by Mick Matricciano, Co-Founder of Cannonborough Craft Sodas, and alum of the Chobani Incubator Spring 2019 class.
The choice to self manufacture or outsource production can be one of the most difficult decisions to make for small brands looking to scale. Self manufacturing affords an incredible degree of creative flexibility and control, but comes at the cost of intensive capital and labor requirements. Alternatively, choosing to co-manufacture is generally a more streamlined process, though the need to conform your product to existing packaging capabilities, high minimum quantities, and margin considerations can add complexity to timing the decision. There’s never a clear cut answer, but by sharing our experience building and scaling our own in-house production, I hope to offer some insight into the reality of self manufacturing.
Cannonborough Craft Sodas began in 2012 with a handful of recipes and a dream. With the help of a few YouTube tutorials, we began producing batches of fresh fruit soda 5 gallons at a time to sell by the glass at our local farmers market. Although our goal was to launch single serve bottles, the farmers market allowed us to test market the flavors and build capital while we developed a plan to scale. Conventional wisdom said finding a co-manufacturer for our product would be the quickest and most efficient way to bring our product to market, so we got to work contacting co-manufacturers of all sizes to find a fit for our unique process. Unfortunately, due to our commitment to utilizing real fruits and fresh herbs and unwillingness to use additives and preservatives, very few facilities were equipped to produce the product we wanted to make. It quickly became clear that we had two options:
Reformulate our product to fit into the existing parameters of the industry
Build our own facility and attempt to reformulate the industry
With exactly zero experience in large scale food manufacturing, our first step was figuring out what equipment we needed to produce and package our sodas. To collect this information, we relied heavily on our state’s Department of Health, the FDA, food science experts at a nearby university, fellow entrepreneurs, and most importantly Google searches. Over the course of a year we designed our dream facility:fully automated, fully compliant, and with plenty of capacity to grow into. With this monumental task behind us, the real work started in squaring our dreams with the reality of the capital available to us to actually build something.
The Use of Modules
Knowing what we could build now, and what we needed to build in order to achieve scale were miles apart. So,we separated our hypothetical facility into modules representing each step of the production process. For Cannonborough, those steps were:
Processing raw ingredients
Blending and carbonating
For each module, we looked to various related industries to see how they handled production. Juiceries gave insight into processing real ingredients, breweries offered inspiration into blending and carbonating huge volumes of liquid, and fruit preserve producers helped demystify pasteurization.
Next we laid out various equipment options for each module in a matrix weighing cost against expected output. This tool allowed us to balance our production capacity and expected growth with a clear path to increasing production. It also allowed us to identify potential output bottlenecks before they impacted growth, and best of all, launch a retail product with minimal capital investment. Our modular approach gave us the ability to upgrade individual processes as demand outpaced capacity, and scale appropriately rather than investing heavily into equipment that would run far below capacity until demand caught up.
DIY vs. “DIWHY”
The level of automation of our equipment was another important consideration when planning our facility. Less automation means less upfront equipment cost, but higher labor costs have to be accounted for to get the whole picture. For some processes, finding affordable equipment that strikes that balance can be difficult, and in those cases it made sense to build out our own equipment to meet specific needs.
In our case, pasteurization is an important step in our process to achieve shelf stability, but even entry level pasteurizers were out of our price range. To solve this, we again took a modular approach to the mechanical functions of bath pasteurizers and identified their critical functions. With that information, we were able to hack together an insulated tank, recirculation pumps, tankless hot water heaters, and digital temperature probes to achieve pasteurization more accurately and at a higher output than off the shelf units, all at a fraction of the price.
On the other hand, we once spent time and money attempting to solve a problem that an off the shelf tool solved for a fourth the price of our “R&D”. Over the years, we’ve become intimately familiar with the difference between a DIY and a “DIWHY?” project. Being able to fully conceptualize the underlying processes of a piece of equipment is necessary to avoid wasting time tilting at windmills. Generally, the less complex a process, the better chance you have for success.
To date, we’ve successfully increased our production by ten times our original capacity. By identifying, planning, and upgrading our equipment we’ve been able to reach that scale organically. We still don’t have that dream facility we planned out all those years ago, but with every upgrade we get a little closer. In-house manufacturing is difficult and complex, but for us, the high level of quality control and ability to offer a more unique product to the market outweighed the additional effort. To anyone facing a similar production decision, I hope our experience will give you a starting place to evaluate the option to self manufacture.