ReScale is Changing the Co-Manufacturing Game for Food Founders
(Listen on Apple or Spotify. Full transcript below.)
Ever wondered why finding a co-manufacturer feels impossibly difficult?
Sarah sits down with Julia Megson, CEO of ReScale, who reveals the shocking reality that co-manufacturers receive about 100 inquiries monthly but only work with one to two brands from that entire pool.
finding a co-manufacturer should be treated like relationship building, not shopping
Julia's unique background – from auditing over 100 contract manufacturers at Trader Joe's to founding a tech platform specifically for emerging food brands – gives her unparalleled insight into what actually works in co-manufacturing partnerships. She breaks down why this process is more like sales than shopping, and how treating it as a relationship-building exercise can save you up to 30% on production costs.
templates & proven strategies increase co-manufacturer response rates by 55%
The episode uncovers game-changing strategies most founders never hear: why you should delay your co-manufacturing search as long as possible to strengthen your negotiating position, how to use simple email templates that achieve a 65% response rate (compared to the typical 10%), and why creating competition between manufacturers can dramatically reduce your costs.
the truth about co-manufacturer minimum order quantities and how to present your brand to overcome them
Julia tackles the controversial topic of minimum order quantities, revealing they are often negotiable barriers rather than hard equipment limitations.
For founders currently overwhelmed by demand but hesitant to make the manufacturing leap, she provides a clear framework for knowing when you're ready and how to present yourself as the kind of partner co-manufacturers actually want to work with - no matter your size.
This episode delivers the insider knowledge that could transform your approach to scaling production and building the manufacturing relationships that will fuel your growth.
___________________________________________________________________________________________________________________________
Episode Timeline
00:00 Introduction to Co-Manufacturing Challenges
05:51 Julia Megson's Background and Experience
10:47 Insights from Trader Joe's Operations
15:04 Understanding Contract Manufacturing
21:21 Emerging Brands and Co-Manufacturing Solutions
24:27 Identifying the Gap for Emerging Brands
30:13 Streamlining the Co-Manufacturing Process
36:40 Navigating Relationships with Co-Manufacturers
44:39 Building Redundancy in Your Supply Chain
Full Episode Transcript
You're listening to the Good Food CFO Podcast. I'm your host, Sarah Delevan, joined as always by our producer, Chelsea Stier. Hey, Chels. Today, we are talking about something our guest calls a major pain point for most small and medium CPG brands, and that is finding, negotiating with, and managing your co-manufacturing partnerships. Yeah, Sarah, this episode is chock full.
of great advice, insights from your guests to food founders out there. But before we get to that, I have a new review. Awesome. Yeah, this is an Apple review and it comes from Samantha, who is the founder of Sequoia Nut Butter. And Samantha said, grounded real advice. I found the Good Food CFO through a talk at the Intense Conference, which we've heard about here on the show.
And then again, in the episode with Christopher from Benny Blanco Tortillas. As the founder of Sequoia Nut Butter, it's so refreshing to hear thoughtful, realistic business advice that doesn't push the do-it-all mindset. And Sarah brings honest context, helpful tools, and encouragement to build the business on your own terms. So thank you for creating this space. It's exactly what food founders need.
That is so nice. I thanked Samantha on social media. And so I'll express my gratitude for this really beautiful review again here on the podcast. You know, we've said it before, Chelsea, it means the world to us to know that what we're doing is reaching people and that it is having a positive impact. That's what we're trying to do. And I feel like, you the podcast is sort of scratching the surface and then we've got the tools and the resources and the other ways that we can help.
founders. So we want to meet you wherever you're at and support you. So thank you so much again, Samantha, for this awesome review. Yeah, agreed. Thank you, Samantha. And if you're listening and the content that we share with you today resonates, we would love for you to share this episode, rate it, review it on Apple or like Spotify and just help us get the word out there because we want to reach a million food founders as we've shared here before.
So Sarah, as we teased earlier, your guest today is well-versed, very well-versed in the world of co-manufacturing. Yeah. So today you guys are going to hear my conversation with Julia Megson, who's the CEO and co-founder of Rescale, which is a software startup that helps food and beverage brands scale their supply chain. So Julia has had lots of experience. You'll hear all about it in the episode.
in supply chain logistics specifically as the former director of ops and item review panelists at Trader Joe's. She was also the head of category management at FarmEgo, which was an online farmers market model back in the day, and supply chain and commercialization consultant for emerging CPG brands. So as you said, and Angela here, she has lots of experience in meeting with, negotiating with, working with co-manufacturers and
We've had discussions here on the podcast about co-manufacturing before. So if you're listening, you're like, why are we talking about this again? Well, number one, it's such an important piece of the financial puzzle for growing food brands, right? You've got to determine if you're going to self-manufacture. If you do that, are you also going to manufacture for others and why you might do that? Are you going to completely outsource your manufacturing to a co-man, right? And of course, can you get your products produced and delivered at a cost
that works for you and your growing business. So there's that financial component. There's also new insights that Julia is bringing to this conversation, ones that I've never heard before, but come along with those aha moments. And I'm really excited for you guys to hear what she has to say. Yeah. I mean, right off the bat, she describes finding co-manufacturing as really being more like a sales process than
you might think or have thought in the past. Yeah, without giving too much away, one of the most stunning stats that she shares in the episode is that co-manufacturers receive on average about 100 inquiries a month and end up working with maybe one to two brands from that 100. understanding that, knowing how to reach out to them, knowing how to speak to them, knowing how to develop a relationship
sell them on your potential, let's say, and really utilize a process that has proven to be successful. I've not really heard anybody talk about it in the way that Julia is in this episode. So I think we should just get to it. Yeah, that sounds good. Let's go.
Hey there, it's Sarah. If you're enjoying the podcast, I want to invite you to become a BABOYOT member. It stands for building a business on your own terms.
and your membership directly supports the continued production of this podcast and helps us reach our goal of supporting 1 million food founders. As a member, you'll get access to our live coaching events, have your brand featured right here on the podcast, be the first to test our new tools and receive a 10 % discount on all of our tools and services when you choose an annual plan. Join fellow successful founders at thegoodfoodcfo.com slash baboyot. That's spelled B-A-B-O-Y-O-T.
Together, we're changing the way that food business is done. Now, back to the show.
Julia, welcome to the podcast.
Thank you, Sarah, for having me. I'm so honored to be here.
I'm so interested in talking with you today. You've got a really interesting sort of food industry background that landed you in a position to co-found a company called Rescale. That's And I want to get into like all the details.
Sounds good. Yeah, I'm excited to share.
Cool. So I'm going to go way back first and just talk a little bit about like how did you get into food? What was your first foray into the industry? What did that look like and how did it sort of evolve over the years?
Yeah, sure. My grandfather was a farmer.
Okay, well that's a great, that's great.
Maybe that's a little too far back. But I always had this fascination with food. I was always interested in farmers markets and local food. And I really always had a brain for logistics and processes. And I just had a big fascination with that. My dad was obsessed with Costco as a child. that was just like an interesting grocery stores. I didn't really plan on it. But once I graduated undergrad, I went to University of Vermont, which is also a very agriculture associated university.
And I found myself looking at companies that were supporting small businesses. I just wanted to have an impact in that way. And I landed that for Amigo within my first year of graduating undergrad, which crossed both the food interest and the small business support interest really quickly.
Yeah, that's so interesting. What did you do at FarmEgo?
So for background, those who may not know, Farm Ego was a VC funded company that was an online farmers market model, similar to Good Eggs, which still exists. We were bringing local farmers markets into sort of a digital marketplace. And I was a very early employee there as employee number 10. I was there through the series A and the series B fundraisers. And I did about everything you can do.
My original job was cold calling farmers to sell them CSA software. Wow. Not the most receptive sales audience.
even like email so I can't imagine.
They love talking, yeah, it was just like a funny intro. But the software business was the first thing that FarmEgo started with. And then they realized we need to, we need to make this accessible to more people. CSAs don't work for everyone. So they started the online farmers market model. And what that meant initially was building two sides of the marketplace. So building out all the farms, trying to have a really robust assortment. I was based in New York city, which as you can imagine, it's pretty limited in the winter time. But we were also in San Francisco at the same time.
And so I was in charge of that entire supply side. So I was finding the farmers, negotiating with them, thinking about our merchandising strategy, and then actually like going, setting up the warehouse, hiring the pick and pack staff. Obviously I outgrew, you know, managing all of those things pretty quickly, but over time, I ended up being more focused on supply chain merchandising. And I was the head of that team of five that was managing the market in San Francisco, New York, and Seattle.
Wow, amazing. early employee number means wears lots of hats. It sounds like you definitely did that. Exactly. I know that you eventually moved on to Trader Joe's. Was that a direct move from Farmigo to Trader Joe's?
Yes, it was. So Farm Ego was unable to close their series C. About the same time Good Eggs, you know, went, they were in five cities and they clawed back to one. So it was just sort of a, a season of life of that model. Unfortunately, I had had this great experience, you know, almost directly out of undergrad of disrupting the food industry and trying to make food, local food more accessible. But I realized I didn't know anything about the food industry from a company who had done it before. So.
As I thought, where can I learn the most about what the food industry looks like from a cool, you know, like a great company with that's well respected and Trader Joe's was just the top of my list. And I was lucky enough to land that role as director of operations at their Boston headquarter office.
Interesting. Tell us a little bit about what that role looks like and what your responsibilities were.
Yep. Trader Joe's is a very lean organization, like kind of surprisingly so when you get under the hood, there's only about 250 people in the entire corporate office. Whereas they have, uh, when I was there about 500 stores. So just a tiny proportion of people are in headquarters. What that meant for me is that I was overseeing the supply chain. So everything from vendor to store for the Eastern half of the U S and I was, uh, two steps down from the, the CEO.
Okay.
Yeah, so a very broad job, but I had a lot of project specific roles too that were a little bit more narrow in focus.
Yeah. I mean, I have so many questions about Trader Joe's, but that's not what we're here to talk about. No, no. I'll reserve those for maybe like NSI. Okay. So you were at Trader Joe's for four years. You're essentially working in supply chain management, and sort of coordinating these two sides, as you said. What are you learning, identifying, starting to understand that you didn't get a look at
at Farmigo. And I'll share with you similarly, when I was in farmers markets, had my own local food business, I also was only seeing one part of the industry and how it really worked on a local, regional level. And it wasn't until I moved into a buying role for a much larger company that I started to see the other parts and how food moved across the country, whereas before I was seeing how food moved within.
estate. So I'm really curious what you were gleaning and kind of seeing for the first time in that role. Yeah.
That's a great question for just to anchor it and something I'm a very visual person. So I always like thinking about things in that way. At Farmigo, I was in a five to 10,000 square foot warehouse, maybe 20 at our max. And at Trader Joe's, I was in a 600,000 square foot warehouse. And that was one of many, many warehouses. So just the scale was enormously different. So that was one thing that I really learned and got.
to wrap my head around, like seeing it, the number of trucks moving in and out every day. It's mind boggling. But the movement part that you're speaking about, I think a lot of people learned this lesson during COVID, unfortunately, but our food is so on demand when it's a large, I mean, in any scale, but you think, I don't know why, but you just sort of think, cause there's all of this food in Costco or Trader Joe's or Hannaford or whatever your grocery store is.
that there's a lot of like backup and backup and backup, but it's so quick. Like it's coming from the field in California, a lot of your fresh produce and fruits, especially going on the truck, landing in the warehouse for, know, very briefly to make sure that the customer can get it as fresh as possible and then going to store. So when you have these big hiccups like COVID, as I mentioned, the disruption is so massive, just losing 24 hours, 48 hours of it's like this constant wheel that's spinning and anything that throws it off.
really messes up the whole cycle.
Yeah. I'm just thinking now the footprint of a Trader Joe's is not that big. I mean, I'm in Los Angeles, so we have a couple of them. Obviously, it's a big joke at this point, how tiny their parking lots are. the buildings themselves, when you go inside and you're shopping, I don't know if other people pay attention to this, but I take a peek around the back and sort of like, okay, what of this building is not retail space? How much they…
have or don't really have for holding inventory there. It doesn't seem to me from what I've seen, they have a large amount of space to hold stock. So they would have trucks coming in, like any grocery store, every single day replenishing their food.
Yep, they absolutely do. they, Trader Joe's, it's sort of published that they turn the most products per square foot of any retailer in the industry. So they don't have a lot of back stock because the product, they're moving their whole store so quickly. So it's just coming in and going out and coming in, going out. And then you take that back to the warehouse and every, you know, truckload of lettuce is coming in and then going out to 25 stores in the same day or next day. Yeah. Yeah. It's really wild once you...
gets your mind around how much is moving, how quickly it's moving.
Yeah. And from our sort of like, you know, research and pre-talking before coming to record this episode, I know that, or as I understand, part of your job was also auditing contract manufacturing partners at Trader Joe's. Can you talk a little bit about what contract manufacturers are for anybody who maybe doesn't know, and then talk a little bit about what your role was and kind of what that looked like?
Yeah, absolutely. So that was one of my more focused projects and outside of, you know, just the general like oversight of operations. That was to be eyes and ears on the ground for category managers, category managers, like a, you know, head of the buying group who manages, let's say produce or deli or something like that. There's just not as many of them. As I mentioned, there's not so many people in the corporate office. So they really needed the extra support to go visit the manufacturers and report like.
How's it going? they have space to grow with us? Are we sort of maxing it out? Just getting our hands around what's happening. To take a step back, what is contract manufacturing? So Trader Joe's has private, what's called private label products. That's everything in their store that says Trader Joe's on the front of it, which is almost everything in the store. They don't own any manufacturing equipment or facilities themselves. So they contract out with manufacturers. This is the same for Kirkland brand, Whole Foods 365, any retailer that has Target brand.
Okay.
that has their branding on it. They're finding manufacturer. They may be using a recipe that the manufacturer already makes, or they may work on a recipe together to produce their specific product. And then they buy from them with that brand, and they're the only person who's buying that specific packaging and or recipe in that format. So Trader Joe's, as you can imagine, because they have so many different items, they have so many different contract manufacturers all over the world.
One of my projects, as I mentioned, was to go visit them. And I visited over a hundred contract manufacturers. That's all over the country and some in Canada as well. And I just saw so many different types of manufacturers. Some are these, you know, what you might imagine, these chrome, shiny robotic arms, moving baguettes into boxes type of operations. But many of them are also these mom and pop businesses that have grown alongside
their Trader Joe's or like their Target, know, whichever is their their big retail client over the years. And they might even have their own branded product that they sell as well. So I really got this insight that manufacturing, whether it's your brand or someone else's brand is very fluid. And people, people change their manufacturing setup over time. A lot the Trader Joe's and the Whole Foods 365. That's sort of like a cut and paste formula. But as an example, when I was visiting
A facility that did jerky for Trader Joe's. noticed what I perceived to be an emerging jerky brand, which just from their branding, would assume they're doing it themselves or like on a farm somewhere, but no, they're in the same facility that Trader Joe's is using at the time. That really opened. was like a light bulb moment of, there's just, there's this big fluidity happening in the manufacturing space. It's not as clear cut as you might think from the outside as a consumer.
Yeah.
Yeah, I think I'll add to that too. We've got in our community of brands, folks who have their own product that is emerging and growing, and then they are manufacturing a product under a different name, under a different label. They're still making it. They own the recipe in many cases, but they're selling it through different channels. They have a different market, and it can be for reasons like
Maybe you've got like your core recipe for your brand and your product, and then you you change an ingredient or maybe one is like an uber healthy version and one is more of what I'll call like a mainstream kind of version of the product. It uses all of the same equipment to make and pack and all of that, but it's two different products or three different products. And then you can reach different sets of customers, you know, as a way of that. It's a great way to.
for some people who have their own manufacturing facility to generate additional revenue, to have different like channels, right? So you're not just relying on the growth of your own CPG brand for your revenue and to pay the bills, but you're also sort of supplying to other folks as well. So it's a really, it's totally interesting all the different ways that it can look and whether you're manufacturing your own product and other people's or you're having your product manufactured by someone who's got their own product.
and is manufacturing for others as well.
Yeah, it's very, it changes all the time. I have a few different examples that I can share that will make the point a little clearer for people listening. This was maybe 10 years ago, but it's something I learned through customer discovery and talking to people who worked in the industry. When Popchips was starting, they've been bought since by Pepsi, I believe, they had the machinery that would produce those triangular puffed chips. Those machines sort of exist on the million unit level.
Yeah.
There's no, you can't scale up into that machinery. So back in the day they would produce for their own brand. And that was their goal was that they would need all million units, but they didn't, they needed, know, a hundred thousand units or something to start. So they would command for all these different emerging brands that were trying to target this healthier snack segment. And over time they grew their own market because they wanted to, maximize their machinery for their own product line. But they also do a really healthy command business.
So then they think, you know, they get to a certain point and they think, maybe we should bring on 2 million units because we have this, this healthy business and all manufacturing tends to grow in these very clunky large ways. And that's why people get so creative. Like a brand will co-manufacture their largest flagship product, but then they will continue to have a commissary kitchen or a small R and D partner to help them on innovation and emerging lines. is just, it changes all the time.
Yeah, I love that we're sort of like opening the conversation to this because we talk a lot about building a business on your own terms and I think this is an area where your manufacturing, your setup, the way that you're operating, whatever it looks like, it doesn't have to look like someone else's and it might not. like the Popchip example, like there may be a very good reason that, you know, their model was what it was in terms of manufacturing for others and it makes perfect sense.
Anything else you kind of want to talk about as far as like how it might look for…
For brands, yeah, sure. Yeah, for emerging brands, the story that we see most often is they're producing themselves in a commissary kitchen really to get that first, you know, 10, 20 retail stores or establishing a direct consumer business, whatever their model looks like. And then they seek out a co-manufacturer because it's so capital intensive to go from commissary kitchen to producing their own. So that's typically the customer who we work with at Rescale is that brand going initially from commissary kitchen to their first
co-manufacturer. However, a few years later, you might see that they're actually going to open their own facility, produce everything themselves, and then even potentially become a co-manufacturer as well.
Three, four years? Four and a half, I think. Yeah. Okay.
So are you at that point starting to think about, while you're there, about this idea for rescale? where does the identification of this need for emerging brands start to come to you?
Yeah. Great question. I had so many ideas once I left Trader Joe's and I went to Trader Joe's to get this like basically a college level education and supply chain, which I totally did. And I absorbed so much information, but I always knew that I wanted to solve something because I come from that from ego, you know, startup sort of environment. And I really loved that we were like fixing something that felt broken at the time. So I just started, I had so many ideas, but I started with conversations with emerging food brands.
I loved working with the emerging brands when I was at Farmigo. I had lost touch with that when I was at Trader Joe's, obviously, because most of them are much larger scale brands when they get to be a manufacturer for Trader Joe's. So I talked to over a hundred brands and I said, what are you struggling with? What are you paying to solve right now? What's painful? And I had a couple ideas and I was relentlessly led back to this space that I happened to have a ton of experience in.
And so it really clicked for me like, okay, this is a real problem and I am the right person to start working on this because my background is just such a great overlap with what they're experiencing.
So can we dive into a little bit of like what did it look like in the early days of you like starting to solve this problem? Did you know from day one that's like, we need to solve this with technology and we know that it's a connection issue in terms of like brands finding manufacturers. What was swirling and what were you thinking about?
So I have a million anecdotes at this point, but a typical pain point story for a brand to me was they went out searching for a co-manufacturer and they tried to do it themselves. They come up empty handed or they have one vendor that's just not great and they struggle to keep up with their sales. That was a common story. Another is that they would pay a consultant and that typically turns out pretty well, but it costs in the range of
$25,000 to $50,000. So that's just shutting out a lot of emerging brands. So we felt there was this big white space in the middle. I had a lot of experience doing this kind of process. I did a brief stint in between my Trader Joe's and my Rescale founding as a consultant doing this for smaller brands. So I also got to like this early feel that pain point of not being Trader Joe's walking into the co-manufacturer, but being an emerging brand that is not the heavy hitter with the big sales numbers that you want to share with them to get their interest peaked.
So I knew that there's this big gap. You could try it yourself. You might turn out okay. It might be a struggle. You could pay the consultant, but there's this, there's nothing to help. Most people who are in the middle who are, you know, scrappy founders, if given a few tools can do it really well themselves.
Yeah. It's one of those things where it's not a lack of trying and there's not a lack of effort. I think I was reading an article about Rescale and you made a comment, you can't just go to Google and do a search for co-manufacturers. It's not going to be helpful. Much like farmers don't love email, I remember placing orders with farmers like, text me. Text is the only way you're going to get me. That's as advanced as a lot of the tech.
was and probably still is that a lot of farmers are using because they're busy and they're outside. Similarly, co-manufacturing, the vibe that I've gotten from a lot of clients who are going through this process is they have enough business. They don't need me. I'm small. They don't need to have a website advertising that they are co-manufacturing. There's just not a lot of access to the information of who's even out there.
That's right. Yeah. Google information is very rough. I think when you hire a consultant, often what you're just paying for is their Rolodex more than anything. It's just hard to know who these people are and where to find them. Trade shows are a good option, but they come around once a year and they cost thousands of dollars to attend and get the hotel and all of that. So yeah, it's just the information is not indexed well.
And one of the first things that we've done on our platform is just index information. So we have over 7,000 manufacturers in the US and Canada where we have just put a comprehensive profile together. And anyone who's done the process before, when we give them the demo, they are like blown away. They're like, this would have taken me weeks to find what they make, what they package it in, their FDA recall history. Just getting this sort of like picture of this manufacturer is very...
It feels like it's stuck in the 80s or something. It's just very, very outdated. that was a, that was an easy place for us to start.
Yeah. So you've got this data index on the website. Are those folks that are like, when you call them or reach out to them, they're going to respond? That's Or is that sort of still up in the air? That's a good question.
we've, we played around with the, with the business model and sort of the dynamics of the platform quite a bit. We've been around for about a year and a half now total since we like first started tinkering. hit on some of the things, but manufacturers typically are operators instead of sales and marketing people. They often receive about through conversations we've had, they receive about a hundred inquiries a month and they end up working with one to two.
Wow.
they're not out in the marketplace seeking opportunity. What they're doing is using their whatever internal system they've made up in their head to decide if you're worth talking to. So often that can be like, do you have a website? do you have a background that I should take seriously? Like, did you come from another CPG company or are you, do you have some sort of, you know, sales channel that you can plug into like an Instagram following or something along those lines? So they're just using this arbitrary system.
yeah, we have created this database and it is not the command isn't they are, they're verifying their profile, but they're not necessarily like going to respond fully. There is, there are a competitor platforms to us that have that. What we've heard are that if you submit a request, you'll get maybe one or two back. What we wanted to do is give you the full set of options and help you do it the best, like do the outreach, the best that you can.
Okay.
And so we've created templates and scripts that are really successful. This is the long answer short. People typically get responses on about 10 % of their inquiries, but using our very simple template, they get about a 65 % response rate.
That's amazing. And then it sounds like the process has been a bit easier because you've got the template. They're not thinking, how do I best communicate with this person? What do I do?
They have enough information to understand the project at a high level. Understand if it's going to be a fit. If they're going to refer you to somebody else, that's a great moment to ask them to do that. That's another trick that consultants use a lot of the time for anyone listening. If someone says no, ask for a referral always.
That's smart. That's really smart. Okay. So you identified – it sounds like through lots of conversations, you identified a primary issue that the brands are having. You also really understood how does it work for co-manufacturing, the fact that they're getting 100 plus inquiries in a month, the fact that they're just sort of doing the best they can to figure out who's the right fit for them.
initially compiled a lot of this data to help give as full a list as you can to brands who are looking for co-manufacturing. And you've got templates. What else do need to know about the process, the roadblocks that people run into and how rescale is either currently solving or working to solve?
Yeah, so that's great question. have, I would say our product in its current form has three main components. So we have the database, which is a great starting point. Then we have sort of a CRM that we built specifically for this process. So it's specifically meant to share out these documents that are kind of, you know, formulated, get your responses back, organize them really efficiently. Everyone who's doing this process makes this like bulky spreadsheet and we've just sort of.
streamlined all of those behaviors. And then the templates and the expert support is the other thing. So we help guide throughout the process. This is the step you should be doing right now. This is the best way to, you know, get to the next stage. and we're there for support as they need it when they're going. A lot of the times people just need to ask a simple question because they've never done it before. And they need that sort of security blanket of a person who's done it, you know, dozens and hundreds of times over.
Yeah. Is it a tiered sort of getting into the, like how the interactions happen or transactions, I should say, with those three main components? Is it sort of like a tiered access where you can sort of like get access to the database for maybe one cost and then you get access to the next level, maybe CRM at like an additional fee? Like how does that sort of work?
Yeah, all of the tools. the database access, the CRM and the templates are all included in our flat 299 a month fee. We wanted to make it super accessible for emerging brands. That was really the main goal of starting the company. When people want a tighter sort of like consulting light supports, they can upgrade into a higher cost tier just for like a month if it's important then or a couple months whenever it matters to them. And those services would be things like.
reviewing or writing your RFP with you. That's like the Bible document that you hand over to the manufacturer to build bids off of reviewing a contract together. Always you need a lawyer to review a contract, but it can really help to have somebody who's done it dozens of times before to say this is normal. This is not normal at all. I've never seen this before. Just again, like giving people sort of that the
security blanket when they need it to really ensure that they're doing the process well and they're not being taken advantage of because oftentimes we see brands coming to us because they were a part of a they did something because they didn't know any better. Like signed a exclusive contract is one that you'll see, unfortunately, or got their IP sort of mixed up with the manufacturer so they can't take the recipe elsewhere. It's those sort of things that we try to help them avoid along the way with
that they're
Yep, yep, exactly.
Tell me a little bit about the size of the manufacturers that you have in your database. know something you mentioned earlier is someone who's going from their own small kitchen or commissary to a co-manufacturer, might then take back, do their own manufacturing in the future. They might need to grow into a larger co-manufacturing facility. A lot of the brands that we work with are between
zero and a million dollars in annual revenue. And so going into a really large co-manufacturing facility, often don't have the need for such big volume orders that are required. And so we often find that they partner with much smaller, I'll call them boutique co-manufacturers who don't have contracts in some cases. Their contracts are very thin. And so I'm curious, A,
Do you have smaller co-manufacturing in the database to of kind of grow into and out of? And then how do you deal with if you do sort of the lack of a contract or really thin contracts from co-manufacturing?
Yeah, we have templated service level agreements, so those are available to anyone who's on our platform. I definitely recommend taking that if you have nothing else going on. There are so many handshake agreements still happening. It's wild to think that there's just no clarity on liability or anything. So yes, that was one of the first templates that we made available to any of our users. MOQs, that's minimum order quantity. This is this.
Nice.
terminology that a lot of people use and they think I have so many thoughts about MOQs. One thought is that co-manufacturers often establish whatever their MOQ is as a barrier, is like one of those check barriers that I was mentioning before. So it's like, you have a website? Do you mean whatever I've determined is the number at which it's worth talking to you? And that might not mean that that's the minimum amount their equipment can do. It might mean that it's at what
Financial point they will recuperate their cost of spending so much time talking to you It might mean that they just don't want to bother with a small brand They want you to prove yourself up to a certain revenue So what I'm saying is moq is helpful, but it's often not set in stone so if there's one thing that listeners take away from this call this podcast, it's that Talking to manufacturers is a sales process more than anything. It's much more
like finding an investor that's a good match, then going out into the market and shopping for a piece of machinery to produce your product. Like I mentioned before, they're just getting inundated with all of these leads. So they need to know that you are a hustler, that you're organized, that you're a great salesperson, you're seeing traction. They should actually see traction like between the first conversation and you know, the third or fourth conversation, like, Hey, I signed five new stores or I got into this new distributor. That stuff goes a really long way. And that's a lot of
sort of the baked in expertise that we put into our templates and our email scripts and call scripts that we provide for our brands as well. It's just making sure they're putting their best foot forward and presenting themselves in an expert in whatever way that resonates with their brand.
Yeah. That's such an interesting tip. I've never heard that before, but it makes complete sense. It leads me to my next question, which is how long should a founder expect this process to take from reaching out to X number of co-manufacturing to hearing back from maybe 65 % of them to actually working through the process? What does that look like realistically?
So it's really hard to answer that. I have one brand that just went from initial outreach to production in six weeks. And I have another brand that's on month 12. It's just so variable. The average, if I had to give one between first contact and trial runs is about three months. If you're doing everything, you know, staying on top of everything and they're responsive.
It's
Is the trial runs when things can really go either longer or shorter pretty dramatically. If they have to schedule an each trial run three to four weeks out and they're not meeting your expectations, you to do another one, that's when things can really take quite a long time. But if they nail it on the first try, can go pretty
And just to make sure we're sort of answering that, the other question I kind of baked in there, do you have smaller commands in your database? That's okay. I like to ask two questions at one time and make it difficult for people to answer.
Yes, we do have small commands. Many of the brands we've worked with are under $5 million in revenue. We've never had a brand that's not been able to find three to five options for them. I mentioned the MOQ being flexible thing at first because if you looked, the answer is when you're looking for the right size command is not to get down to the granularity level of like, can I do my product, my packaging, my MOQ, are they in the right state? You want to actually cast a wider net than you think.
amazing.
drive a little bit of competition and excitement into the process because then people might sort of, you know, flex a little on the MOQ if they feel like you are really organized and creating a good competitive process and that sort of thing.
Yeah. Yeah. So interesting. you talk about emerging brands being like who you are, you know, focused on helping. You just mentioned like under five million in annual revenue. Most of the founders who are listening to this podcast are between zero and one million in annual revenue. Is there anything that you want that specific audience and size business founder to know about this process or
Any key insights you think we should share with them?
I have so many sort of tips, but I would say the first one is try to hold off on a co-manufacturing search as long as is realistically feasible for your company. If you can come to them and show that you have grown to 100,000, 500,000 in revenue in a commissary kitchen, you're in a much better starting place than if you're coming with
zero dollars for a lot of the reasons I mentioned before they're going to take you more seriously. They're going to be more excited about your product. You're going to drive more competitive bids into the process and get better costing at the end of the day. That's my that's my first tip.
Yeah, I love that. I have a question that I think I hear some founders asking and they're like, okay, Julia, but I'm a one person show or I have a super tiny team and I'm doing the manufacturing myself and I'm trying to do the sales. I've worked with brands who their bottleneck is that they cannot keep up with the orders because they just can't make their own product fast enough. What do you say to that founder?
I have a couple ideas for that founder. One is if you fall into this category, there's this category of exceptions. So for example, we once worked with a brand that was they required HPP processing, pressure, pressures, pasteurization, um, processing, which is a really specific piece of equipment. It's very expensive and big and no one's, you know, buying that and putting it in a commissary kitchen or anything like that. That person has to start with a comment search. There's just no question about it. And there's a lot of cases like that that makes sense. If
Yeah.
You otherwise, I would say, put your best foot forward. If you have a background that's relevant, lead with that. That could be the thing that gets you over the hurdle. If you have interest, like sales commitments that are ready that you're, you know, wanting to meet, but sort of scared because you can't produce the product, lead with that in the conversation. And the other thing is you can also have conversations early.
and then work through the process showing your traction over those three months, like I mentioned. I think that's if you start with very little production now, but you're showing growth in the couple of months that you're actually onboarding them, that can go a long way as
Yeah. What I'm really hearing a lot from you is this is a relationship. Yes. Yes, it's a sales process, but it's also a relationship process. a certain level of transparency that I think if you're building a relationship, which is a very serious relationship with a brand and a co-manufacturer, right? These are the people who are making your product. Yeah, high trust. Right. Yeah, you have to trust them. You have to be able to communicate with them, right? The success of your brand
is partially in their hands. And the success of your product, you know, being made correctly, being produced on time and getting delivered to where it needs to be delivered, lies with them. And so as with I think many or all relationships in business, it's like they have to be qualified to do it, but then there also has to be that human element of like, can be honest and open with these people. I can communicate with them. We can dialogue to solve
problems together, right? And so I think building relationships, communicating with them early on, it's going to give you a lot of insights into is this the right personal fit in a sense, right? Like, can we work together or does this feel very transactional or am I getting a gut instinct of like, don't feel like I can say what I want to say in this process? And those are all really important things to learn.
Yeah, those are so important. Even when we were, you when I was a consultant or when we were in prior models where we were doing more of the initial outreach and conversations for brands instead of them doing it, we always looked the brands in directly with the manufacturer. If you have five options and they're comparable, comparable price point, they have good references, you know, good FDA recall history. The relationship is so, so important. If you just feel like they're
being cagey or you don't feel comfortable sharing with them. If there's any of those dynamics, it's only going to get worse when you're actually, you know, up against any kind of pressure. Like you have a PO that needs to be produced faster because you're growing faster than you expect or your supplier of bottles is running three weeks behind and they need to shift around their schedule. Those things are going to happen once you're in the relationship with them. whatever, however you can suss out like the pressure testing in advance is really.
Yeah. Any other tips or advice for the zero to 1 million size brands?
once you do approach the co-manufacturing search, and maybe I'm being a little bit redundant here, but it is to cast a wide net and to create the competition. I've seen it make a difference as high as 30 % reduction on the cost that some of these manufacturers are putting forward. So you might, and this is, I'm talking like an early stage brand. I've seen that exact behavior before. They have one brand that they love, but they came in way higher because they had another two that had bids in hand.
They had created a competitive process by casting a wide net, you know, three months prior, right? They were in the position to negotiate and that that manufacturer liked them just as much as the inverse. And they they lowered the bit really significantly for them. And that's going to make the difference when you're, know, you're building your your cogs and your margin stack for the next at least year and probably longer. So that's just so important. This this is a piece of advice that I think is, you know, people don't love.
Amazing.
You really need to seek out redundancy in your supply chain or start thinking and seeking out your next manufacturer almost as soon as you have your first manufacturer. That's advice that I've gotten from people who are some of our advisors who are way more experienced than me. They've just seen people, people get, know, it's a, it's a, a fun process most of the time, unless you do it on rescale and, know, use all our lovely templates and things, but
Once you cross the finish line, you're just so relieved and excited and everything. And the last thing you want to do is start it over again. Yeah. But it's so important because you might want geographical redundancy. You might want just redundancy in case they encounter like, you know, issue a production schedule problem. Really want to seek that out as quickly as you can, because you want to be ready to turn on your second manufacturer when you need it instead of having to start at this zero position again and go through the whole process.
I have a couple of questions about that in terms of the redundancy. It's like, okay, you finish the first process, you find your primary co-manufacturer, now you're looking for that redundant one. How do you know? I mean, is it like your sales plan is indicating? I mean, that might be one way that you would know. And then obviously, if you're opening another part of the country and like logistically, that makes sense. But if
It's purely like a backup situation if something goes wrong. How do you literally have them available to you? Is it a contract? Is it just a conversation? What does that look like?
think that the key would be to take it up to the point of trials so that you know you have a manufacturer who can produce your product well. And at that point you would understand sort of what the ballpark pricing would be. You don't have to take it across the finish line. And I don't think it's even appropriate to do that, but you should get, know, have the conversation. This is who we are. We need a new manufacturer. We think they'll produce about X number of units. And I would, if you're producing a million units a year, I would say, think about when your second manufacturer
talking about some fraction of that, right? Because you probably want to keep your first manufacturer in some way. There's a lot of that sort of longer conversation about different strategies that you can approach, but.
I feel like you've given so much valuable information about the process. We've also gained a bit of insight into what Rescale has to offer and how you're helping emerging brand founders. Before we sign off for the day, is there anything else you'd like to share with our audience?
We have a blog where I sort of try to synthesize some of these learnings totally free. It's on our website, tryrescale.com. There's a resources tab on the top for anyone who just wants to learn more from me, someone who's just done it a lot. Please take a look at that. give lots of targeted advice and I'm always open to suggestions on new blog posts if people are, you know, have any burning questions.
Well, we will put a link to the website and a direct link to the blog in our show notes. And Julia, I just want to say thanks so much for taking some time out of what I assume is a very busy week for you to talk about this and to help educate our audience.
Thanks, Sarah.
Looking for more content like this? Subscribe to our YouTube channel. You'll see weekly podcast episodes as well as other content related to the show. Just visit youtube.com forward slash at the Good Food CFO. Thank you for joining us here today. If you enjoyed this episode or found it helpful or inspiring in any way, please share it with your founder friends on social and rate and review the podcast wherever you listen. It's the number one way to help good food founders find the show.
We'll be back with a brand new episode June 9th.
HAVE YOU RATED AND REVIEWED THE GOOD FOOD CFO PODCAST YET?
IT’S THE NUMBER ONE THING THAT YOU CAN DO TO HELP OTHERS IN THE FOOD INDUSTRY FIND THE SHOW!
And you can do it in just a few easy steps:
Click here to find the podcast on iTunes
If you listen on Apple hit “Follow” so you never miss an episode!
Scroll to the bottom of the page, Click “write a review” and share what you love about the show!
THANK YOU for helping to support & promote The Good Food CFO!