The Startup CPG Podcast

Lance Schwarzkopf
Foreign. So I always recommend going to their website first and contacting them with an email saying, hey, this is what I do. And then follow up a couple days later with a call and, you know, get through to someone and tell them exactly what you're wanting to do. That's generally the best way to do it. Now, if you don't hear back, unfortunately, that's just a no. So as well, one of those unfortunate things in life, you just have to kind of move on and say, all right, gotta keep hustling here and find somebody that can make this for me.

00:37
Daniel Scharff
You know what's hard? Damn hard? Finding yourself a co man. It's gonna be hard to figure out who they are. And if you try to contact them, they might not write back or might not have the equipment you need. So many other things, even once you actually get them on the phone. Lucky for us though, today we've got lance from co pack.net. He helps brands find their dream co man and he's gonna talk us through the whole process from getting yourself ready to approach them, figuring out who they are and then actually how do you go about talking to them once you get them on the hook. Lance has actually released this very epic directory on his website. It's free and it's got 2,000 of his preferred manufacturers, custom packers, suppliers. It's available@copack.net also, he's got a free gift for you.

01:17
Daniel Scharff
If you sign up, you get access to their formula template. You use that to convert your recipe into a formula. You can calculate costs, estimate the nutritional profile of your product and a lot more. Also, Lance does this for a living. He has a specially discounted service he'd like to offer to our listeners here, which is for $3,500, you get a custom coman search package which includes getting those custom specs for your product, getting a process authority letter, ingredient doc assembly, a co packer match, and a manufacturing contract that is not too shabby. It's a lot of stuff. So if you're interested in that, email him@lanceopack.net all right, let's jump into the episode. Welcome to the podcast, everybody. As you know, I love to geek out on all things ops.

02:01
Daniel Scharff
And today we've got Lance Schwarzkopf, the founder and principal consultant@copack.net so they specialize in product development and ops for food and beverage companies. Lance has over 15 years of experience doing this in the food industry. He's worked for companies like Tarani, Eat Smart, Campbell's Bolthouse Farms. He's Got a master's degree in food science from Washington State University. He did his thesis there on whey protein peptides. Lance is angel investor. I know, I was really excited to see he actually did an investment in one of our favorite community brands, Miles Comfort Foods. Lance, welcome to the show. We're so excited to have you here.

02:38
Lance Schwarzkopf
Thank you, Daniel. It's great to be here. Yeah, I was really excited to start working with Miles and I know he's really doing great. That brand has really taken off so I'm know happy to be involved with those guys and yeah, really excited to talk about co packing today. I know that's on everyone's mind. It's something we, you know, we all do in the industry and so yeah, let's dive in. Let's, let's talk about it.

02:59
Daniel Scharff
Yeah. And I was very pumped to see actually Miles just won a golden ticket when he was out at the California Grocers association pitch competition, which is a super cool under the radar opportunity a lot of people don't know about, but all of the west coast retailers go there and brands get to pitch and win these cool golden tickets. So Miles was out there and crushed it. I love to see that. So Lance, I'm really excited to get into the topic of coman searches today because it's such an opaque part of the industry. If you haven't done this before. But maybe first, can you just tell me a little bit more about yourself and the range of work that you do in this industry?

03:33
Lance Schwarzkopf
Absolutely. So I specialize and split my time really 50 between product development and commercialization. On the product development side, I'm doing a lot of protein work. Protein powders, protein shakes, you know, meal replacements, those types of products. And then on the commercialization side, it's much more varied. I, I love to take a product from the, you know, the initial idea and develop it, commercialize it. But on the commercialization side, I do pick up a lot of projects in the pasta space, for example, a lot of dessert categories, baked goods, candies, those types of things. So it's a little more diverse. There's. But you know, like you said, I've got a lot of experience in this industry and have been in hundreds of plants. And so there's a, you know, if you have a problem, there's a good chance I can commercialize it for you.

04:16
Daniel Scharff
All right. And actually I have a specific question on whey protein peptides, which is what are they? I feel like I just keep hearing the word peptides. And I was bad in science in class. And so I, like, have one friend who's in super good shape. And I was like, I never even see you work out. Like, how come you're in such good shape? And one of their friends was like, oh, like it's peptides or something. Like, everyone's talking about it now, but what does it actually mean?

04:42
Lance Schwarzkopf
Yeah, it's when you take a protein and you hydrolyze it, you break it up into smaller pieces, and those pieces are called peptides. So you might have a string of amino acids that would be a peptide, and it has specific functional properties. So that's why they're so important, is because, you know, a lot of those peptides can have physiological effects.

05:02
Daniel Scharff
All right, well, I already learned something here today, so we could just wrap it up, but we won't. All right, so when you're going out to talk to a co man, I mean, you know, you don't want to just like, wander up to them like a lost kid in a movie theater. Like, can you help me? Right? You want to make a good impression. And like, the first thing that you really need to have is like a recipe or a formula. Right. And I think there are two options maybe where, like, you could have yours already or they could help you with it. How does that work?

05:26
Lance Schwarzkopf
Yeah, so. So a co packer can make a formula for you, especially if they're a larger operation, they have some food scientists on staff, or you could go to, like a product development firm and they take your recipe and create a formula. So there's two options there. I really recommend having your own formula, and that's because it gives you more flexibility on what co packers you can work with. And then it also, you know, it makes it actually a little bit cheaper for you in the long run. And so I'd love to hear your opinion on that, Daniel, but I would say I. I'd recommend that you come to them with your own formula.

05:58
Daniel Scharff
I mean, yeah, ideally, I think that is a good way to do it, just based off what I've seen, because I think, you know, if you have your own formula, probably you just have a little bit more flexibility on it if you want to take it and leave it. Like, they're not going to try to safeguard it. You're not going to feel like they're the only ones who could make it. You could try it a couple different places. And like, really, you. You own that, right? I've seen instances where people have really dependent on a co packer to make it and then like okay, you are now wholly reliant on them on their timelines to do it.

06:28
Daniel Scharff
Like you might feel like well if they make it then it's going to beautiful because they know they have the equipment to make this thing exactly the way it's supposed to be. And I just feel like you may be giving up a little bit too much leverage and relying on them too much at that point and they are going to charge you for it and you won't know how. You could maybe save on some ingredients and you know they will definitely have their margin in there throughout. Right?

06:50
Lance Schwarzkopf
Yeah, it's hard to see in an agreement like that to you know, to the individual costs of the ingredients and things. So you know, I think it is better to have your own formula because it does give you insight to that and it gives, allows you to, you know, make sure you have a very cost effective product.

07:08
Daniel Scharff
Yeah. Otherwise I feel like if you ask a coman to do it, you know they're going to like be like yeah, here's your cost target and they're going to come back and be like well it's this much now but you like the product right? You know, just like always sneaking in cost and just until you're finally at some unreasonable total cogs to make the product. But at least if you're going to do that, try to get extremely detailed with them and let them know that like no, I will be there in the Excel with you understanding every single input into this thing. Obviously the downside is the cash that you need to pay somebody to do a formula. Right.

07:39
Daniel Scharff
Like I've seen some really skilled product developers who might do something for like yeah, I can do 3 skus for you for 10k or 15k like something in that kind of ballpark to do you think that's an okay way for people to just think about the one time cost for developing some SKUs.

07:57
Lance Schwarzkopf
Yeah, I think that's a good cost. Say if you're making a soda, if you want something that's more proprietary, you know you're going to pay a little bit more. So I think this kind of depends on. You have to just kind of try to estimate how many hours are in this and then it'll give you a rough, you know, a rough cost. But yeah, that's a pretty good range to get started.

08:15
Daniel Scharff
So when I did my beverage company we ended up working with a very high end formulator, just one of the top ones in the world who usually won't even work with early brands, but we managed to convince them to work with us. Honestly, they did an excellent job. They just have some of the most advanced technology out there in terms of like sweeteners and modulators and all this stuff. But it was expensive and they didn't charge us for the development, but they charged us for the ingredients. And it just, it, you know, was a very expensive cost. So if it was my money, I probably would pay somebody and I would really be extremely careful about all of the input costs and just fight for absolutely every penny. So anyways, very interesting discussion.

08:57
Daniel Scharff
So but let's say I do kind of have a recipe or maybe I even tinkered around with this thing at home and I have like a general target for what I want to make. How could I actually get that into the kind of formula that I'm going to need to be able to pass over to a coman.

09:11
Lance Schwarzkopf
Yeah, I've actually made a template. It's a Google Doc and you know, we can share this Daniel but it basically allows you to take, you know, your formula which may be in ounces or cups or something like that, and you put it into this template and it converts it into a percent. Because that percent is what they need to scale up their batch, right? You know, they're going to create an industrial size batch and they need that formula to be in percent. And typically, you know, we like to use grams and metric. That sort of system is generally the best way to approach a co packer and that'll fit into a specification which we'll talk a little bit about later. But that's the, definitely the best way to go.

09:49
Daniel Scharff
Lance, that's awesome. So we'll definitely link that template in the show notes here if anybody wants to get access to it. So okay, now I have my formula. It's in percent. I know they need it by weight. It's very important to get the thing right because I've definitely learned that, you know, you do like an ounce in California is not the same as an ounce in Sri Lanka. Like they can be very different weights. So you gotta have that. Right. So okay, once I have that, what about getting the ingredients? Because you know, obviously the things that I can get from my kitchen or even that my formulator might be sourcing may not be the things that I can actually get that fit my specifications or the certifications that I want or what is even just available to the coman.

10:27
Lance Schwarzkopf
Yeah, ingredients. It's really important to use industrial Suppliers. So you want to pick a supplier that can give you the bulk packaging that you need. So, you know, you don't want to pick a cocoa supplier if they're going to sell you little tins of cocoa because they're just going to be dumping those. So you need an industrial supplier. And there are a couple good places to start, like ift, you know, Institute of Food Technologies is a great place to start. Foodmaster.com is also a great sort of directory for finding ingredients. It's kind of this old school. It was like a catalog of ingredients and then they moved it all online. So that's a helpful resource. And then it just takes a lot of work and calling up different suppliers to see.

11:08
Lance Schwarzkopf
The other tip I have is you can actually go through a distributor or a broker and that's, you know, that's kind of contrary to what we typically do in the industry because they add a margin. But if you're starting at smaller scale, typically they'll get you smaller volumes. So they might, especially if they have like a warehouse in your city, you can go there and you can just buy five bags. So an example of a distributor might be like Univar. And there's quite a few in LA that I work. So if you're working in that space, you know, just ping me. I can let you know who to contact there.

11:38
Daniel Scharff
Awesome. That's quite an offer. I had never thought about that. But what about when you're actually, if you're formulating or you have hired a formulator, can they get samples of all of those industrial ingredients that you're talking about? Or are they more likely to be working with just kind of whatever they have? But then, yeah, you gotta figure out the industrial ingredient partners that you can translate it to.

11:57
Lance Schwarzkopf
Oh yeah, good food scientists will have industrial samples there. And it's always best to formulate with those because there can be some differences and not all the time that you can get those. And sometimes your co packer is a great resource for helping you find some of those tough to find ingredients. But you always want to make sure that you put those ingredients into your formula. And don't assume that just because it's a cocoa powder that it's going to taste the same. You know, it's what you've been using in your kitchen. So it's very important to do the due diligence and the work to make sure that you know your product is exactly what you want it to be.

12:30
Daniel Scharff
All right, that makes sense. Okay, so now I've got my Ingredients figured out. I've got my formula. What comes next?

12:37
Lance Schwarzkopf
That's the specification. It's really the most important part. So in your spec you're going to have you know, your ingredients and then the next part of that your going to have your processing steps. So that's exactly all the details of how to make your product step by step. The next part is going to be your QA section, your quality assurance section. And you're going to have a range of for ph and some different testing parameters there. And then the next part you want to have like a packaging section. So this is going to be pretty important. You want to have like an image of your finished label to make sure that they're using the exact label that they need.

13:13
Lance Schwarzkopf
Needs to have, you know, your bottle, your cap, all of those, you know, your case needs to have, you know, description of all of those different things.

13:21
Daniel Scharff
This is like the one true secret document that no company would ever want anyone finding. It's the like this is exactly the treasure map. It's like what our product is exactly how to make it in each of these steps. It's how you put it into the packaging and all of the specs. Like it has to between between a certain carbonation and microbial allowances. Right. Food safety stuff.

13:45
Lance Schwarzkopf
Yeah, it's all your proprietary information. So and I'm glad you mentioned this because this is something that you want to protect. So before you hand over a specification to anyone, you want to make sure you have the right agreements in place. At minimum that's an NDA preferably that's a co pack agreement. Because what you can do if the co packer is asking you for more information on product, typically what you do is send over your label and that's has your ingredient statement, it shows the packaging. So typically they can figure it out from there and then if they need more detail, you want to get down the line a little bit before you share that.

14:20
Daniel Scharff
All right. I like that tip about the label. I haven't heard that. That sounds like a really good idea. What about sometimes I hear like, hey, my coman is starting to make a competitive product to mine, which sounds like a nightmare. Do you see that a lot? Is that something you would worry about as a brand when you're giving over information?

14:37
Lance Schwarzkopf
I see it in general categories. If it's kind of a standardized product, they're probably going to run other sodas there and it's typically not a problem if you have the right agreements in place and you want to make sure that they aren't showing your ingredients to their other customers. And so I think generally you're okay if it's something that's highly proprietary, like let's say you're making a plant based product that exists nowhere else, then you want, may want to have a non compete, you know, where they only make your product. So that's something to think about. Those agreements do exist. You know, I have done a couple of those. So think about that and think about how proprietary your formula is. And generally it's, I would say on average it's going to be okay.

15:22
Daniel Scharff
Okay. I know one other thing that we needed was a process authority letter which sounds very official. Can you break down what is that and who are these authorities that can give you one?

15:33
Lance Schwarzkopf
So the process authority letter, it comes obviously from a process authority, but what it is, it's the legal standards that are how you're going to process your product. You know, time and temperature. For example, if you're doing pasteurization, it's going to have that listed. So it's sort of the legal requirements to manufacture your product that comply with, you know, fda, you know, usda, your state department of agriculture, all of those requirements are going to be met in this letter. And there's actually an association of food and drug officials. You can go to your website and you can find process authorities there or you can contact, you know, ping me and I'll give you a list of my favorite ones that I've worked with.

16:13
Lance Schwarzkopf
But it's, you really need, you know, sometimes this isn't always transparent because co managements will go and do this for you and you know, never mention it. But it's something you want to have transparency to because you want to make sure that your product is processed in the best, you know, legal, efficient way possible. Because that's something that could come back to you in the form of a lawsuit if there's ever a recall or something like that. So definitely get the process authority letter.

16:38
Daniel Scharff
I know what you mean. And yeah, that will be your problem. Yeah, I remember in that process authority letter it also told us what the shelf life could be which was really important because you know that impacts so many things. Especially because a lot of the distributors will only take your product when it has 75% of the shelf life remaining. And you know, you obviously want the product to stay good. You don't have bad product on shelf, even if it's not like unsafe from a food safety perspective. It could taste bad. But then yeah, and also what you're Talking about, like, I remember talking to other comands who were like, yeah, we can't do that thing that your process authority requires, but we'll give you a different process authority that we work with that is very familiar with our capabilities.

17:14
Daniel Scharff
And they will do it this way where you're like, what? Wait, what is that? Okay, it's either true or it's not true. And I don't have your background, so I don't know.

17:22
Lance Schwarzkopf
Yeah, so the process authority, you typically, you're going to process it to a standard. So it might be like commercial sterility. And so from there you can see, okay, with commercial sterility, my shelf life might be, you know, two years because nothing is going to be growing in that product. So it does predict your shelf life in terms of what could grow in it, but it doesn't necessarily predict your shelf life in terms of, like, sensory. Like, it may start to taste weird or start to taste funky. So that typically is going to be your limiting factor on your shelf life. You know, for example, if you're talking about a citrus product, like, you don't see a lot of shelf stable orange juice out there, because after a while it just starts to break down and kind of taste bitter and funky. So good.

18:03
Lance Schwarzkopf
Thanks to you.

18:04
Daniel Scharff
That was actually a big surprise to me is like learning through this process that if you pick up a Diet Coke, you know, off the shelf, like, one may not taste like the other. If it's a Freshy Fresh that's been printed recently, like, you might get more of the kind of fresh flavor off it. But I definitely noticed this, for example, I mean, so I used to work at Mars Chocolate, and one of the big benefits of working there is you got to actually go on the line and do a factory tour. And I tried one of the peanut M&M's right off the line, like before, I think they'd even put the candy shell on it, and it's just like so fresh and delicious. And once they put that shell on, it's just like, not even a big crunch thing.

18:43
Daniel Scharff
You're just like chewing gently through it and it's, oh, man, it's good. And then if you have one that's a couple years old, it's just not gonna. It's, you know, it's gonna taste stale or like, I don't know, whatever is gonna happen over time, this will happen to all of our products also. You're gonna, like, get it off the line. You're like, well, this is the greatest product that anyone has ever made in the history of the world. And then like a couple months later you're like, well, yes, yeah, it's good. And then like you might have it after a year and be embarrassed by it.

19:08
Lance Schwarzkopf
Yeah. So you're definitely gonna wanna do a shelf life study. So in general that's gonna go something like this. You're gonna make up like a hundred bucks. Let's say you're doing a beverage, you're going to make up a hundred bottles of your product. You know, you're going to put some of them in the freezer, some of them in the refrigerator and let's say it's an ambient product or it sits on the shelf, stable product. You're going to let that age out and then what you're going to do is you're going to do, you're going to pull it at certain times and taste it against the fresh product and see how it's changed. And sometimes that can be drastic and that will injure shelf life.

19:39
Lance Schwarzkopf
So you might have a six month shelf life because after that it just tastes weird and funky and old or it may keep going. You might find out, oh, my shelf life is actually a year and it still tastes pretty good. So it's very important to do that step.

19:52
Daniel Scharff
I didn't realize that's how it works. Like you put the thing in the freezer as the control one and then take the other product out at certain times and try it against that as the control. That's pretty interesting. I know you can also pay for accelerated shelf life studies, right, where they're probably like heating it up or something.

20:07
Lance Schwarzkopf
Yeah, they might put it in kind of an incubator, if you will, to kind of project and sort of extrapolate how long it's going to last. So you know, it's always, you know that if you need something quick, that's a great thing to do. It's always best practice to let it age out sort of naturally. I mean, you only have a year or two years to do that, but you want to start those and just see. You know, even if you've already launched your product, you want to keep those shelf life studies going to see where your profit ends up even.

20:34
Daniel Scharff
I mean, for me, I just would keep a lot of product around from different runs and then just try it periodically against fresh samples, just at least so you understand like how your product is going to taste over time because it should help you in the formulation, like you know what the flavor actually is not coming in. So Strong, which is giving a different kind of taste of the thing. Like we're going to actually just give it a little bit more flavor on the next round at the beginning, knowing that it's going to disintegrate a little bit over time.

20:58
Lance Schwarzkopf
That's a great point. You might top note it with some more flavor to account for that loss you're going to have over time. But you know, if you have big problems, you may end up having to reformulate. So we don't want any surprises there. Then go ahead and do some of that shelf life work before you get, before you commercialize.

21:16
Daniel Scharff
It always sounds perfect. But we're all like, no, I'm, but I'm starting this business. Like I can't twiddle my thumbs for a year or two years while we do this thing. But yes, like if you're a big company you can do that. But us like ambitious entrepreneurs just betting our whole lives on this thing. Unfortunately we just got to make some educated jesses here on stuff.

21:34
Lance Schwarzkopf
Exactly. Sometimes you just have to go for it and hope for the best. You can also kind of show that to, you know, an expert in the field and they'll kind of get like I've done enough beverages to kind of tell which ones are going to make it and not make it. So feel free to send me some samples and check it out for you and give you my guess, my best guess. Right. You know, I don't have a crystal ball but I can try to estimate it for you.

21:58
Daniel Scharff
That is a great offer, Lance. Okay, so now what we've talked about is kind of the product development stage that you hopefully have gone through to the point where you're now doing your coman search. So let's say I've got all this stuff, I'm ready to go. It's in a nice, well packaged up document. It's time to find my coman. So where do I start?

22:18
Lance Schwarzkopf
This is kind of an old school process. It's really good old fashioned work as I like to call it. I think you have to understand what you're looking for because you approach a coman, you're kind of trying to fuel around and see what capital, what equipment do they have and can they make it? Can they make my product? Because just kind of economics. Right. If machines are making it's going to be much cheaper than if it's, you know, sort of being handmade. Right. And so good places to start I think are try to find someone that's somewhat local to you. And I say this because you want to be able to go there and that's going to be a really important part of the process.

22:56
Lance Schwarzkopf
And then if you can afford to like hire someone, you know, if you have a little bit of budget here, this is really a good place to use it because setting up a co packer is so important and so critical. It's going to be worth it in the long run to get the right deal in place. That's going to allow you to be successful, right? That's going to make you successful.

23:16
Daniel Scharff
I know it's not crazy expensive. I mean had a partner help us when I was trying to find a coman. Like there are some lists out there that I know that you can find. I also have heard some people like lists are very tricky to rely on because this is such a fast evolving world and the equipment changes and who's out there changes. And just so many co mains also will not pick up the phone for somebody they don't know already. It's an old school world. Right. It's like the last bastion of just like handwriting. Okay. So Lance, I know you can do this on your own. It can be pretty tough as a newbie without a lot of industry knowledge.

23:53
Daniel Scharff
But like you can go out there, find lists, you can ask friends, ask them slack and spend a lot of time spinning your reels is great if you're absolutely trying to be scrappy. Or you can hire somebody to do this, which is what I did when I have average brand. The good news I think people are, is that we actually have a deal with Lance that makes it a little bit more affordable. Every penny matters. Lance, can you just tell us like typically, what do brands pay for this? And also do you mind sharing some details about the offer that you guys have for our brands?

24:19
Lance Schwarzkopf
Yes. So typically it's going to be around $5,000 if you hire someone to do this. We're doing a deal for you guys. We're going to do $3,500 and that's going to be more inclusive of what you might find somewhere else. So we're going to include putting together all the ingredient specs and do the administration work, you know, putting together the specification, you know, gathering all of your information and making it, you know, packaging it and then a nice little spec like we talked about earlier. And then we're going to go out and you know, match you with some, give you some options there around different co packers that we've worked with. And I think that's the key Is, you know, the experience that we have working with them and experience we have setting up the deal.

24:57
Daniel Scharff
Right. It is a big difference if we're doing it or if you're doing it. You guys are going to have a list of co packers on your website, Right? We can put that link in the show. Note if people want to go out and try on their own, like you're going to make some of the ones that you know available.

25:10
Lance Schwarzkopf
Yeah. So if you're going to DIY it, we'll help you there too. So we're going to publish a list, you know, on our website, co pack.net and you can go there and see some of the ones that we've listed there and some of the ones that we've worked with and that'll be a great start for you. And you know, and that's sort of a work in progress. As we expand our network, we're going to publish more to our list there. So keep checking back with that list and if you find that, you know, I want someone to kind of set up, you know, I have someone I want to work with and I have someone and I want someone to come set up the deal, then we could work with you there too. So we're flexible in that sense.

25:44
Lance Schwarzkopf
And I do some hourly consulting. I know a lot of firms don't do that. So if you get into a jam and you need some help, reach out. I'll do the best I can to get you on in the right direction.

25:56
Daniel Scharff
People like that are at the top of my speed dial list because you will get into a jam. Even if you work with Lance and he finds you a great coman, you will get into a jam with them at some point. It's like the only thing you can definitely expect is that it will not go perfectly 100% of the time and you will need people who have been there before. And it's great to have those people willing to just jump in and help you. It's sort of like when something goes wrong in your life and you have never been so grateful for your family who, you know will always pick up the phone. Like, you want these ops people in your friendly phone list who will answer. They are lifesavers.

26:30
Daniel Scharff
Okay, let's say I'm doing the diy, I've got your awesome list and I'm reaching out to them with my stuff. Like, what do you think? Are they going to respond to me? I mean, is there anything I can do to make them more likely to respond?

26:42
Lance Schwarzkopf
Yeah, this is again part of the Process, I think is really challenging because, you know, you're going to do a lot of work, you're going to do a lot of searches, you're going to contact a lot of people and then you're not going to hear back. You know, no one's going to respond. And there are a few reasons for that. Typically is it's just not a good fit. They don't have the equipment and what's great with they'll just kind of send you a reply. But they don't. But so I always recommend, you know, going to their website first and contacting them with an email saying, hey, this is what I want to do, and then follow up a couple days later with a call and, you know, get through to someone and tell them exactly, you know, what you're wanting to do.

27:17
Lance Schwarzkopf
That's generally the best way to do it. Now, if you don't hear back, unfortunately that's just a no, you know, so it's one of those unfortunate things in life. You just have to kind of move on and say, all right, got to keep hustling here and find somebody that can make this for me.

27:30
Daniel Scharff
I always see people post on our slack where they're like, hey, I'm looking for a CO man who does exactly this and also is near me and also can do very low minimums and also can do this. I'm just like, every CO man is going to hate this person. Just I, I don't know if they know what they're asking. And a good price like low moq and good price almost never go scales.

27:51
Lance Schwarzkopf
Yeah, just an FY high.

27:53
Daniel Scharff
Like comans do not want to do this for you. Just if you put yourself in their shoes, they like to do big volume stuff where they just have their margin nice and predictable.

28:00
Lance Schwarzkopf
Yeah. And that's kind of understanding the business, which is really going to help you. So if you want to really low moq, understand you're going to have to be more flexible. Right. So, and you want to, you know, have your ducks in a row.

28:12
Daniel Scharff
Right.

28:12
Lance Schwarzkopf
You want to make a great impression on this CO man that you're going to be a good customer. Right. That you're going to come in and it's going to be smooth. They're going to be able to get you in and out. And that's really the key to kind of getting those lower minimums is being a good customer, making great impressions on people. So that's a very helpful tip, I think.

28:31
Daniel Scharff
Yeah, I've done this where I had help looking for the coman from a search which was great. And that was when I really knew nothing. I absolutely needed that. I also have looked where I would say once my network was bigger personally, then I could go to brands who I really respected and just ask them like, hey, you're at that level that I'm hoping to get to in a year or two. Can you tell me some of the commands you're using? Sometimes brands will be protective because they're like, if it's smaller, like no, I need the flexibility in the line time. Right. Because like with comans they have it in the contract. A lot of times like, yeah, you could put in the order but I might not make it for two months.

29:04
Daniel Scharff
And you're like, I'm not really motivated to give you more customers to do that because I want the flexibility. I want you to like the minute I place the order to scramble and make the thing. So. But others, especially at the bigger stages might do it. And you know, especially if they're friends and you've built up your network and like, maybe they owe you some favors. I think that can be a cool way to do it if for like products and kind of getting that like next tier because it's, it doesn't go away like at the early stage it can be hard to get them to respond to you. And then once you're even scaling and you want a bigger one, like it can be hard to get them to maybe flex down and take a chance on a growing brand also.

29:40
Daniel Scharff
But if you come recommended by somebody, whether it's a commercialization consultant or another brand, that at least helps you get on their radar and maybe get one of their salespeople rooting for you as an internal champion.

29:52
Lance Schwarzkopf
Yeah, and I've worked for a Fortune 500 companies. They're doing millions of dollars of business and I still have people not call me back. You know, it's just kind of, sometimes it's just not a good fit. But yeah, I think that, you know, if you get a little bit in the budget, it's, this is a good place to spend it on, you know, finding someone to help you know, put it together.

30:10
Daniel Scharff
All right, so let's say I'm out there on my own, wide eyed, a little terrified, getting on my first call with the co, like okay, I got them on the phone and now we're talking like what, how should that go and what are some of the watch outs?

30:23
Lance Schwarzkopf
Yeah, again, you know, you're kind of keeping the back of mind, you Want to make a good impression. You know, you definitely want to talk about kind of some of the momentum that you have. You know that, hey, we've got some distributors lined up or we've got a great customer lined up because you want to kind of show them you're going to be able to move this product because they're thinking long term. Right. They're trying to establish a relationship with you and grow with you. So think about that. So make a great impression. And then you need to kind of talk about some of their capabilities, you know, what sort of equipment they have. And you can kind of start talking some rough cost. You know, if there's any outstanding ingredients that you need help sourcing, you can kind of talk about that.

31:01
Lance Schwarzkopf
But it's really good to have at least sort of an NDA in place when you kind of start talking to them and you can make it mutual and you can say, hey, you know, I won't disclose your suppliers, and you want to kind of talk about who I'm using. So I think that's a good thing to start. And you really want to kind of start talking volume a little bit, because they're going to say, well, we need at least a half a day's production, or we need a full day's production, or we need two hours of line time, you know, whatever that is, and kind of start discussing those details.

31:29
Lance Schwarzkopf
And you can say great things like, already have a specification that's all been squared away at a food scientist, put it together, you know, that's going to make them more comfortable, a good kind of showing them you're going to be a good customer. So those are all great things to talk about. Do you think I left anything out? What's on your mind?

31:44
Daniel Scharff
I really like that point about making a good impression. And actually, like, for my teams, I would always tell them, like the ops team, you are salespeople also for our business, which is when you talk to an ingredient supplier, anybody, tell them our story. We are all so passionate about this. Show them, like, what we're actually trying to do here, some of the great momentum that we've got. Because turning any partner into a fan of yours can only be helpful, whether it is to get you some volume discounts or when you're in a pinch and you absolutely need them to go out of their way to overnight you something, they're way more likely to do it.

32:18
Lance Schwarzkopf
Totally. That's a great point.

32:20
Daniel Scharff
Yeah. And then on the volume part that it's funny because, like, as a new brand, you're like, well, let's tell them we're going to be huge so that we really get them interested. But very quickly that is going to turn into an agreement with them where there are penalties when you don't order that much.

32:33
Lance Schwarzkopf
Yeah. One little tip I'll say is you want to try to make as little a product as possible because just in case, you know, you want to change it, let's say you want to change the label or you know, you found out that, you know, you need to make some tweak to the formula, you want to have as little as you can so you can make those changes. So sometimes you can say, hey, we want to do a pilot run. You know, we want to do a trial run with you just to make sure we've got our formula all set up. That will allow you to kind of get some lower volumes for your first run. And then with time, as you get more distributors and, you know, more customers, you're going to be able to do. Do larger runs.

33:11
Lance Schwarzkopf
So that's going to sort of buy you some time, if you will, and that's going to help you kind of get kicked off without having to do too much product.

33:19
Daniel Scharff
Yeah. And it's not if you need to change your label, it's when you need to change your label, you will need to.

33:26
Lance Schwarzkopf
That I would say that's one of the most common changes that I see after a first run is we want to change the copy. You know, we want to change the label in some way. You know, we got a new graphic.

33:36
Daniel Scharff
If anyone listening has been in business for like five or 10 years and actually never changed their label from the beginning, please tell me. I want to give you an award because I've never heard of that happening. What I hear much more is like, oh, we need to fix this. Oh, we need to fix this. And like constant approvals for new packaging. So, yes, I totally agree with you on that. I know when I was going to market, we actually used a pilot facility because what we wanted were just sales samples. Like, I need to go to Expo west and have some cans to show retailers that actually look like cans and have the product inside, which can be hard to do, especially when you're waiting on like, certification.

34:10
Daniel Scharff
So we ended up going through the lab, which is owned by Bev Source, and I think paid like 5k just to get a couple hundred cans. And that was enough. Like, I don't even think went through all of those. That was enough to give me like, you know, six, seven months of lead Time selling before were actually going to get started with our coman. So that was one thing that I'm a fan of, just to like, yeah, get the minimum viable product out there.

34:31
Lance Schwarzkopf
That's a great tip. And I've actually done some of that work as well at an innovation center, just, you know, running enough to see if, because you're kind of at big picture, you're really looking for that product market fit, right. And so you're trying to, you know, get something out there, you know, an MVP of some kind to show that, you know, and if you could change that, you know, because sometimes it may not go as planned, maybe it doesn't. It's not quite as sticky as what you would hope and you want to be able to change that. So the smaller you can do that sometimes the better.

34:58
Daniel Scharff
Even if, like, I don't know, some formulators will give you some test bottles and you're like, can I use this for sales? Or like no one technically is allowed to try this except for you. You're like, okay, just me trying this and then you can talk to somebody else and get them to do a water fill can with one of your sleeves or something. So at least you could show people the thing. It's all about like just being able to like make a good impression even if you can't do a full run of stuff. So I like that. I also really like your point about looking for a coman that's near you.

35:27
Daniel Scharff
I think, you know, some people will be obsessed with optimizing the location of the coman for shipping lanes near the warehouse, which, I mean, yeah, especially at a bigger scale is I personally just when you're getting started with a Coleman early on in a product, it's so helpful to be there, right? So you can like see the place. You're talking about asking what kind of equipment they have. Like when you're early on, you won't even know what that equipment is. And you know, a year in, you should be an expert in that stuff. And then, you know, being able to like, work with them to find efficiencies, be obsessed about the quality of your product and then just like you're gonna talk to them all the time, you're gonna be talking about checking ingredient inventory and checking product quality.

36:06
Daniel Scharff
And I think maybe the most important thing is just being able to really have a relationship with them. And a lot of that is done in person. Like for me, I was the CEO and I went, not because I knew anything about ops, but that was a relationship trip. I went, I visited them, I visited the warehouse because, you know it's going to go wrong, right? And just having that like, okay, I have a good relationship from the start. We're going to partner on things in general, like get to know each other personally a little bit, which was very fun. It makes a big difference.

36:34
Lance Schwarzkopf
Yeah, I agree. And I was going to say the big part is really establishing that relationship and finding someone you want to work with that's going to be, you know, flexible and, you know, help you really do the things that you need to do. I mean, there may be some small problems that pop up and you're going to have to deal with those. And I think that, you know, having a good relationship is the best way to work through those and have, you know, establishing trust. That's really key, is establishing that trust.

36:57
Daniel Scharff
So also the tour is fun. I actually, I mean, it's cool to figure out how products actually get made and look and then you just feel like you learn so much and it will help you every time you're working on something with your ops team to really just kind of know how things flow through and how your label actually gets put on the product at the coman and that'll help you in thinking about the design of it. There are just so many things that you can. And then what about when you're actually creating the contract with them? Because that's one of the questions we get a lot in the Slack channel is like anyone know a good lawyer who can help me with a comb ingredient, like have a good template.

37:32
Daniel Scharff
What do you think are some of the things you really need to get right with the agreement?

37:36
Lance Schwarzkopf
Yeah, it's definitely one to, you know, protect your confidentiality. That's an important thing. I think one thing that can be surprising to people, you don't always have to have volume deals in there. And I would say I would stay away from those until you really have like a forecast. Until you're really forecasting really well. I would stay away from putting volume in that deal. But you're going to have things like the terms are going to be, you know, to make sure that they're. That product is manufactured to the specification. You always want to have some reference to your specification because if they put the wrong cap on it or if they put the wrong label on it or they put the wrong label on the wrong product, you don't want to have to pay for that.

38:15
Lance Schwarzkopf
And so that's really what you're trying to establish with that agreement is I want my product as it's specified. And that's what this co Packer agreement, this co Packer contract is going to do for you.

38:28
Daniel Scharff
Yes. And the other thing I'll say is when people are, when you're putting together your timeline for like getting to market and when you're launching or marketing all that stuff, just know this is going to take longer than you think it will. Like, you can make a nice aggressive timeline. Like there's no reason we shouldn't be able to hit that. But you won't. It will take longer. Something will go wrong. You'll be missing an ingredient or you'll miss a deadline and then that's going to hit something else by two weeks. So it's good just to know that and plan for it. Like, it's just not going to go the way you think it will.

38:56
Lance Schwarzkopf
Yeah, but I think that trying to get all your ducks in a row, you mentioned ingredients because if, for example, you, they make a mistake or you make mistake and ingredient doesn't get ordered, now you're going to have to get back in their queue. So that can be a little tricky sometimes. And so doing as much due diligence as you can, having a real process set up before you go into this venture is going to make sure that you know it's going to give you an upper hand and make sure you're successful. Right. That's, that's.

39:24
Daniel Scharff
Hopefully it's one of those things that can be fixed. Like, oh, they checked and there's a bag missing of the ingredient. Okay, we need to wait a day. The worst part of that is, oh, we already started mixing a lot of the stuff and that ingredient's going to like expire now that it's open and you don't have enough. And now everything is effed. Right? Yeah, that's like the worst case scenario. So always good to like just kind of plan and give yourself enough time, make sure everything gets there and triple check that it's there. Like, okay, you have it and how much do you have? And it's good. And you check the expiration date and yeah, don't panic.

39:53
Lance Schwarzkopf
I mean, most of these, at least for me, I feel like most of these go pretty well. I'm trying to think of the last time I had one that didn't go as planned. I think that, you know, having a system in place, having the experience and having the process really makes a big difference for your success.

40:07
Daniel Scharff
Right. Okay, cool. So let's say now you've come to terms with the Coman.

40:13
Lance Schwarzkopf
Hooray.

40:14
Daniel Scharff
I've got somebody to go to the show finally. Right, do it. Let's go. Okay, so what do you think now that you're actually getting set up with them, what are some of the key things you want to get right or other? Watch out.

40:26
Lance Schwarzkopf
Yeah, I think, you know, again, you want to share that spec with them and go through it sort of line by line, especially if they have a technical person or they're production manager, you know, and just make sure that they understand how everything works. You need to start sharing all the documents with them, you know, all the ingredient specs, sort of your document packet for your ingredients. And they're going to have certain requirements for those because they're likely going to be getting audited by like Costco or something like that. They're going to have like a silica audit or some sort of audit they have to comply with and they're going to need some documentation. So understand that. And again, that specification is a part of that audit as well. So make sure that's in line.

41:05
Lance Schwarzkopf
And I think that now you can, you know, once you have all these agreements in place, you could really start sharing because they're going to have to know everything because they're going to make your product so you can really start sharing all of that information on how it's processed and those types of things. So those are the main highlights. And also talk about the quality. Make sure that they understand how it's supposed to taste in some of those century attributes that might be a little bit sort of flexible. And then the best thing to. Another great tip I want to share with you. Make sure you send them a control product before they manufacture their.

41:36
Lance Schwarzkopf
You can have them take all your ingredients, you send them a target that's been made by a food scientist or whoever, and then you have them make up a small batch of your product with your ingredients that have already arrived at their factory and then compare it to that control. Right. If that matches, then go ahead and scale up at that point. And then once they make the product, they're going to compare it back to those samples that you just made.

41:59
Daniel Scharff
They're going to do like a bench sample then, meaning not like run it through all of their machines, you mean, but like you can ask them, hey, do this like on a table.

42:07
Lance Schwarzkopf
Yeah, do a lab sample for me, do a bench sample for me so that I can see that all the ingredients are as expected. Especially if you're like, oh, they're like, oh, hey, use this ingredient instead, you know, all those little changes can kind of add up and move your product away from your target. And so, yeah, doing a bench sample is going to one make sure all your ingredients are there. It talks about that importance of that and then make sure it matches with your control.

42:33
Daniel Scharff
So you do a lot of different kinds of searches of people, a lot of beverage, a lot of other stuff. Also, tell me what you think about this. For me, for beverage, I felt like they were always so confident. They're like, it's. I mean, just give me all the stuff and give me the process. Like if we're going to make it's going to be great. Whereas I feel like there's a little bit more anxiety with food type stuff. Like maybe there's just more variables. It's not as complicated of an ingredient formulation process. That kind of stuff like thickness of the pipes can matter. All that kind of like, what do you think?

43:00
Lance Schwarzkopf
Yeah, different food products can be much more complex. And that's because the, let's say you're forming a dough. That's a very complex process. You have to mix it in a certain way to a certain endpoint. And you know, equipment really affects that. Like you can do it really easy by hand, but then when you scale it up, there can be some variation there. So I think understanding your product and then when you're talking to your co packer, you know, sort of pick their brain about, you know, what might be some problems we would have with this. You know, are there any watch outs that you see? And then just make sure you're working through the process with them and providing targets for them. You know, let's say take the dough for example.

43:36
Lance Schwarzkopf
You know, you may want to go ahead and send them a dough as a target, like just for that one little piece of the process that's the most complex. So they know exactly what they have to hit. Or you may want to go there in person and you may want to pull a sample out that part of the process and look at it. Is it what I want it to be? And so it is. It's more complex, it's more things to think about. But if you can try to anticipate any challenges you might have, you're going to be much better off.

44:01
Daniel Scharff
Okay, so, and then what about when you're getting to the point where like, all right, we need to start actually sending you ingredients to your warehouse? That's like, you're like, really, it's happening. Okay, let's do it. Like, I need to send you the ingredients. I Need to send you my packaging, like whether it's, you know, cans or pouches and secondary packaging and all of that, like any important learnings at that stage.

44:21
Lance Schwarzkopf
Well, I think it is better to have them order all of those things. All right, so because, you know, you don't really have a lot of insight into their inventory system and things might get lost. And it's always better to have them sort of order all of those ingredients, the packaging, because it's then their responsibility, it's in their facility. So that's always part of the agreements that I set up, is that they order those ingredients, but make sure they have all the documents that they need with those, you know, certificate of analysis. That is a typical requirement, and that's got to come from the supplier of those ingredients. So make sure all of those things are coming with your. With your ingredients and help them out with that. You'll help them sort of get set up.

45:02
Lance Schwarzkopf
So they'll want to set up that ingredient supplier in their system, and they're going to need a lot of things to do that. And that's one of the big things that I do, is help that whole setup process.

45:12
Daniel Scharff
It's. So a couple things you need for that. One is they really need to understand your forecast and when you're going to be ordering stuff from them and how much. Right. To make sure that they're. Because this stuff has lead times. Right. Like, I've had flavors that they're like, oh, the lead times four weeks. And then you order it, and they're like, it's three months right now. Sorry. That's like one tiny ingredient that you use, and there's nothing you can do about it. That.

45:31
Lance Schwarzkopf
Yeah. As you're sourcing ingredients, that's important to kind of ask them, hey, what's your average lead time? You know, and that's one of the reasons, like, it doesn't hurt to go ahead and order your ingredients ahead of time, especially if they have a long shelf life and just get them there, make sure that they're there. So that's pretty important. Yeah. Lead times can really kill your schedule, kill your timeline, because it can vary. And sometimes suppliers just have problems. They have machines go down, they have shipping problems. You know, they. They're running a business just like you, and they have problems. So, you know, give them a little extra time to get your. To get your ingredients.

46:04
Daniel Scharff
Yeah, I mean, thinking about giving all the control to them sounds great, actually. Like, okay, this is. You have the ownership of this. Like, make sure all the stuff gets there you need to count it all. But it's also like, man, if something goes wrong and they need to push your production, it impacts you way more than it impacts them. You might be waiting on filling a key retailer, distributor order or something. So I like what you're saying. In theory, it will would be much more efficient.

46:28
Lance Schwarzkopf
Well, you're still communicating with that supplier. So what I always do is I always check to make sure that the co packer has ordered the ingredient and check to make sure that it's arrived. So those are two things you can do. Even if it is their responsibility to order the ingredients, you want to be doing that due diligence on your own to make sure everything is going to plan.

46:49
Daniel Scharff
Okay, so let's say it all gets there. Amazing. You know, it's there. And finally it's the day of your first run. What do you think you should be looking out for at that point? And double checking.

47:01
Lance Schwarzkopf
Okay, so definitely make sure that all of your targets are there. You know, you're finished. You've got your lab samples, you know, you got your bench samples. Those are ready. You've talked the QA person. They're kind of like the person that think of the quality assurance person as sort of the gatekeeper. So you're going to want to meet them, get to know them, and really talk to them about what the target is for your product. So they're going to start batching your product, they're going to make it. You're going to be hanging out, checking, just making sure they're using the right ingredients, that the ingredient numbers match. You know, they're putting the right amount of product in your batch. Double check that for them. Typically you can say, hey, I'd like to audit this batching process. And that's a cue for them.

47:39
Lance Schwarzkopf
They'll, they'll show you. Okay, here is, you know, we got to put 365 pounds in. Okay, here it is on the pallet. Here's the number of bags, you know, and just double check all that and just watch them as it all goes in, right? And then the very important process of approving the batch, right? So you're going to go with the QA person, they're going to pull a sample, you're going to come back to the lab, you're going to, you know, taste it, pair it to your control. Oh, yeah, this is great. Oh, this is made. And you know, everyone's going to agree that, okay, this is on target, meets the quality assurance parameters that you've set up in Your specification and you're going to release the batch, Right. And then it's going to go to, let's say you're doing a beverage.

48:14
Lance Schwarzkopf
It's going to go to the packaging, the processor at that point. So it's going to get pasteurized, it's going to get filled into a bottle and it's going to start coming out, you know, real slowly down the conveyor belt. You're going to see your product coming off the line and that's going to feel great. I think that's one of the most amazing feelings of seeing a product come off the packaging line for the first time.

48:33
Daniel Scharff
It's beautiful. It's so beautiful. Oh, my gosh. Okay, cool. So I love that. And I mean, just reflecting on it, like, when I have been down this road before, I always kind of wish we had just paid for a little bit more help up front to like, from people who knew more than we did but didn't work at the coman, who could like push them on some things and just knew when something was being shortcut a little bit that we wouldn't know. You know, it's like. And it's tempting just to rely on people and try to save costs everywhere, but you can also really pay for that later because you just something you don't know.

49:06
Lance Schwarzkopf
Yeah. And I think, you know, operations is one of the first hires that people typically make is someone that has that knowledge to come in and do those things. But if you can, yeah, have you want to get set up on the right foot. So if you can, you know, pay just a little bit to do that, it's going to make sure that, you know, everything is going to be successful for you. And it's not that I don't think that there are a lot of people out there intentionally trying to rip people off or something like that. I think it's just people make mistakes because they don't understand exactly, you know, what the target might be or they don't quite understand something.

49:39
Lance Schwarzkopf
So if you have someone there with some experience that knows what questions to ask, it's going to make everything go smoothly for you.

49:47
Daniel Scharff
Yep. All right, so it's all gone smoothly, like I hope it will for everybody listening to this. And now I've got all this big, beautiful product. Where is it going to go? What am I going to do with it from there?

49:59
Lance Schwarzkopf
Yeah, depending on your agreement. So a co packer is probably going to give you one or two weeks to move it out of their facility. Sometimes co packers will have space for finished product. So that's another thing that needs to be in your agreement. If they're going to warehouse for you, put it there. But it's, you know, it's typically going to go off to some sort of warehouse where you're going to store it or some place that's going to fulfill orders for you. So that's always the next step. And as you know, Dan, that's, you know, selecting that, you know, three pl, that's another challenging part of the process. That's where it's going to go next.

50:33
Daniel Scharff
That'll be our next episode. Honestly, I got very lucky when I was trying to find a warehouse. I posted in our startup CPG Slack and someone found me a great warehouse that was down the street almost from the coman that I was using, yet somehow they didn't even know each other. And it was like perfectly suited for exactly what I was doing. I mean, that was an incredible coincidence. But yeah, there are lists. We at startup CBG have a list of warehouses and three PLs. That stuff is all through our resources page also. So nice if you can make that link up well with the coman that you find or Lance helps you find or whatever you end up. Okay.

51:08
Daniel Scharff
So Lance, this has been incredibly interesting, I think, just to like delve really deep into this world of how do you find a coman and make sure you're approaching them the right way and just kind of get through all of these steps with them. I think, you know, especially for somebody who hasn't done it before, it's. It should be very illuminating into all of the fun parts of this. And I think those of us who work in cpg, we mainly love it. There are all of these kinds of challenges and things that you have to work through, but this stuff is actually very fun. Like for me is a joy to go to a coman and take a tour and learn all of the stuff and think about the possibilities and understand their capabilities and advantages.

51:46
Daniel Scharff
And there are cool people there also who care a lot about their craft. Some of them are startups also. You know, they want to make your product well and have that be a case study for them and you want that also. So this whole thing is like, it's very interesting to go through all of this the day that you learned about a process authority letter and this is how you get out there and get your product to market. So thank you for detailing it so well and for the offer that you made to our community also for a discount on actually getting pro's help. In finding the comands as well. You guys can see that link in the show notes here. Any final words Lance before we wrap up?

52:22
Lance Schwarzkopf
Oh well, thank you for having me on the show, Daniel. It's been a pleasure to come and to talk to you and to your listeners and I hope that you get a lot of benefit from this. And yeah, please reach out. You can contact me on LinkedIn or go to co pack.net and yeah, if I can help somebody out there, please reach out. I would be excited to meet new people and see if we can make some new great products.

52:44
Daniel Scharff
All right, thanks everybody for listening. See you next time. All right everybody, thank you so much for listening to our podcast. If you loved it, I would so appreciate it if you could leave us a review. You could do it right now. If you're an Apple podcast, you can scroll to the bottom of our Startup CPG Podcast page and click on Write a Review. Leave your company name in there. I will try to read it out. If you're in Spotify, you can click on about and then the Star rating icon. If you are a service provider that would like to appear on the Startup CPG podcast, you can email us@parthipsartupcpg.com lastly, if you found yourself grooving along to the music it is My Band, you can visit our website and listen to more. It is super fantastics.com thank you everybody. See you next time.