchen space. But what we're trying to do is figure out what kind of machine and there's a lot of different machines out there that could actually be put together to replicate the final product or what machines exist if you're working with a contract manufacturer that you can put together and kind of rework the whole process so that it actually is optimized for the final product. Yeah, I'd love to give an example here about dumplings specifically, which was a big part of civil foods. And we did hand full of dumplings at first and realized this is probably not going to work. And then we invest into a machine, a commercializable machine specifically that can make dumplings. And there's actually two different types. There's these kind of machine folded ones. And then there's this, I'm going to use a very technical term, an extruder type dumpling machine which fits out a tube full of filling and dough. And then they use a mold to mold out these dumplings and spit them out. I'll say that right now the extruder model is getting much more popular because of the ease of use because the issue with the kind of the replicated handful of the ones that there's so many moving parts, there's so many things at the oil, things can break very easily loading the skin onto that dumpling machine is extremely cumbersome and a lot of people are moving away from that feel. So, but there's a trade off because that hand that machined, pan folded one has a very, very good artisanal quality. They do look really good and they do shape really well and they look can folded and these extruder ones do not. So that's like a big trade off though about how you want to kind of consider your products is that do you want an artisanal quality or do you want something that is a little bit easier to handle and you can produce more. Those are two of the biggest trade I've seen is essentially a quality versus quantity trade off but this is a conversation you're always going to have when you scale up and that's something that you personally will have to decide but we decided to go into the extruder route. We believe that when there's a lot of other people doing it too, it is a really is machine to handle. I can do it myself and there's maybe only had one or two major technical issues with it. I want to preface this specifically because this is always going to be a discussion you're going to have when you transfer your product over to a more scalable level. Yeah. And even if you decide to switch from a contract, why contract manufacturer maybe they're because they're smaller in size and you have grew of their capacity into another contract manufacturer. Even if it's the same output, you actually want to go through the same commercialization trial process because it could be a similar formulation but it's a very different process. It's even larger scale or minute differences in how it's set up or the type of machine, how old the machine is, the packaging line, things of that nature. Those slight differences make all the difference in making something as commercially viable. Yeah, let's go through this process of how we get commercialized. I think we have, even though we work on a lot of different products, I think the process is still the same, starting with contacting them. What are your recommendations about contacting Co-Manager? We're going to go into a lot more detail next episode but I do think that based on some communication styles, based off of like, you know, some of these contract creators don't even have good websites, right? Or they just give you a phone number and it goes straight to voicemail because either they just have bad customer service or they're just too busy. Any tips on the initial contact? Yeah, I think the top three questions to ask is about capabilities, about their capacity and about allergens. You want to frame it so that the question is more in their favor because you're asking the contract manufacturer to do something for you, right? You want to build the relationship as such. So essentially if you're to ask about capabilities, you actually want to learn for yourself what is the minimum order for a volume run or minimum or a quantity for production. But when you ask that type of question to a contract manufacturer, they're going to think you're very small or you're not really like looking up for them, right? Because they don't really make business off of an MLQ. So what you want to do is you want to reframe that and ask the question about what is your ideal manufacturing run in terms of volume production? And when you ask it in that manner, then essentially they're going to think, oh, you're looking out for us because now you're thinking what is our ideal volume for our customer? And then you're now matchmaking in that process that you follow up with. What is our ideal frequency of production runs? Because you don't anticipate to run every single day. They don't necessarily anticipate for you to run every single day. So it's all about scheduling the time out. So is it on a quarterly basis, on a monthly basis, on an annual basis? It gives you an understanding of what is the projected one year contract in terms of volume that they would want to see on a contract. That actually gets you to a point where you don't have to negotiate. You don't have a guess in terms of what is an ideal contract. You know exactly their number is for a good production run. And the allergen statement is really more to understand how many times they have to clean up the processing line, or if they actually want to take on that particular allergen because there's a lot of cleanup that is necessary for every different allergen that you bring on into their facility. I actually didn't know about the ideal run. I always do MLQ. But let me refrain that and then they smile strategy about it. When I ask for my MLQ and I unfortunately have a good conversation with them. If call back or see the potential, you they'll go with you. I think that's a huge thing. They know R&D is a huge risk. They know it is a, they also know it's an investment and they mitigate that appropriately through specifically language I've noticed. If you talk a certain language to them, they will like you more because they deal with people who don't know the language or who just made out of the kitchen and want to scale it. And there's a lot of technical burden or technical knowledge that you need to communicate with these contract manufacturers. And I've noticed at least the successful ones that I've worked with. We've established really good rapport and just really good competency each other. And it's a two way street, right? Like I can be the best client in the world. A lot of contract manufacturers are really hard to work with. At least that's what I've noticed, right? Like some will not respond to your emails. Some will not. We'll have really bad inventory management. Some will be very secretive, which can be a kind of a red flag, I'd say. And it's just a lot can go on. I would say there's a two way street about that. And whatever you found to be the best way to talk to them. You mentioned ideal, but are there any other secrets? Yeah, at the end of the day, you're building rapport. And at the end of the day, what you're trying to do is figure out can they actually produce your product? Can you trust these stakeholders in the supply chain to manufacture what you're looking for? And part of that is being able to have that conversation openly about an on-site visit a tour so that you're actually able to see each other in person so that you know you're both real people and you run real companies and that you're actually face to face. Seeing how production can happen, seeing if they actually have a QAQC lab, seeing if they have R&D support and being able to say, okay, this is legitimate. And we're able to figure out together how to move forward together. If they're not willing to share with you a visit, an on-site visit and their manufacturing line, that's something to question about. What are they trying to hide? Now if it's for an audit that's understandable, you just reschedule for a different time frame. And these companies can be audited by the USDA if they have meets on-site or FDA if they're going through a recent recall or a third party food safety certifying board or bodies, SQL for BRC. Now those are very valid excuses, but if they are saying that, oh, we don't ever give tours, there's a pause that's necessary. And so you kind of want to be able to not only understand where they're coming from, but you want to be able to open up and say, this is where I'm coming from. This is what I'm looking for. This is what I know and this is what I don't know. And you want to allow them to kind of guide you through their process. And once you understand their process, then you can come together and make a decision together. Because again, their first commercialization trial of your products, they don't make any money off of that. They're trying to figure out feasibility. They make a lot of money when they have a set process, a set contract that is efficient. Because when you understand their ideal volume run, you know, they're going to be making money at that point because it's just a process that their team and their equipment is already set up for. They just need to have the products or the raw material in and then they need to produce based off of that golden standard and then send it off to a third party laboratory to get some checks and they're done and you move on. You know, if all they really want is pretty much efficiency, just keep going, keep going, keep going, any new or any slowdown in their process, whether it's an allergen or if there's a recall or difficulty in the product or a new commercialization trial, there is going to be set back in time. And that's not only from their side, but also your side is you want to make sure that the process and the first commercialization trial be optimized so that for future production runs, it is going to be more fluid. It's going to be fewer issues and you're going to have the optimized cost of goods sold that you're looking for. Yeah, I would say these people are are extremely sensitive, high-persensitive on time as the main way of communicating. And you know, you could say their love languages literally call the time. - They will like anything that has to do with convenience for them and saving time for them, because for them every minute counts as money. - Yeah. And they hang up up to 500 calls a year. I mean, they get called non-stop. - Yeah, so it's just for something for you to keep in mind when you work with a contract manufacturer is that there are a lot of trade-offs you might have to make for your product. And we suggest being flexible about that with a contract manufacturer. Overall, it's up to you of what you want your product to be, but we just want you to let you know that these manufacturers really do care about efficiency. They really care about time. And then the more you can cater to that, the better the relationship is gonna be. I kind of want to go through the process of like paperwork and talk about legal stuff and all that with them. And even specifically, the word contract manufacturer does have the word contract in it. What have you found to be the necessary paperwork that you usually give co-packers? - Yeah, it's, once you have the contract signed, sealed and delivered, you're looking at what is their onboarding of ingredient process looking like, especially if they're SQF or BRC for fruit safety standards. You're looking at manufacturing instructions. Be able to kind of write over to them or cross-compare if they have a template. And then you're also looking at what are their quality assurance laboratory standards that you want to be able to cross-compare so that you're able to send them golden standards that they're able to check on site. And then you also want to be able to understand if they don't have a water activity meter, let's say they're doing baked goods. Is it necessary? Are you aiming for that long-term shelf life in which you want to test for water activity of? And I think those are questions to figure out in which it's like, okay, should you bring a portable water activity meter, should you invest in one? Is there a close enough lab that can have a quick enough turnaround time? Those are some questions to kind of ask. And is there a willing investment on their side? So those are like very high level type of questions or paperwork that I kind of want to start as soon as possible once I have something signed. - Yeah, I think something that I'd notice on the brand side is IP, right? Like who controls the formula? Usually food science don't think about this, but the people who pay the bills and are managing brand or selling the product really care about is the IP involved. I would say generally you are a lot safer if you have your own formula and you know what you're talking about. It's always good to mention up the IP situation. Just for clarity and on a contract specifically, it's very good to have on there. And I'm saying this because there are a lot of brands who communicate with the manufacturer for them to just say create the product for me please. And they don't read the IP involved in that. And basically when the manufacturer creates your own product, mainly from the ground up or from just the prompt, they control everything. They, and they will probably sue you if you take that formula to another co-vaccer for instance. So it's something I've noticed specifically for the consumer end is that this is really important. And mostly you don't deal with this, but I think for, you know, or us as food scientists don't deal with this, but as a brand owner, you will deal with this a lot. And to have that nailed down and writing on the contract is really important. You know, definitely agree. Yeah, and I want to say that there are possibilities. So I'm called backers, we'll do this. They have an innovative idea. They work on the formula for you. And because the IP isn't set or who controls it, they can white-learn that formula too. There are stories about that as well. They can take a client's, let's just say, innovative plant-based protein bar and recreate it for another client or for a white label project for instance. So there's a lot of things involved in this. It's sadly malicious, but it is important for you to recognize that they can do this and that to have a statement about who controls the IP, an intellectual property of your product is really important. Yeah, a lot of reasons why we get hired on first is that of onboarding a contract manufacturer to do the R&D process is that there are, no incentives for us as a consultant to be able to just start creating on foreign relations and then licensing it off. Because if we did do that, we'd vice what would be creating our brand? Why would we be consultants in the first place? And we also know how hard it is to launch brands in general. You need stakeholders, you need a lot of this investment. You need a lot of different moving parts. So if you're trying to convince consultants to be co-founders or advisors, you wanna actually have that type of mindset too in understanding where they're coming from before you even make that suggestion. Not only if they have the background, but also the willingness to commit to those type of contracts. And then that kind of goes the same way with working with a contract manufacturer. 'Cause when you're looking at commercialization, that is a point of risk. Because there's a lot of money that you're putting down up front, there's up front payments to lock down a schedule time to do production. And then you're paying for a lot of raw material to go into set facility. And that money's tied up until you actually have finished product. And you would finalize the payment once they finish production. And so essentially you're awaiting and your cash flow is kind of slow until you actually have finished goods. And so you wanna think about not only the IP, but also how that money's being deployed in conjunction in that process. Because if you don't have the trust being built with said contract manufacturer, then essentially that IP and the money that goes with it is gonna be spent more on legal rather than actual production. - Yeah, it's just not worth it. Legal gets really fast. - Oh yeah. - I do wanna mention another way to bet eco-packer is asking for a bench top replica of your product. So after you send an NDA and make sure that sign and that's probably the basic you can do for that. Ask them once you share the formula to recreate it in their bench top scale as well. And I think that's pretty important. Some are harder than others. For example, if you're doing like a ready to drink, it's a lot harder to do that. Or I would say even frozen to some extent can be pretty difficult to get a bench top sent to you. But generally it's a good gut check about to see the competency of the team and see how well they can copy your formula. And also how well you can communicate your formula to the co-packer. And I think in general, I've had good success asking for bench top samples from the co-packer. It just shows me some of their technical knowledge and it shows me a lot of, and there's started categories that are better than this than others, specifically popcorn and protein bars and shakes or powdered products. I guess have you had experience of the bench top side of things, especially in the co-packer sense? - Yeah, if you're looking into sauces as well, you go through the whole formulation process and yourself and then you send that prototype over to the contract manufacturer to see if they can replicate it. Part of it is supply chain. Do they have similar ingredients that they have in stock that they're buying and volume that they could utilize to replicate the formulation? And then the other part is processing behind it to make sure it's shelf stable. So there's a lot of different ways to do sauces. You can have aseptic processing, which is not feasible for a lot of svarups, unless you have a lot of money behind it. And those sauces tend to be very thin. It's more on the soup or chowders if anything. It's very homogenous in that context. You have retort and that's more of like canned process, like the actual in a metal can, but you can also do that in inserting jars as well. And then the most convenient, or I would say lowest barrier of entry is your hot-filosidified type of processes. And that's a lot of their tomato sauces, a lot of sauces are done this way. If you have an ingredient statement that says some sort of citric acid or acid in general, then you typically would find it as a a certified hot-filosid type of process. Definitely. I will say that when it comes to ingredients, if you have a connection with an ingredient company and you're getting ingredients from them, I personally always connect them to the go-backer. And I think one, it establishes rapport to the ingredients supplier will actually like you more. They'll appreciate a lot because they understand a big sale's coming up. And then they can connect you to that ingredient sale then they will do more business with you. And it becomes just a better relationship in general. Yeah, let's get into ingredients a little bit. I think that's kind of important. There are three ways I've done it. It's either we give them a list of ingredients that they use. They have their own ingredients that they want to use because they give better deals over this or a hybrid model where we collaborate, especially if a product is really new to either leverage their supply chain or we give them ingredients and connect them with our ingredient manufacturer. In general, with cell-bo foods, specifically, we had a deal out with produce like fresh cabbages, which for us is a brand, it's harder to manage than for them as a factory, which gets fresh vegetables on the daily and on the truck load. Yeah. You want to ask the contract manufacturer, do you have turnkey services when it comes down to procurements? Like, can you actually buy from their existing stock? In other cases, if it's such a novel ingredient, what does the onboarding process look like of said novel ingredient? Because if you're bringing in 13 new ingredients, is that viable from their perspective of food safety and transparency? Because every single ingredient that they bring into their facility, they need to be able to validate and check off if this is grass, if the COAs are appropriate and establish the net terms, the lead times, the scheduling of trucks to receive inbound raw material. These are things that brands don't necessarily have to think about once you actually work with the contract manufacturer. The contract manufacturer has to think about it through the lens of operations, logistics, the food safety, and all the other moving parts before it actually gets into the production. Do they have room to store raw material before your actual production or commercialization trial? I think that's also a moving question of how optimized are they in their operation flow or are they backed up? Yeah, and I always say this does take a while. I mean, from two to four months, I would say, to manage all these documentation, to send the ingredients, to establish the relationship between them. I do think this does surprisingly take a while. I've noticed at least the commercialization is that sending up these chains do take a bit of resources, a bit of time. It is a waiting game in some regards, but it is important in the end of the day. When you onboard with the contract manufacturer, just be aware that this will take a while. I always say six months max. It can always take longer, of course, but in general, these communication projects, which in my opinion, that's what it is, do take a while to set up. Generally, I think a way to shorten that timeline, or at least a validate legitimacy, or is scheduling a pilot run. I think a pilot, or is the term come from just testing things out, right? Like a pilot episode from a sitcom, for instance. I'm sure there's an etymology somewhere in that, but in general, a pilot run is to test everything out in a very, very small scale that legitimizes literally everything, I would say. Yeah, I definitely agree. In some cases, I can actually combine the pilot run and the commercialization trial if it's feasible from the contract manufacturing perspective. I think some contract manufacturers, if they're small to mediums in size, essentially, they call it the same thing. It's like a pilot run is a very small, very bare minimum amount of ingredients, so they understand feasibility themselves. By bare amount of ingredients, I mean the bare amount of ingredients that goes through their processing line, because these are big pieces of equipment. That could be 50% of capacity that could be or operations in the line. It could be 25%. It really depends on the equipment that they have on hand and what's the smallest amount. This is actually a, maybe think about something. A strategy I use specifically for pilot runs is a very explicitly state. Is this a commercializable pilot? Because if you don't say that, they can knock the line, they can not check their allergens, they cannot do certain things in the process, just validated. They will find a way to kind of have acid, I would honestly say, if you just ask for a simple pilot run. If you ask for a commercializable pilot run, they will put everything in place. It might cost a little bit more, but it's worth it. But specifically, it's because you can sell your product or or gave your product away in a legitimate manner if you ask for a commercialized pilot run. This gets really good when it comes to testing things. Or sensory tests or even sampling. Asking for commercial pilot and it goes, well, you can do a lot of things with that because it's still a lot of product at the end of the day. You don't want that probably to go to waste. Exactly. Essentially, you could use it as marketing opportunity when you go to a trade show. Trade show samples and of itself. You could use those same samples to be able to send over to retail buyers or wholesale buyers in general. You can actually utilize that for pop-up opportunities so you can actually get some sensory feedback and some sort of return investment. You also want to clarify with the contract manufacturer, are these goods sellable? Essentially, that's what Adam is really talking about is commercially viable, which typically means they're going through the whole due diligence in food safety and things of that nature so that you can have a product that is sellable. If it's not sellable, essentially, they may not have to care. They just need to make sure that they can actually go through their machines. If it's the ladder that we're talking about, that's not really doing you much justice unless you're creating a novel ingredient. If you're creating a novel ingredient, you want to go through and test to see if it's actually viable a few times over before you start to mass produce the ingredient for actual sales or actual market opportunities. I would say language and documentation of this language is extremely important. I have had a lot of issues where they either brush it off this side or they're not very clear about if this pilot is actually sellable or the pilot products are actually sellable. It's very important. Getting a writing if you can, just in case, but most importantly, they have to be crystal clear. That's what you're looking for. Pilots are also very good at fleshing out costs. In the co-packer, especially if it's a new process, one example we had with sellable foods is that the co-packer we used have never done dumplings and we negotiated a deal to bring our technical knowledge and our manufacturing equipment to them to make it. They didn't understand how dumplings would work in a manpower perspective. The costs were hard to pinpoint until we actually ran a pilot and figured out at least a basic cost structure to it. I always tell clients that especially when they're contacting a factory, get a pilot as soon as possible because or at least mention it to them and see how long it takes because these things do take a lot of time to set up. Overall, I find there'd be a great tie-in to almost any aspect of the commercial-aided your process. Definitely. Essentially, we're looking at figuring out a lot of different moving parts. There is a lot of risk that's involved. You're setting up supply chain if it doesn't exist already. You're figuring out the cost of getting sold for the very first time at scale. At that particular point, too, it's figuring out how do you tweak if necessary because some ingredients start to scale linearly. You don't just multiply a thousand fold of salt or sugar or even acids and flavors and expect it to taste the same at scale. If you try to go from 100 grams of producing bars, which could be at 45 grams, so that's about two samples, and you're trying to scale up to making thousands of bars, that doesn't necessarily mean when you're going through the mixing process that that salt level that you taste on the bench shop is going to be the same salt level at scale. The advantage in the food industry is it's better to add things in than to take things out. Once some things are mixed in, it's very hard to pinpoint where the salt granules are, where the sugar granules are, the acid granules are, and try to take that out. It's even worse if it's a liquid because essentially once it's all mixed as a liquid, let's say it's water soluble flavors inside a beverage of sorts, there's no way to remove that. Yeah, I remember my first job in the granola bar factory. We had like this 2% roll when it comes to syrup, so sometimes the granola would look too dry for instance, so we would add, and essentially 2% increments syrup so we can see how it works. This is a very important note is that we can change humidity conditions just the way the machines work that day. A lot of days can change when it comes to the processes of making a food product. Generally it's not supposed to, but just to realize that some products do have something that might change a certain way. Flour is a really interesting one too for dumplings because they absorb water. And depending on how old the flour is, it will absorb water just naturally. That is something to keep in mind is that a lot of these things sometimes add a little bit of water or oil or syrup to depend on the product to make sure that it's working properly. Yeah, and that's where I have to educate a lot of prospective clients. especially the smaller client side of things, that ideally you would want to have the food scientists who has worked through from concept of your idea all the way to a commercially viable formulation from, and I would say at that point, it's 90 to 95% of a finished formulation. That 5 to 10% deficit is going to be dressed at scale. You would want that individual to be on site to kind of help facilitate. And it's essentially insured. And some people already have the background or are larger companies that have a team that can do that. That's perfectly fine. But those you do not, essentially that's a lot of risk. And there's a price tag associated that. I would argue that sometimes that could be a higher price tag than the actual RD process itself. - Mm-hmm. - Because you're trying to make sure you get a scalable product ready to sell. And it could be as simple as a complete nutrition blend of different types of ingredients, 25 different types of ingredients, 25% of your daily value of cross all your macro and micronutrients. But if you have a little flavor that's off, you could have vanilla flavor that tastes just right when you accepted it at the bench top. But then it could be overwhelming perfume vanilla when you have too much vanilla 'cause you didn't actually scale appropriately. - Yeah. So have you had experiences where a pilot has gone wrong or have, you know, or they just haven't aligned properly with the client's expectation? - Oh, there's a good amount of times where I had to spend an extra couple of days and then extending the process to fix the whole process. Some of that could be taking a look at just measuring the bricks levels and kind of just, and bricks is just like sugar levels or sweetness perception for the audience members out there. And effectively add to balance it out. What are my balancing factors? So if it's two suites, like there's too much syrup or sugar or honey, et cetera, then essentially what can I add to it to kind of level down that sweetness? If it's a liquid based type of, like a beverage, then of course the easiest is to add more water to kind of dilute it out. Now if it's more of a cookie or cake, then essentially weak, we can't rework that. We actually have to redo at a smaller size and be able to find some sort of way to measure maybe the dough or something of that nature to figure out what are the next appropriate steps. And in the case of even syrups itself, when it's supposed to be sweet, sometimes it may not be sweet enough, you may have to add more sweetness to it even though the recipe doesn't necessarily call for it. And so there are margins of error to kind of account for and for those type of situations, I would recommend buying 10 to 15%, that's one five, not five zero, 15% more of the ingredients so that in case there is an issue, you're able to add more at kind of balanced things out. - Yeah, it's always good to have an overage in this situation right or at least the amount of ingredients in the plant. 'Cause it can be issues where you have to redo the trial, or in general, you might just have to make another fund right on the spot to test a certain thing. It can be very minute too, it can just be a flavor or it can be reducing a soy sauce by half or so like that. Co-backers know this and co-backers do prepare for this as well and they know that if they don't use it now, they'll use it further down the line. - Exactly. And another thing to point out are these are projects that are more complex than just private label. For those of you who are listening and you're thinking, should I do private label or should I actually go through the whole process, it's more about the innovation and IP around it. If you're just asking for private label, as an option is sticking on your own, sticker and branding and logo, et cetera, essentially you lose the rights of IP, 'cause essentially you're just borrowing from the contract manufacturer and their work. What we're talking about here is if you want to own the IP and you want to build a mode around whatever the IP you're looking after to scale a launch, then that's where a lot of these risks are coming at hand. - Definitely, yeah, it is hugely probably dependent. It's hugely in control of who has the technical expertise. I would also say as well, if the client side has a lot of technical expertise, it's very good leverage to commit to a co-packer that is actually your legitimate. And then with the co-packers, if they have the more tech-led expertise, then they have a lot more control over your product without you even knowing about it. Okay, so after we know the pilot and let's just assume everything great with the pilot, we go through the actual contract manufacturing or production run of the actual product. And that's I think where we kind of step off, and we just make sure the first production run is good. Unless you have otherwise, at least this is where I had a step off. This is where we've took in that pilot, we've took in the learns from that pilot, and then we literally make a day's worth of product, which can last from what I know, three to six months of inventory. - Yeah, it's, if for those clients that need some rework, that needs to reschedule, then that's when I would come back to help support in that sense. Other times, if they're trying to do something that's more complex, like let's say there's a new technology, whether it's like a vacuum technology, vacuum frying, vacuum drying, things of that nature, that's where I would come in a few times, just to make sure that everything's consistent, especially when it's a new process. If you're building your own manufacturing line, essentially that does require a lot of onsite visits to make sure that your processes personally are set up for success. But a lot of times, if you are working with a contract manufacturer that's kind of set in stone, you transition out of that, or you transition us as the consultant out of that. And in that sense, we make sure that everything's handed off, and you understand the process so that you can go and figure out, how many times you wanna be onsite yourself, if you wanna do that. I recommend that if you are able to see that everything is running smoothly, then you just come in two more times, just to make sure that everything at scale is running smoothly, and you sign off if there's any differences, and then you're able to kind of work things remotely and figure out communications if there's a recolor, if there's a mishap or anything of that nature, as the client to the contract manufacturer. If you do three or more onsite visits, the question becomes, do you trust this contract manufacturer? Unless you're actually trying to make some sort of change, in which case the contract manufacturer's gonna ask you, how many changes are you going to add of us every single time, because we're no longer efficient? No, it's a balancing act in which you're building trust in that two-way street. - Yeah, I would say that the most times that we've ever gone there is because we wanna help make it more efficient, at least that's the background I usually take it, and they do appreciate that, in this summer guard, at least they say the same thing. And it generally helps when negotiating the next route of cost, if you can find out ways that to make things a little bit faster. The good news with that several foods is that we bought a commercialized machine, and we're able to, we had a luxury to do this by the way, and then we were able to test out the machine and the processes for over a year before we went into co-packer to understand what they can do better, and how we can communicate that better. - Definitely, yeah, it's a two-way street. I mean, in some cases, you could work with the contract manufacturer, in which they may have extra space, literal space, where you could bring your piece of equipment in, and augment and make efficiencies. You'd have to work out a separate contract on, is that your machine, are they buying it from you? Are you renting out their space, who keeps the equipment on hand, and who gets to utilize the equipment, who takes the liability off of said equipment, but there are ways that you can enhance and existing contract manufacturer grow with them, as a strategy, and figure out how you can keep that intellectual property in the process, kind of simultaneously or symbiotically in conjunction with that contract manufacturer. - Indeed, so how do we do the production run now? They have tons of product they have to store in their warehouse and eventually get rid of or ship somewhere. To end off this exciting adventure with a classic way of voucher, how do we deal with the inventory after the product is done? - Yeah, we wanna make sure that there's a pathway of utilizing the final product, whether that's part of it is going to marketing. A good amount of it is gonna be spent in trade spend, and that's just essentially sampling opportunities in of itself, whether that's at a retail grocery shop or the likes of Costco, and which you sample a lot, or it's actually at a convention or a trade show where you're sending out a lot of samples for people just to see if they like your product. But also a good amount of it should be locked into sales. You should have conversations going, If not already set in pilot testing at said small location. of smaller retail chains or independent shops, or finding a way to have people pre-purchase online, where pre-purchase, whether it's a subscription, or pre-order X amount of volume, so that you can get some sort of feedback. Some people would do this using Amazon Vine. Some people would do this on their website, somehow have some sort of creative way to connect with people with a newsletter or podcast and actually have built-in subscriptions. That's what it's. Yeah, those are some of the strategies in the contract manufacturer realm. I guess how have you dealt with exporting out product or do you even touch that stuff? Oh, yes. So there's part of the conversation when working with the contract manufacturer in understanding, do they have three PL services? Some of the smaller ones that are pre-term key that only purchase but also have their own fulfillment center that you can integrate with them. In other contexts, some of them may have extra room where you can rent by the pallet to save both raw material and/or finished goods. So you can work in that capacity. If they don't have the extra inventory space and they need to move products out, then essentially we need to work pretty quickly to figure out where you can warehouse, whether it's a three PL or actual distributor or your own house, if you can have a garage that has actually a room or something of that nature, that we can actually figure out where to move the product. There are very small instances where I actually store extra cases and that's more along the lines of sensory evaluation, shelf life testing, quality control, or to be able to make sure that if there is a potential recall, I have the same product on hand to be able to taste test as well or send out to a lab in things of that nature. So there are different pathways to go around that as well. It really depends on having that conversation first and foremost, and then quickly getting your logistic setup because that also takes a bit of time to get going. I would say that this is the point where we step out and ideally the next couple of runs are going to be repeatable process that the start of the logistic team or the sale team will handle or the marketing team. Yeah, exactly. But if it's the first commercialization trial, I typically would kind of help facilitate in which it goes into the sensory side of things and safety side of things. If they do need help, it's not my role, but I can help facilitate in making introductions. I also have been privileged enough to interact with distributors, distributors that are looking for product placements, distributors that are looking to create their own private label, but also distributors that are open to new programs in coordinating where I help identify an appropriate new brand or introduce that distributors to a new brand that they can onboard and regionally distribute as a point of differentiation between the larger players. These are more of the regional distributors, rather than the large incumbents like Khe and UNFI. Yeah, I see. They have enough people knocking on their doors. So, yeah, I think we went through that process pretty nicely, I think we covered all that, pulled the points that started to communicate with the contract manufacturer. The big thing I want to really focus on is that pretty much everything is available with the co-packer. Though I will say they are tough customers. They know their stuff. They understand their equipment to a T. They know every minute equals X amount of dollars, and they understand their resources quite well, because they have to be very sensitive about that too. So, there are ways, specifically, if you know the language to negotiate with them, but it is a very different language than what you're probably used to. Yes, it's not marketing language. It's either technical language or just manufacturing language that you'd have to translate in. Just in previous episodes, we are translators of sorts. We are translating the technical knowledge, the manufacturing knowledge, the supply chain knowledge over to you. And that's what we're here for. Yeah, and this is a relationship game. A good co-packer, just like a good partner, is someone who communicates clearly and understands the end goal of everything. So, that's something really important to understand. A difficult factor isn't giving you the time of day or is, you know, just does not know what they're doing, which some don't. It is important to understand this, just that this is a relationship game, and that this takes time to nurture, and then there is a match associated with that. Definitely. And I think that actually gives us to a segue to our next topic, which we'll talk about in the next episode, about how to find that perfect match. Yes, there's a whole strategy that people don't really think about. And it's not just the search, but as we've discussed in some detail here, how do you actually find the right trust in building that rapport? All right. Well, that sounds exciting to me. I have my ways and you have your ways with that thing is going to be really interesting to talk about. And yeah, can't wait for next episode. Have a good rest of your day, Brian. Teach your item. Take care.