Co-manufacturers are a catalyst in Colorado’s high-flying food industry. But here’s why brands are struggling to find right-sized manufacturing

Takeaways from the first Colorado Food & Beverage Co-Manufacturing Summit

Aerospace gets the headlines, but more Coloradoans work at food companies than in any other manufacturing industry in the state – over 26,000 employees and another 10,000 or so in beverage businesses. As long ago as 2013, growth in this powerhouse sector convinced me that America’s newfound love affair with locally made products would extend to other industries.

Manufacturing innovation in the form of industry-savvy co-packers was a catalyst then and remains so today. Co-packers manufacture for multiple brands, providing hard-to-develop production expertise — and scale — as they also free up customer leadership to focus on products, on sales and marketing – on business.

But as capable as the co-manufacturing (the new term for co-packing) ecosystem has become, it’s also become difficult for smaller, entrepreneurial companies to find right-sized solutions. In some ways, industry success has begotten a less accommodating co-manufacturing ecosystem.

It’s nothing the industry can’t solve, and to that end, I recently worked with Naturally Boulder to host the first Colorado Food & Beverage Co-Manufacturing Summit. Here are some of the takeaways from the panel discussion with co-manufacturers and food brands – for nearly 200 attendees:

By way of challenges in the food industry, there are plenty. It’s been a perfect storm of post-pandemic uncertainty, inflation-induced interest rates hikes, and a fast-changing wholesale and distribution landscape.

As a result, capital is much harder to come by. More brands are competing for limited space on grocery store shelves and freezers. And as panelist Lee Gray, a food-industry attorney, pointed out, consumer class-action lawsuits are more prevalent than ever: there’s no shortage of aggrieved consumers (and lawyers) suing for alleged false or misleading labels.

Macro-industry challenges have been amplified by operational headwinds. Though Colorado’s sector is 27th nationally in total food-related jobs, average wages in Colorado’s sector rank 12th nationally. And food inspectors, from the FDA for example, have shaken off the COVID malaise and are active once again.

This means the industry is more risk-averse today than in previous years. Co-manufacturers are more selective in the brands they choose to work with.

That said, brands can trust that familiar attributes will always open doors. An “ideal client” as described by the co-man panelists would be one with an experienced management team, transparency, a willingness to collaborate, mutual respect — and of course, resources and capital.

Panelists also encouraged brands to develop a direct-to-consumer channel, focus on products that are more shelf stable, stay flexible (be ready to pivot), reinvent yourself when necessary, and let go of old business practices that no longer serve you.

Product trends shape any conversation between a brand and co-manufacturer, and panelists agreed on several: Gluten-free and clean ingredients here to stay – in fact, engineered meat products are challenged today because of their complex makeup. Better-for-you low-sugar products will continue to grow in popularity. Keto is a sustaining trend (for now, with some reservations), as are simple and short ingredient lists, including ingredients for gut-and-brain health.

Other takeaways from the Summit will inform go-forward efforts to develop a transparent and accessible regional co-manufacturing ecosystem. Beverage co-manufacturing is on the rise – in fact, we’ll convene a bev-specific summit this spring. Colorado Proud – the popular marketing program from the CO Department of Agriculture – is developing a new digital co-manufacturing directory. (Brands and co-mans: I’ll connect you with Colorado Proud to ensure you’re listed).

More next time.

Bart Taylor is a Moss Adams BDE and founder and former publisher of CompanyWeek manufacturing media. Reach him at bart.taylor@mossadams.com

 

Panelists at the first Colorado Food & Beverage Co-Manufacturing Summit:

Bart Taylor, Moss Adams

Lee Gray, Gray Bugos & Schroeder, LLC

Alex Cioth, Founder & CEO, Claremont Foods

Zora Tabin, Chairwoman, Wild Zora Foods

Chris Lehn, Founder & Owner, Made4U Foods

Benjamin Frohlishstein, Co-founder, Cappello’s

2024 Manufacturing Forecast: 5 Sure Bets

U.S. manufacturing is on a winning streak, even as its success is challenging economic convention. How the newly energized sector co-exists with America’s powerful “import economy” is a topic of interest and intrigue in 2024.

  1. Tariffs are sustained. Other pro-manufacturing measures are stymied in ‘24

As fashionable as it’s become to be pro-manufacturing, America still has a love/hate relationship with its industrial base. 

Tariffs exemplify our split-personality. The Wall St. Journal op-ed page speaks for powerful economic interests in opposing the Trump/Biden tariff regime, even as squaring this position with a pro-U.S. manufacturing platform is really hard. 

Unless, voices like Harry Moser of the Reshoring Initiative argue, the cost of manufacturing in the U.S. can be lowered by 20-30%. But the means to get there — action to devalue the dollar, graduate more manufacturing employees, uptool thousands of SMBs, and reformulate trade policy to protect domestic industry – seem today, impossibly elusive. 

In an election year lip-service will be paid to U.S. manufacturers and employees, but America’s “import economy” is still king. How manufacturing fares in advancing its fortunes, is the story of the year.

(More with Harry Moser next time.)

2. Brand power: Local manufacturers elevate their brands to win

Wagner Skis in Telluride, Colorado, has no business being successful. They compete with high-volume, low-margin producers that win on price, “buy” editorial coverage and big-name influencers utilizing fat marketing budgets, and generally operate from a different playbook than smaller, U.S.-manufactured producers. 

Wagner Skis’ founder Pete Wagner isn’t fazed. “It’s not that we’re ‘Made in the U.S.,” Wagner says, “it’s that we’re an agile company – and we’re a real brand.” The take-away? “Business is really good.”

Brand-builders focus on the customer experience – the visceral, emotional connection that sustains through price wars, supply-chain woes, or unforeseen pandemics. To interact with the Wagner team will change your outlook on the sport and brands you patronize, generally.

“Real” brands will thrive in 2024. Including comeback brands like the Isuzu Trooper, bought and reimagined in ‘24 by a savvy OEM. 

3. Space Command re-re-locates as workforce investments payoff

Space Command should never have been moved from Colorado to Alabama in the first place. That its final location is still in play is ridiculous. 

That said, two developments will shape the final, final, final decision: neither Biden nor Trump will win the general election in 2024, and Alabama officials will pivot to find their way before Colorado’s do by linking manufacturing-related employment to the success of the overall space industry. 

Alabama’s investment in its aerospace manufacturing workforce will be rewarded.

4. Five CHIPs Act-inspired Regional Innovation Hub winners are…

According to China’s president Xi Jinping, Taiwan’s reunification with mainland China is “inevitable.” 

Trusting that smarter people than me are assessing the heightened risk of China controlling America’s top supplier of advanced semiconductors, I’ll guess that CHIPs-inspired programs like the Regional Innovation Hubs competition will prioritize U.S. semiconductor manufacturing – the OG CHIPs goal – including a new advanced manufacturing workforce and U.S. leadership in a new global energy paradigm. 

We reported on the 31 finalists last year. My forecast of the five winners:

  1. Texoma Semiconductor Tech Hub
  2. Nevada Lithium Batteries and Other EV Material Loop
  3. American Aerospace Materials Manufacturing Tech Hub
  4. New Energy New York (NENY) Battery Tech Hub
  5. Corvallis Microfluidics Tech Hub

America’s national security is at risk. EDA: get it right. 

  1. Twitter/X: the new voice of Musk’s Industrial Complex

Can Elon Musk be Henry Ford and William Randolph Hearst at the same time? 

He should try. Elon Musk is the world’s most consequential industrialist – with a media bullhorn. In the 20th century, Hearst newspapers were a voice for The Chief’s personal and political agenda. If only he’d owned a U.S. satellite monopoly. 

Speculate about its future, but know that in 2024, Twitter/X’s AI-fueled algorithm will promulgate Musk’s social and commercial narrative. 

Twitter/X’s corporate evolution gains steam in ‘24. 

Bart Taylor is a Manufacturing & Consumer Products BDE at Moss Adams and founder and former publisher of CompanyWeek manufacturing media. Reach him at bart.taylor@mossadams.com.