America’s craft brewers would have been forgiven earlier this month for looking awry at a recurring headline in the Wall St. Journal: Why the Recession Still Isn’t Here might continue to describe macro conditions, but for much of the local suds industry, a deep downturn — a beer recession — has been a harsh reality for some time.
“It sucks,” deadpanned Eric Wallace, co-founder of Colorado craft first-mover Left Hand Brewing Company. I caught up with Wallace at Left Hand’s sparkling new restaurant and taproom in Denver’s bustling RiNo district, an ironic place to be discussing craft beer’s current struggles. It teases exciting new possibilities.
Yet for Wallace and others who upset convention with brash new ideas, it often begins and ends with beer, and the industry wreckage today has dampened enthusiasm for what lies ahead. Breweries too many to count have shuttered, and some of the industry’s most established operators have backed up. COVID, inflation, and a market flooded with a seemingly endless roster of inventive beers have proved more formidable than Big Beer.
Wallace considers what his own innovation ethos has wrought. “We helped bring this on,” he offers. “We have innovated and pushed the boundaries of beer to a point where not only are our customers and beer drinkers confused, but I’m confused. It feels a bit like the first shake out back in the late 90’s and early aughts. Lots of beer on the shelves of questionable quality with very short functional shelf life, and lots of gateway inventions leading our customers away from beer, not into beer. There are so many brands on the shelf that you need good fortune’s help to make a decision on what to actually try, hoping to not get burned.”
As a result, he sees consolidation as pretty inevitable. “We have an overbuilt brewing environment and until some of the excess capacity is transitioned out of the marketplace, margins will suffer, and brands will perish.”
Fewer brands would certainly refocus consumers. But even if Left Hand’s stellar brands like Milk Stout Nitro and Sawtooth lead a beer comeback, the appetite to diversify, like Left Hand’s RiNo restaurant and bar, is industry-wide and seems here to stay.
Nick Nunns gained a craft foothold with TRVE Brewing Company with a reputation for making great beer but also with a unique brand: TRVE’s connection with Denver’s ‘heavy metal’ scene not only informed the vibe at its downtown location but also its retail presence. Nunns also wasn’t eager to get big, fast.
“Our tap room numbers haven’t changed,” Nunns told me, “We’re certainly seeing a slight decline in wholesale year over year, but it’s nothing I’m panicked about. I think it’s just the downturn of the industry overall. Given my personal experience, I can understand where the consumer is at, having less purchasing power overall,” he added.
Nunns has also kept the brewery in motion. “TRVE has always been a brewery that has done pivot after pivot after pivot. Sour beer took a downturn, so we pivoted, you know, and we started boosting production for the wholesale market of a lot of our clean beers — like IPAs and lagers. We’ve been told we were doing craft lagers before they were cool.”
And for Nunns, it’s no longer just about just making beer. “I was getting a little tired of ‘The Lonely Island of Denver,’ you know, just being so far from literally anywhere else was just starting to feel very restrictive and isolating.”
So, Nunns made the ultimate pivot — and acquired a brewpub in Asheville, North Carolina. He’s from the East Coast originally. “My wife has had ties in Asheville for quite some time, and through the process of us dating long distance, I just started visiting Asheville fairly regularly.”
Like Left Hand, TRVE made the jump into the restaurant business — but half a continent away. “We’ve established a wine list, a cocktail program, thanks to some collaboration with a group of folks who are trying to look into opening their own bar. And we’re doing like, pop up bars, you know, around Asheville. Obviously, our licensing is a little bit more flexible here, doing business as a brewery.”
“We’re really shifting what we’re doing,” he adds, “at least here in North Carolina, into more of an on-premise business model where it’s really just about running a brewpub more than it is about, like, trying to find placements (for beer) in liquor stores and bars and all that stuff because there’s just not as much money left in that anymore.”
Nunns’ has also outsourced production to New Image Brewing, nearby in Arvada, Colorado. It’s a move that might have been a death-knell for a craft brewers’ reputation a decade ago, but as craft has matured and effectively won its battle with Big Beer, feels like an evolution of sorts.
“It was really just us reading the room and saying, ‘Why are we struggling in a production facility that’s never really going to be an efficient setup,’ and at the same time, New Image was looking for partners to bring in because they had a building and facility that’s set-up for bringing in more beer, more production. All we needed was tanks,” Nunns explains, “so it was literally just moving some of our equipment over to their location, without us having to cut any corners or affect our recipes or the ethos of how we go about making beer. All of those things are easily maintained.”
Contract production — co-manufacturing — isn’t new to craft. Denver’s Sleeping Giant Brewing Company was a first mover in the space. Founder Matt Osterman has been helping brands manufacture at scale since 2015 and, today, is making beer for brands across the West. But more, he has a growing interest in the beyond-the-beer category. The stainless-steel tanks in Osterman’s Denver factory cater to a diverse, fast-changing beverage market.
Beer was first for Sleeping Giant, and the connection remains strong. “Beer is what our facility is designed for, and that is what our team is built around. Beer is certainly the lifeblood of what we do,” he says.
That said, the beer recession seems to be forcing every operator to reconsider its path. With a slowdown leaving more and more empty stainless-steel in the market, brewers are evaluating new ways to fill ‘em up.
“I mean, it’s been interesting. Or I could make it a bit more dramatic and say that we’ve seen not just other breweries get into the space, but brands that were actually clients or prospective clients of ours that today have become co-packers,” Osterman says. “So, it’s not just the more competitive landscape, it’s that the pool of prospective clients has shrunk and the amount of suppliers has grown. It’s interesting for sure.”
But it’s not more beer that’s capturing the imagination of brewers; after all, there’s already so much beer on the market. Today, it’s ready-to-drink cocktails, a dizzying array of hard teas and kombuchas, spiked seltzers and straight-up canned drinks, and everything in between.
“A lot of breweries are making things that aren’t traditional craft beer right now, and we’re talking the big kids — like Sierra Nevada, New Belgium, Boston Beer Co. — the ones that have been around for a long time, the ones that are arguably the most successful companies from a business standpoint.” Osterman says.
“Sierra Nevada’s got this whole new innovation production space that they’re doing, and it’s clear that they are leaning into this space and understand that they’re not going to conquer the future with the same things that they’ve done in the past.”
I asked Osterman if he’s leaning in by necessity, given craft beer’s challenges, or simply because opportunity beckons.
“The diversification that we’re doing is intentional,” he answers, “in part because, honestly, it makes us a healthier, more well-rounded company. I continue to believe in the [beer] space, but I think that it would be foolish not to recognize some of the segmenting that’s going on, and some of the diversification that will keep happening, especially the more that we get influenced by Gen Z. The upcoming target demos don’t want the same thing that their predecessors have had.”
Eric Wallace has lived the entire arc of the craft brewing experience. “We survived the first shake out by merging with Tabernash Brewing Company in 1998 — in the old Denargo Market back then — and then starting up our own distribution company (Indian Peaks Distributing) in 1999,” he says. “We had to cut, scrimp, shuck, jive and raise capital to get through it. Today, we’ve now brought on a number of co-packing partners in the distilling, hard kombucha, CBD seltzer, and beer businesses — and will be bringing on others as well. We’re all going to have to find ways to keep our breweries busy and work our way through this next shake out. And it’s easier said than done.”
That may be, but from each setback, craft purveyors have indeed shucked and jived their way to sustained success. It may look different on the other side, less may be more, but there’s little doubt the next craft industry iteration will again fly high.
Bart Taylor is a Moss Adams BDE and contributor to MFG Insider. Reach him at bart.taylor@mossadams.com.
Utah is winning in the regional competition for manufacturing prominence. Here’s how a new hierarchy is shaping up in the West
/in General/by Bart TaylorFour years ago I wrote that in the regional competition between the Rocky Mountain look-alikes to attract manufacturing business and economy, the outcome would likely come down to Utah’s workforce advantage vs. Colorado’s “high-velocity food and beverage business.”
Today, the big news is Utah’s success.
By the numbers, Utah is a manufacturing juggernaut. A study by Economic Innovation Group released in October concluded that Utah led the nation in manufacturing job growth between 2019 and 2023, adding over 16,000 jobs — roughly a 12 percent increase.
Moreover, EIG surmised that nationally, “Utah was among the five states that accounted for two-thirds of the sector’s job growth, including Texas, Florida, Georgia and Arizona.” In September this year, Bureau of Labor Statistics (BLS) data measured manufacturing employment in Utah at 154,900 jobs — up from 138,000 or so in September of 2019.
Colorado manufacturing employment has leveled off, for now. The BLS measures current manufacturing employment at 150,600 jobs — a decrease from a post-pandemic high of 154,000 jobs in August of 2022 and flat from the same month in 2019, if not down a smidge from 150,900. The Colorado Chamber of Commerce also reported this week that the number of manufacturing businesses has declined in the state, from 6,210 to 6,163.
In part, Colorado’s white-hot food economy, the largest manufacturing employer in the state, has cooled. The well-respected Colorado Business Outlook and Forum is forecasting net job losses for the sector when the dust settles in 2024 and modest growth in 2025. Colorado’s transformative craft beer sector, long a dependable engine of growth, is also slogging through a nation-wide reset in the brewing and spirits industry.
Fortunately, what’s painful today will likely usher in a new growth phase. Until it does, Utah is assembling all the pieces to win the competition for manufacturing companies and jobs. It likely starts with workforce.
I wrote in 2020 that, “Utah’s workforce advantage is a beacon for manufacturers. Simply, the state’s developing the next-generation talent manufacturers need — educated, tech-savvy and capable but also shaped positively by Utah’s cohesive community. Many leave on Church of Jesus Christ of Latter-day Saints missions, but return often fluent in another language, motivated and exposed to the world, to start careers and families.”
Today, the state has also become a model for how economic developers and federal and local resources collaborate to support manufacturers. The Utah Manufacturers Association, the federally supported Utah Manufacturing Extension Partnership (or MEP), eco-devo groups like iMpact Utah, and state government including the Governor’s office, provide unique, complimentary services in the manufacturing value-chain — with the success of the entire ecosystem in mind. And Utah Governor Spencer Cox is deliberately cultivating a pro-manufacturing brand.
Utah, Texas, and Arizona are leading an advanced manufacturing comeback in key industries like transportation (including aerospace and automotive) and the emerging semiconductor supply chain. Manufacturers are locating there to find workers, deliberate support, and a pro-business climate.
In Utah, they’re also finding success.
Bart Taylor is a Moss Adams BDE and former publisher of CompanyWeek Manufacturing Media. Reach him at bart.taylor@mossadams.com.
At the Arizona Manufacturing Summit, a workforce plan comes into view that challenges conventional wisdom – and positions the state for success
/in General/by Bart TaylorArizona manufacturing is having a moment. And like every state grabbing for a piece of America’s industrial comeback, leaders here are grappling with one challenge above all others: workforce.
Last week manufacturing and education leaders convened in Phoenix at the Arizona Manufacturing Summit to assess the current state of manufacturing employment and forecast the path ahead. Speakers at the event, co-presented by the Greater Phoenix Economic Council and Arizona Manufacturers Council, expressed high confidence that Arizona is poised to succeed where other states are struggling.
I helped moderate the discussion, that from industry included representatives from Intel, Taiwan Semiconductor Manufacturing Company (TSMC), VB Cosmetics, Heitek Automation, and Latham Industries. Educators from Arizona State University, Maricopa Community College System, Grand Canyon University, and Arizona’s K-12 ecosystem spoke to Arizona’s talent pipeline.
Arizona Commerce Authority Senior Vice President Allison Grigg helped establish an employment baseline, citing “more than 330,000 manufacturing jobs in Arizona across more than 5,400 companies.”
Standardized data from the Federal Reserve and U.S. Department of Labor, tied to NAICS industry codes and used across all states, pegs Arizona manufacturing direct employment at just over 192,000 jobs.
Regardless of the source, Arizona manufacturing employment has been on a tear: Economic Innovation Group’s (EIG) analysis of U.S. Department of Labor data estimates that just five states – Texas, Florida, Georgia, Utah, and Arizona – have accounted for over half of all U.S. manufacturing jobs added since 2019, including 16,797 jobs in Arizona alone.
The nuance of manufacturing employment is that sector jobs ebb and flow across different industries and Arizona is benefitting greatly from its industrial mix. On a national level, EIG estimates that “the transportation and food manufacturing industries have accounted for the lion’s share of job growth in the manufacturing sector post-pandemic; these were also the two leading industries for job growth within manufacturing after the Great Recession.”
In fact, Arizona’s legacy “transportation” companies have fueled the local boom: Honeywell Aerospace, Boeing, Northrup Grumman, and General Dynamics are top-10 manufacturing employers in Arizona (the feds’ NAICS designation includes aerospace in a broad NAICS Transportation classification).
All great, but the biggest reason for optimism here is Arizona’s burgeoning “computer & electronics manufacturing” (more NAICS) opportunity, i.e. semiconductor manufacturing. It’s also the source of the state’s biggest manufacturing employment challenge.
Consider first that more jobs have been lost in America’s computer and electronics manufacturing ecosystem than any other since 2000 – EIG estimates that “Despite the recent uptick…there remain 39 percent fewer jobs in computer & electronics manufacturing than in the year 2000.”
Arizona, Texas and other semiconductor outposts are in a position to reverse the trend. Grigg estimated that Arizona would add 18,000 or so manufacturing jobs by 2030. Many of these will be at Intel and TSMC and Amkor, and at hundreds of suppliers in the regional semiconductor supply chain.
There will be setbacks along the way. Intel’s Angela Creedon, speaking at the Summit, conveyed the challenge of announcing layoffs in Arizona at the same time the company is poised to receive a heavy dose of CHIPS-related subsidies – to undergird workforce development, in part. Intel has preliminarily qualified for $8.5 billion in grants under the CHIPS Act. The optics are, well, challenging.
Yet Intel is already Arizona’s top manufacturing employer – and given TSMC’s growth plans in the desert, more “computer & electronics manufacturing” jobs will add to an already dynamic manufacturing ecosystem. To wit, LinkedIn counts 10,783 current job openings at Arizona manufacturing companies.
Not all positions are production-focused, and educators at the Summit were hyperfocused on the evolving-skills mix. And for good reason. The make-up of the manufacturing workforce is changing. A study by Georgetown University’s Center on Education and the Workforce estimates that the percentage of manufacturing workers with bachelor’s degrees hit roughly 30 percent in 2016 compared with 8 percent in 1970. And a 2022 NAM (National Association of Manufacturing)-involved study found that nearly half of the manufacturing job openings that year, around 1.2 million, required at least a bachelor’s degree.
I quipped to Binil Starly, School Director at ASU’s School of Manufacturing Systems & Networking and Summit speaker, that a decade ago, ASU wouldn’t have bothered to attend. Starly smiled like the cat that ate the canary. Today, ASU is leaning into manufacturing with a $200 million investment in its southeast Mesa Polytechnic campus in the form of a 100,000 sq. ft. advanced manufacturing center. Intel hires more ASU grads than from any .edu outpost. Grand Canyon University’s new Dean of the College of Engineering and Technology, Paul Lambert, spoke passionately at the Summit about GCU’s investment in manufacturing. He’s a qualified source – an ex-Air Force pilot and retired Boeing executive. Things have changed. And if other states have been slow to benefit from university involvement – and planning – that’s not the case here.
But if university grads are key to manufacturing’s future, today, companies here and elsewhere continue to rely on human capital from the trade and vocational pipeline. In Arizona, the primary talent engine is the Maricopa County Community College system (MCC). Speaking at the Summit, Daniel Barajas, chief officer of Workforce & Economic Development Strategy for MCC, described a system working overtime to fill Arizona’s growing demand for talent – via a network of colleges and programs that today is highly integrated with industry – not only semico’s, where CHIPS-funded development programs will in part unfold through MCC – but Arizona’s stable of established manufacturers.
Here then, is the rub. Today, manufacturers like Latham Industries and VB Cosmetics and Heitek Automation (represented at the Summit by Tracy Latham, Bob Acheson, and Dan Heitek) and a hundred others, are competing with Intel and TSMC for the same talent. The technicians, operators, welders, and dozens of other trade grads that Barajas’ MCC (and Tucson’s Pima Community College system) are churning out continue to be the workforce lifeline for Arizona manufacturing, as important the university system is becoming. All educators here have a secure place in Arizona’s future manufacturing economy; the journey there will be messy, and competitive.
But this orchestra of talent all seems to be headed in the same direction here, where in other states, not so much. Arizona’s tight geography also helps; Phoenix and Tucson are competitive but fuel nearly adjacent manufacturing ecosystems. Other synergies are developing organically: Phoenix’s West Valley is becoming a transportation and logistics hub for the entire state. Chandler and Mesa and points in SE Phoenix are expanding in the manufacturing game.
NAM forecasts nearly 4 million new U.S. manufacturing jobs in the coming decade. Arizona’s ambition is to compete for a growing share. If workforce is a differentiator – and it is today – AZ will be a key cog in America’s neo-industrial future.
Bart Taylor is a Moss Adams BDE and founder and former publisher of the AZ MFG REPORT. Reach him @ bart.taylor@mossadams.com
Arizona Manufacturing Summit | October 23, 2024 | Phoenix, Arizona
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Food brands and co-manufacturers retreat from the bleeding edge to survive and thrive
/in General/by Bart TaylorFood manufacturing is America’s great but underappreciated industrial success story, a tale of workforce growth fueled by innovation that’s even more impressive considering the full-tilt automation underway throughout the sector. Against a tide of robotics, job growth in food continues to be a highlight:
But as much as innovation has been a catalyst, the pace of change has slowed. “Breakthrough” product developments have given way to incremental change, to “safe” innovation in what’s become a more risk-averse business and product landscape. And for those whose job it is to go-to-market with new products or processes, to find the next big thing in an industry that’s produced game-changing results year after year, fast growth ahead is less certain.
Fresca Foods’ Allie Brimlow joined Colorado’s market-moving co-manufacturer in 2016 to in part manage the myriad opportunities coursing through the market. “A huge part of why I was hired was to help the sales and marketing team formalize and monetize some of our services around innovation. We were doing so much, going full bore,” Brimlow says. “We were doing a lot of free product development — new product ideation — and were proactively presenting new concepts that fit our manufacturing capabilities. So much so that I was brought on board, the mindset of like ‘wait a minute, these are services that we are providing right now for free that we should really monetize,’” she laughs.
“By 2018 -2019, we’d also become the innovation arm for big food companies specifically in the natural and organic space. They’re really good at doing large scale production of conventional foods, but when it comes to doing innovation outside of that, they struggle to move quickly and manage some of the challenges that come with the natural and organic space — like allergens, certifications, and things like that. So, they looked to companies like Fresca that could help that and be an external source of that innovation,” she adds.
COVID changed the game. “Since the pandemic, I feel like innovation has been a lot more safe, a lot simpler. Pre-pandemic, we were doing things like upcycled veggie jerky, really ‘out-there’ and interesting food products — more bleeding-edge innovation. Today, a lot of the innovation we see is different, more ‘can you take our bar and put a drizzle on it?’ Our hypothesis, and what we’ve heard from our brand partners and industry friends, is that consumers are craving familiarity, things that are comfortable, that are familiar, given all the other uncertainty in the world,” Brimlow says.
It seems a more comfortable place for industrial-size, consumer packaged goods companies, and less so for the small operators who, in the last decade, have made a mark by coming to market with novel ideas. “I think smaller brands have always been the more breakthrough innovators,” Brimlow confirms. So where does that leave the “innovation arm” of the industry?
“I think the path for smaller brands to scale, to muscle their way through to national distribution, has become really challenging,” Brimlow says. “As the product window has narrowed, there’s also a lot of pressure right now on ingredient and labor costs — especially where we operate, in Colorado. I mean, the number of innovative ideas that have been scrapped in the last couple of months that had chocolate in them is nuts,” she says. “There will be a decline in the launches of anything chocolate next year because of prices.”
Moreover, “everything is more expensive when you’re just getting started — smaller quantities mean ingredients are more expensive, the cost to make your product is more expensive, packaging is more expensive, and you’re oftentimes ordering more than you need just to hit target product cues,” she says.
Yet attend any industry function — in the natural food mecca in Boulder, Colorado, or elsewhere —and the energy and optimism seem as high as always. Brimlow is no different.
“For one, if you had a brand in-store and were able to stay on the shelf through the pandemic — a lot of those brands are experiencing incredible growth,” she says. “There’s also this interesting dichotomy that — despite inflation and supply chain and challenges related to capital — in the ‘safer’ innovation category, as I call it, there’s still a lot of growth and health, especially in the natural and organic industry.
“And I do think that the pendulum will swing back towards more breakthrough innovation. From my perspective, I think the only thing holding it back is the economy and the kind of uncertainty that consumers are feeling,” she adds.
As an early mover in Colorado’s dynamic food manufacturing ecosystem, Fresca Foods rode into the pandemic as a market leader and has emerged in an enviable position. “Fresca is growing like crazy this year. We literally cannot keep up. Most of our systems are at capacity,” Brimlow says. “We’re looking at our next building, expanding our footprint and capacity on two of our core platforms — bars and granola. We see a lot of growth just on the manufacturing side,” she notes. And innovation is key. “You can’t just do one thing, you have to always be innovating, product life cycles are tricky. They will fade over time.”
But she also acknowledges a manufacturing gap that makes it hard for smaller brands to find right-sized manufacturing. “As you embrace innovation, you’re investing in equipment. The most efficient way to use that equipment is just by running it as much as you can as often as you can, so there’s a lot of incentive for contract manufacturers to ‘go big,’ to lean into the bigger volumes. The efficiencies are there. It’s been amazing to watch the company grow, but it also means we’re outgrowing some of our smaller brands,” Brimlow explains.
It seems only a matter of time before local and regional co-manufacturing realigns with a newly energized, post-pandemic food sector, where small and middle market brands have better options. Even today, the resources may be available, just hard to find.
What Brimlow, Fresca Foods, and other influential brands and co-mans are doing is leaning in to support the overall health of a sector that’s poised for post-pandemic growth. Join Allie Brimlow, Awakened Foods’ Jeff Schmidgall, Bobo’s TJ McIntyre, Boulder Organic Foods’ Greg Powers, Cappellos’ Ben Frohlichstein, others guests, and me, Monday July 15, for a mid-day Colorado Proud webcast to discuss how food innovation goes-to-market in today’s “normalizing” economy.
REGISTER HERE>>
Bart Taylor is a Moss Adams BDE and contributor to MFG Insider. Reach him at bart.taylor@mossadams.com
As craft brewers grapple with a beer recession, less is more as new business models beckon
/in General/by Bart TaylorAmerica’s craft brewers would have been forgiven earlier this month for looking awry at a recurring headline in the Wall St. Journal: Why the Recession Still Isn’t Here might continue to describe macro conditions, but for much of the local suds industry, a deep downturn — a beer recession — has been a harsh reality for some time.
“It sucks,” deadpanned Eric Wallace, co-founder of Colorado craft first-mover Left Hand Brewing Company. I caught up with Wallace at Left Hand’s sparkling new restaurant and taproom in Denver’s bustling RiNo district, an ironic place to be discussing craft beer’s current struggles. It teases exciting new possibilities.
Yet for Wallace and others who upset convention with brash new ideas, it often begins and ends with beer, and the industry wreckage today has dampened enthusiasm for what lies ahead. Breweries too many to count have shuttered, and some of the industry’s most established operators have backed up. COVID, inflation, and a market flooded with a seemingly endless roster of inventive beers have proved more formidable than Big Beer.
Wallace considers what his own innovation ethos has wrought. “We helped bring this on,” he offers. “We have innovated and pushed the boundaries of beer to a point where not only are our customers and beer drinkers confused, but I’m confused. It feels a bit like the first shake out back in the late 90’s and early aughts. Lots of beer on the shelves of questionable quality with very short functional shelf life, and lots of gateway inventions leading our customers away from beer, not into beer. There are so many brands on the shelf that you need good fortune’s help to make a decision on what to actually try, hoping to not get burned.”
As a result, he sees consolidation as pretty inevitable. “We have an overbuilt brewing environment and until some of the excess capacity is transitioned out of the marketplace, margins will suffer, and brands will perish.”
Fewer brands would certainly refocus consumers. But even if Left Hand’s stellar brands like Milk Stout Nitro and Sawtooth lead a beer comeback, the appetite to diversify, like Left Hand’s RiNo restaurant and bar, is industry-wide and seems here to stay.
Nick Nunns gained a craft foothold with TRVE Brewing Company with a reputation for making great beer but also with a unique brand: TRVE’s connection with Denver’s ‘heavy metal’ scene not only informed the vibe at its downtown location but also its retail presence. Nunns also wasn’t eager to get big, fast.
“Our tap room numbers haven’t changed,” Nunns told me, “We’re certainly seeing a slight decline in wholesale year over year, but it’s nothing I’m panicked about. I think it’s just the downturn of the industry overall. Given my personal experience, I can understand where the consumer is at, having less purchasing power overall,” he added.
Nunns has also kept the brewery in motion. “TRVE has always been a brewery that has done pivot after pivot after pivot. Sour beer took a downturn, so we pivoted, you know, and we started boosting production for the wholesale market of a lot of our clean beers — like IPAs and lagers. We’ve been told we were doing craft lagers before they were cool.”
And for Nunns, it’s no longer just about just making beer. “I was getting a little tired of ‘The Lonely Island of Denver,’ you know, just being so far from literally anywhere else was just starting to feel very restrictive and isolating.”
So, Nunns made the ultimate pivot — and acquired a brewpub in Asheville, North Carolina. He’s from the East Coast originally. “My wife has had ties in Asheville for quite some time, and through the process of us dating long distance, I just started visiting Asheville fairly regularly.”
Like Left Hand, TRVE made the jump into the restaurant business — but half a continent away. “We’ve established a wine list, a cocktail program, thanks to some collaboration with a group of folks who are trying to look into opening their own bar. And we’re doing like, pop up bars, you know, around Asheville. Obviously, our licensing is a little bit more flexible here, doing business as a brewery.”
“We’re really shifting what we’re doing,” he adds, “at least here in North Carolina, into more of an on-premise business model where it’s really just about running a brewpub more than it is about, like, trying to find placements (for beer) in liquor stores and bars and all that stuff because there’s just not as much money left in that anymore.”
Nunns’ has also outsourced production to New Image Brewing, nearby in Arvada, Colorado. It’s a move that might have been a death-knell for a craft brewers’ reputation a decade ago, but as craft has matured and effectively won its battle with Big Beer, feels like an evolution of sorts.
“It was really just us reading the room and saying, ‘Why are we struggling in a production facility that’s never really going to be an efficient setup,’ and at the same time, New Image was looking for partners to bring in because they had a building and facility that’s set-up for bringing in more beer, more production. All we needed was tanks,” Nunns explains, “so it was literally just moving some of our equipment over to their location, without us having to cut any corners or affect our recipes or the ethos of how we go about making beer. All of those things are easily maintained.”
Contract production — co-manufacturing — isn’t new to craft. Denver’s Sleeping Giant Brewing Company was a first mover in the space. Founder Matt Osterman has been helping brands manufacture at scale since 2015 and, today, is making beer for brands across the West. But more, he has a growing interest in the beyond-the-beer category. The stainless-steel tanks in Osterman’s Denver factory cater to a diverse, fast-changing beverage market.
Beer was first for Sleeping Giant, and the connection remains strong. “Beer is what our facility is designed for, and that is what our team is built around. Beer is certainly the lifeblood of what we do,” he says.
That said, the beer recession seems to be forcing every operator to reconsider its path. With a slowdown leaving more and more empty stainless-steel in the market, brewers are evaluating new ways to fill ‘em up.
“I mean, it’s been interesting. Or I could make it a bit more dramatic and say that we’ve seen not just other breweries get into the space, but brands that were actually clients or prospective clients of ours that today have become co-packers,” Osterman says. “So, it’s not just the more competitive landscape, it’s that the pool of prospective clients has shrunk and the amount of suppliers has grown. It’s interesting for sure.”
But it’s not more beer that’s capturing the imagination of brewers; after all, there’s already so much beer on the market. Today, it’s ready-to-drink cocktails, a dizzying array of hard teas and kombuchas, spiked seltzers and straight-up canned drinks, and everything in between.
“A lot of breweries are making things that aren’t traditional craft beer right now, and we’re talking the big kids — like Sierra Nevada, New Belgium, Boston Beer Co. — the ones that have been around for a long time, the ones that are arguably the most successful companies from a business standpoint.” Osterman says.
“Sierra Nevada’s got this whole new innovation production space that they’re doing, and it’s clear that they are leaning into this space and understand that they’re not going to conquer the future with the same things that they’ve done in the past.”
I asked Osterman if he’s leaning in by necessity, given craft beer’s challenges, or simply because opportunity beckons.
“The diversification that we’re doing is intentional,” he answers, “in part because, honestly, it makes us a healthier, more well-rounded company. I continue to believe in the [beer] space, but I think that it would be foolish not to recognize some of the segmenting that’s going on, and some of the diversification that will keep happening, especially the more that we get influenced by Gen Z. The upcoming target demos don’t want the same thing that their predecessors have had.”
Eric Wallace has lived the entire arc of the craft brewing experience. “We survived the first shake out by merging with Tabernash Brewing Company in 1998 — in the old Denargo Market back then — and then starting up our own distribution company (Indian Peaks Distributing) in 1999,” he says. “We had to cut, scrimp, shuck, jive and raise capital to get through it. Today, we’ve now brought on a number of co-packing partners in the distilling, hard kombucha, CBD seltzer, and beer businesses — and will be bringing on others as well. We’re all going to have to find ways to keep our breweries busy and work our way through this next shake out. And it’s easier said than done.”
That may be, but from each setback, craft purveyors have indeed shucked and jived their way to sustained success. It may look different on the other side, less may be more, but there’s little doubt the next craft industry iteration will again fly high.
Bart Taylor is a Moss Adams BDE and contributor to MFG Insider. Reach him at bart.taylor@mossadams.com.
Industry Scorecard: Employment Data Points to a Healthy Manufacturing Economy, but High Costs Are a Headwind
/in General/by Bart TaylorThe state of US manufacturing is a mixed bag.
There are plenty of positives. Total US manufacturing employment is poised to exceed 13 million workers for the first time since December 2008. (Manufacturing employment peaked in 1979, at just under 20 million.)
Overall, the economy has added 800,000 or so net manufacturing jobs during President Biden’s tenure — including those regained after the COVID hit. Employment had grown by roughly 500,000 jobs during President Trump’s tenure, to 12.8 million jobs, but dropped off a cliff during the pandemic — to 12.1 million. The comeback is significant, and a counter narrative to the conventional wisdom that automation would stymie job growth.
Jobs continue to be reshored at a brisk pace. Harry Moser’s Reshoring Initiative (RI) measures the intent of US companies to reshore manufacturing jobs, and while activity slowed in 2023, during Biden’s tenure over a million jobs (1,099,708) have been announced.
Cost parity would bring more outsourced work back to the US — a lot more. Asian manufacturing costs are 20 to 30 percent less expensive in most cases, according to Moser. Reducing US costs could have a huge impact — Moser estimates the US would add 5 million new manufacturing jobs by achieving true cost parity and balancing the trade deficit.
But if manufacturing cost is a jobs fulcrum, headwinds might continue to limit overall employment and the vitality of the sector.
For one, as much as public investments in semiconductor, battery, and EV infrastructure are catalyzing job growth (comprising nearly 70 percent of all reshoring job announcements in 2022, per RI), inflation is the defining price trend and high-priced products the rule.
“My fear is that the [semiconductor and battery] factories will be uncompetitive and therefore they won’t last,” Moser says, “in part because they don’t solve the underlying problem, which is that US manufacturing cost is too high. Biden understands this [semiconductor manufacturing] is big, and you have to do something about it,” he adds. “Yet bribing companies to build factories [to make overpriced chips] isn’t the long-term answer.”
Inflation is also constraining demand in other growth industries like food and beverage — as is the high-value of the dollar helping imports and hurting exports. Higher borrowing costs are also limiting investments in equipment and technology.
The Biden administration hopes that IRA, CHIPs, and other public investments will drive down the cost of domestic manufacturing – a spending halo that draws more workers into manufacturing, to staff a new generation of companies, more automated and efficient than ever before. So far they seem to have had the opposite effect.
For his part, Moser’s optimistic about trends that would work to drive down the cost of US manufacturing, long term. He cites:
The Biden “industrial policy” is also just getting started. Only a small percent of the dollars to supercharge US semiconductor manufacturing have been spent. And data compiled from companies using Moser’s Total Cost of Ownership Estimator show that about 25 percent of what they now make offshore and import would be more profitably reshored.
Against this positive backdrop, there’s room for optimism.
Bart Taylor is a Moss Adams BDE and MFG Insider contributor. Reach him at bart.taylor@mossadams.com.
How one Austin machinist is pushing back on America’s job-shop habit, one project at a time
/in General/by Bart TaylorAmerica’s precision machinists are searching for balance. On one hand, the business of contract manufacturing has become a lowest-cost, shortest lead-time proposition (read how, in space procurement).
On the other hand, when provided room to operate, companies are leaning-in to engineering, to design-to-manufacture, to an operating ethos that values quality and acumen and technology and everything that goes into being globally competitive. All things that differentiate American suppliers.
Fortunately, more companies are getting a chance to manufacture a product and not just job-shop a part. Domestic production is in favor, and a new generation of manufacturers is busy reinventing US industry, in a flurry of eye-catching products.
Daniel Hester, founder and CEO of Austin-based American Precision Engineering (APE), leads one of those companies. Hester maneuvered APE into an opportunity to design-and-build the aptly named “Universal Lift System” for one of America’s top VTOL aircraft manufacturers — and the project provided his company an opportunity to do what it does best.
“It was a wheelhouse project for us,” Hester says. “There were a lot of engineering challenges — and we have a lot of experience with lifting attachments and developing lifting equipment and material handling. Engineering and designing a solution and then being able to build it for them is what we do best.
“But we’re also this scrappy and nimble company, and it enabled the customer to cut out the middleman and work directory with us — and that’s no small thing,” Hester says. “Our customer is building VTOL aircraft — they have significant design and manufacturing challenges in their products; they didn’t need an additional challenge to design a lift system and figure out how to build it as well. And that’s where our value came in.”
The lift system, which the Austin Regional Manufacturing Association (ARMA) recognized as the Coolest Product Made in Austin, plays a role both in aircraft assembly — like affixing wings — and with lifting key components like batteries into the fuselage.
“So, the premise with the universal lifting system,” Hester describes, “is a core platform that then has a modular set of tooling that can be used for a variety of manufacturing uses. It’s a mobile platform with a vertical actuator; it opens up a lot of uses, especially in aviation.”
APE’s prototype was a hit. The company is already working on building several production units.
But as great as the ULS turned out, the subtle way that Hester’s team turned a procurement request into a demonstration of capabilities is an equally compelling outcome. “In the end, it was solving a very complex geometry problem — how can we figure out how to get all this functionality into a very small space from what essentially began as a crayon drawing? To be trusted with that process means everything,” he says,
“Consider the alternative. What we often see is that a customer will design something, give it to us and basically say, ‘how much to make this?’ The cost is often astronomical — and we tell them why. They go back to the drawing board, and they bring something back again. But it’s the same price for a different reason,” he laughs.
“They quite often end up throwing that part ‘over the fence’ (to offshore providers) to shop on price, when the better approach would be to hire a design-to-manufacturer like us. We’re involved from the outset, but then share in the rewards of the value we’re created,” Hester explains. “And when I talk to companies that are like, ‘oh, we send this stuff overseas,’ I’m just like, ‘how do you sleep at night? You’re literally slitting your own throat.’”
This self-defeating behavior, where companies wish there were more capable domestic manufacturing options, only to perpetuate offshore supply chains, is maddening — but also a habit that’s hard to break.
“We have Protolabs and Xometry and Paperless Parts and other companies that are aggregating quotes from so-called ‘independent companies’”, Hester says, “but what it’s doing is putting this massive amount of market pressure on price and not so much on quality. If you’re making something in your garage, that’s great. But I don’t know if it’s good long-term for a business like ours.”
Moreover, “We need, as a country, to build companies and infrastructure to be able to manufacture high-end domestic products at a globally affordable price,” Hester adds.
I’ll finish the thought: an important step is to reimagine procurement, not just production, in a way that enhances rather than diminishes the attributes of America’s new generation of capable machinists. Quality not price, prowess not profits, where community matters.
Hester’s team at American Precision Engineering, and a hundred others like them, offer a path forward.
Bart Taylor is a Moss Adams BDE and founder and former publisher of CompanyWeek manufacturing media. Reach him at bart.taylor@mossadams.com.
Winners and losers from Oxford Economics’ report on manufacturing job growth across US metros
/in General/by Bart TaylorUS manufacturing ebbs and flows across multiple industries. For communities intent on matching economic assets with emerging opportunities, the future is bright.
Sometime in April, if it hasn’t happened already, US manufacturing employment will surge past 13 million total jobs for the first time since November 2008. Back then, manufacturing was in a free fall from its all-time high in May 1979, when the sector employed almost 20 million Americans — the most ever.
But US manufacturing’s modern iteration is different, its industries varied from 1979.
Oxford Economics is helping us sort out manufacturing’s new personality with its recent analysis of manufacturing job growth across industries – in this case the five sectors (I’ll use ‘sector’ interchangeably with ‘industry’) leading manufacturing’s employment comeback.
The sectors are automotive, computer and electronics, food and beverage, aerospace, and pharmaceuticals. The cities benefitting most are:
Here’s the data, charted (click here for a bigger graph):
Aside from the obvious top five, here’s my take on winners and losers from the report:
Winners
America’s food and beverage ecosystem is a juggernaut. US F&B manufacturers added 400,000 jobs in the 2010’s and today, most every US metro is home to an innovative, increasingly automated F&B sector.
The community is an innovation machine. It’s also local, it’s well-funded, it’s authentic most of the time (Expo West was a greenwashing festival), it supports rural redevelopment and farmers — and it’s increasingly automated. It all adds up to growth.
Everyone hates on California. To listen to its critics, California’s business community, led by an exodus of manufacturers, is being hollowed out by EVs and bullet trains and taxes and DEI.
But if manufacturing is defined by its diversity, the cross-industry panoply developing here leaves it well positioned. From aerospace in Los Angeles, to “technofacturing” in the Bay Area, to a state-wide automotive supply chain second to none, if California can get out of its own way, manufacturing may bring the besieged state all the way back.
It will be fascinating to review this same chart in five years. What’s happening in south-central Texas may reshape US manufacturing for a generation.
Tesla’s enormous Austin factory is one giant magnet for new business – but just a few miles to the northwest, Samsung is anchoring a semiconductor ecosystem to rival any emerging industrial community in the US – including its TSCM/Intel counterpart rising in the Arizona desert.
Dallas is a city playing to its strengths. Diversity is a social and economic calling card here – and manufacturing is both a beneficiary and an engine of growth. Dallas doesn’t get the manufacturing headlines of its Texas neighbors, but numbers don’t lie in this case. As in #1.
Much like Texas cities, Phoenix is opportunistic, building a business-friendly reputation on available real estate, a population influx, and deliberate strategy to embrace manufacturing. It’s not so much that one attribute or another is a draw; it’s that combined, the sum of the parts happens to align with the needs of manufacturing companies in specific industries.
The key is being deliberate around packaging-up community assets to pursue new manufacturing opportunities in lieu of others.
Losers
On one hand, it’s hard to label an industrial epicenter like Chicago, as a loser relating in anything manufacturing-related – and it’s in the top five on this list.
But are its modern attributes lost in its size and reputation? A giant in agribusiness, chemical and pharmaceuticals, fabrication, and way more, it’s small business community of manufacturers, across multiple industries, is arguably the most compelling ecosystem in the US.
Chicago must aspire to be #1 on this list, the national leader in employment growth. Full stop.
Denver has no such aspiration, and it shows. Its food and beverage sector including a capable and diverse co-manufacturing ecosystem is a national draw for CPG companies, money, and talent (see above), but community leaders here are enamored with the tech industry.
That’s not a bad thing. The plan to chase tech will pay off. Meanwhile, as Denver leans in to a lifestyle-and-high-tech-or-bust approach, Huntsville, AL, its Space Command rival, leans into creating aerospace manufacturing jobs, and today Denver lags behind its more ambitious, smaller counterpart. It says a lot about Denver’s priorities.
Even if Seattle’s diminished aerospace sector can be chalked up to the struggles of its embattled icon (more on that next time), it’s still disappointing that the town’s fabled innovation ethos isn’t translating to more robust growth, to a maker-community jobs engine. Yes, much is percolating in food and beverage as locavore trends are as pronounced here as elsewhere. But this compelling city, as with others here in the L column, will hopefully show better in the next five years than they do now.
Manufacturing beckons. Who’s in?
Bart Taylor is a BDE at Moss Adams and founder and former publisher of CompanyWeek media. Reach him at bart.taylor@mossadams.com.
Space holds promise for small manufacturers, but modeling success is proving as challenging as the missions
/in General/by Bart TaylorHere’s how Primes and the companies that fly can make life easier for suppliers
If “Prime” contractors like SpaceX and Lockheed Martin, along with companies like lunar explorer Ultimate Machines, are the public face of America’s new space economy, contract manufacturers and other suppliers to the industry are the glue. Their parts comprise the systems that fly. Without them, without an industrial base of suppliers, there is no burgeoning space industry.
But in key areas — like national defense — it’s an industrial base already in crisis. The National Defense Logistics Agency (NDIA) estimates that the defense industrial base has declined by over 40 percent in the last decade — over 17,000 small businesses in the past five years alone.
There’s no mystery as to why. Government contracting — Department of Defense contracting — is notoriously hard. Fewer entrepreneurs are launching manufacturing companies. And for a new generation of business leaders passionate about manufacturing, other opportunities beckon.
Including space.
But the “space base” is already showing signs of strain. Turns out that space procurement is its own animal. Volumes are lower than traditional aerospace contracts — orders are smaller. Money is also tighter — there’s more upstart commercial work. Turnaround times are truncated. Uncertainty is the rule.
Even its most successful operators are wary. Hernan Ricaurte, principle of Ricaurte Precision Inc. (RPI) and a growing supplier to the space industry, told me, “Working with space companies requires us to be agile given the NPI (new product introduction) to production requirements and tight schedules. It’s an industry,” Ricaurte says, “that’s not for the faint of heart.”
Justin Quinn’s Focused on Machining was an early entry, perched within Colorado’s space-friendly Front Range. “I mean, for a shop like ours, capacity is always the issue.
But it’s not with this type of business. It’s not long-term capacity. In fact, they don’t want to know what you’re doing two months from now. They want to know what you’re doing in the next two weeks,” he laughs. “Parts manufacturing isn’t a two-week proposition. So, that’s where we see the hang up now,” Quinn adds, ” there’s just not a lot of time to react.”
Quinn’s persevering, as is Mike Sneddon, CEO of SG Aerospace and also a space-industry supplier with clear-eyed views of the ecosystem. I asked Sneddon how he’d launch a contract space manufacturer today. “The only thing you would do is consider it a secondary business or a subsidiary of a current company,” he says. “There’s just no way that you could sustain these [company] conditions in any type of a business model, at least in a business that lasts.”
Sneddon speaks from an enviable position. SG Aerospace was invited to be a supplier to Artemis — NASA’s ambitious program to land the first woman and first person of color on the Moon, explore the lunar surface, and lay the groundwork for sending astronauts to Mars. SG has unique talents. “We do a lot of titanium and stainless — hard metals,” Sneddon says, “that kind of gets us in the door.”
Space is a means to an end for Sneddon, where it’s less than 5 percent of his current business. “Space is by far the hardest. We were trying to use space as a stepping stone into different opportunities, to be able to say ‘Hey, we’ve tackled space, and we’re good at it.'” His Artemis work should validate his approach.
All of this to say that the space industry would do well to avoid the pitfalls that plague procurement in defense-related aerospace and aviation, to attract, not repel, the quality suppliers it needs. Both Quinn and Sneddon have suggestions.
“I think SpaceX has kind of hurt the industry a little bit, as they have this ‘I need everything tomorrow’ kind of mentality,” Quinn says. “It’s becoming the kind of industry that if you say, ‘I can’t get to that right now,’ they won’t hesitate to go down the road and find someone that can. I’m not sure that’s in the industry’s best interest.”
Sneddon sees it similarly. “We understand the need to do good, solid work, and demonstrate we’re passionate about the industry,” he says. “But once you’re in, and you’ve proved yourself, the primes need to [provide some certainty], to establish a time frame and say, ‘OK, give us everything you have for two years, and we’ll set aside work to keep you guys busy and successful.
“It’s already happening with some government contracting, where specific contracts set aside work to keep suppliers engaged and motivated — but still required to meet their commitments,” Sneddon adds. “It’s not a freebie. Just make sure you support suppliers while we make space work for us. Or else many will go under.”
Space missions are hard enough. But in the industry’s rush to be first, highest, and farthest, once again, the uber-important industrial base is now vulnerable. Those that fly, and grab the headlines, would do well to ensure the “space base” prospers.
Bart Taylor is a BDE with Moss Adams and founder and former publisher of CompanyWeek manufacturing media. Reach him at bart.taylor@mossadams.com.
What in the World Is Going On at VF Corporation?
/in General/by Bart TaylorTwo plus two equals three at Denver’s influential apparel House of Brands
A year ago, I forecast tough sledding for VF Corporation, Denver’s multi-billion-dollar apparel and outdoor industry amalgam. The headwinds buffeting most consumer-brand importers were transparent enough then and remain so today; among them are supply-chain disruptions that have turned inventory management into a guessing game.
But the earnings wreckage at VF Corp reported last week by the Denver Business Journal – a “$42.4 million loss in its fiscal third quarter on sales revenue that dropped 16% year over year to $2.96 billion,” ending in December last year and including the crucial holiday shopping period – has shaken the company and compelled CEO Bracken Darrell to, well, spread the blame. The most recent casualty was the messenger: Bracken showed the door to longtime CFO Matt Puckett after a broad purge that also included “a new top human resources executive… a new lead for the company’s commercial efforts, a new head of design…a new Timberland brand president,” and others in support of “new leadership” at other VF brands.
What’s unclear is whether any of the other reported personnel moves or other cash-saving tactics, like divesting in corporate jets and real estate, will improve the outlook for VF’s corporate collective. Not that its portfolio is lacking: Vans, Dickies, North Face, Timberland, and others, are singular, compelling brands that have manifested the emotional connection with customers that brand-builders pine for. Darrell acknowledged as much in admitting that Vans, down 28% year over year after a pre-pandemic boom, had been left to trade on past success. “We actually took our eye off the core youth audience that built our brand,” he said.
Darrell’s mea culpa may not be enough. Reuters reports this week that “a member of the founding family behind VF Corp is backing activist investor Engaged Capital’s push for board seats and faster change at the struggling owner of the North Face, Vans and Timberland brands.” VF’s share price soared. Darrell’s stock will hopefully follow.
Success will likely take more than cutting people and properties – the standard “turnaround” playbook. For one, forecasting a consumer business today is really hard; uncertainty is the operating norm. Steven Sashen, co-founder and CEO of Denver-based XERO Shoes, told me in a phone interview, “I don’t think anyone knows what the hell is going on. And if your entire story is based on growth, it’s a fool’s game – especially in the footwear industry, where there’s so many things that impact business that have nothing to do with you.”
Sashen cites footwear phenom Hoka as an example. “Hoka became really, really popular in the last few years, not because it became the running shoe everybody wants to wear or to run in, but because a whole other universe of (lifestyle) buyers suddenly embraced it.”
Reason number two: the more that brands (and holding companies) focus on financial decisions, on EBITDA growth, the farther away they travel from what Sashen calls “brand DNA.”
“When VF Corp made the move to Denver, there were a number of those brands that didn’t want to move, believing that it would be a challenge just to manage the human factor and other brand-related factors,” Sashen says. “Take Altra, a brand I’m most familiar with. They’ve dramatically changed the DNA of that product.”
“Unfortunately,” Sashen continues, “companies see what’s happened through network effects, things that happen almost accidently, and their response becomes fundamentally based on financial goals that may be antithetical to what is beneficial for the brand, let alone a ‘house of brands.’”
Bracken Darrell’s roundabout acknowledgment of an existential threat to Vans – a consummate brand – may signal that not everything at VF Corp starts with share price. A founder rejoining the board might also have a positive effect on the company’s relationship with customers. Founders are invariably tuned in to things that define what a brand or business stands for. It seems that parts of Darrell’s business have lost that connection.
Darrell would also do well to revisit the company’s brand promises. “LIFESTYLES. NOT LABELS,” VF’s website proclaims. “Our iconic brands are more than just labels. Each one is uniquely authentic and has earned its place in the lives of millions by consistently exceeding their expectations with amazing products that enable them to live sustainable and active lifestyles.”
Every aspect of the respective Jansport, Smartwool, Dickies, and Timberland businesses were at one time interrelated with the others. Design, manufacturing, packaging, selling, and distribution all happened with a purpose and trajectory that led somewhere. Today, the ethos, the vibe, the adventure embodied in the products, seem lost in offshore manufacturing, in container ships, in the ever-more-slim margins that importers like VF Corp manage. Rumors of a new 60% inbound tariff don’t help.
My take on this? Keep your promises. Lean into your brands, to what makes them uniquely authentic. Customers will respond. And for a house of brands like VF Corporation, two plus two can again equal five.
Bart Taylor is a BDE at Moss Adams, and founder and former publisher of CompanyWeek manufacturing Media. Reach him at bart.taylor@mossadams.com.
XERO Shoes is finding success with an ever-expanding, direct-to-consumer line of “minimalist” footwear. Visit them at www.xeroshoes.com.
Co-manufacturers are a catalyst in Colorado’s high-flying food industry. But here’s why brands are struggling to find right-sized manufacturing
/in General/by Bart TaylorTakeaways 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