#162 - Ops Nightmares, Powered by Crstl

In this new series on the Startup CPG Podcast, Daniel Scharff and Jamie Valenti-Jordan from Catapult Commercialization Services take callers who have had 'Ops Nightmares' that plague many brands. Joining them are Katherine Harvey, co-founder and CEO of Bare Bones Broth, who faced a bone broth launch disaster at Costco due to manufacturing and contamination issues; Brett Perrotta, co-founder and Chief Operating Officer of Chubby Snacks, who recounts his own ops nightmare involving production errors with a co-packer, underscoring the critical nature of founder involvement during initial production runs; and Brady DeLong, VP of Sales & Ops at Clean Age, who reveals chaos from a major inventory mix-up with Walmart.

Teva from our sponsor, Crstl, provides expert advice on leveraging Electronic Data Interchange (EDI) for managing high order volumes, as well as for reducing chargebacks and driving revenues.

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Today's topics:

• Advice on Handling Ops Nightmares
• Katherine Harvey’s Ops Nightmare at Costco
• Brady DeLong's Operational Nightmare with Walmart
• Brett Perrotta’s Operational Nightmare with a Co-Packer
• Teva's ( Crstl EDI ) Discussion
• Communication with Buyers
• Handling Freight Problems
• Legal and Insurance Considerations
• Damage Control and Transparency
• Planning and Risk Management
• Operational and Product Losses
• Common Business Challenges
• Packaging and Labeling Issues

Episode Links:

Catapult Commercialization Services Website

Jamie Valenti-Jordan LinkedIn

Bare Bones Broth Website 

Katherine Harvey LinkedIn

Clean Age Website

Brady DeLong LinkedIn

Chubby Snacks Website

Brett Perrotta LinkedIn

Don't forget to leave a five-star review on Apple Podcasts or Spotify if you enjoyed this episode. For potential sponsorship opportunities or to join the Startup CPG community, visit http://www.startupcpg.com.

Show Links:

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Episode music by Super Fantastics

Creators & Guests

Host

Daniel Scharff

Founder/CEO, Startup CPG

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Daniel Scharff
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00:54
Daniel Scharff
So crstld the links in the show notes hello CPG ers. We have a very special episode for you today. It's Ops nightmares. And this is a fun new call in format. So brands from our community are calling in to tell us stories this time about when it went way wrong. So we're really thankful today's episode sponsor, Crystal, which is a modern EDI platform that's electronic data interchange. It's how do you automate that whole process from getting invoices to doing your shipments to retailers and distributing and all that stuff? And because we're talking Ops nightmares, I wanted to invite Jamie Valenti Jordan to join me for this episode and listen along because he is literally the first person that I call when I'm in the middle of these nightmares. He can tell you I've done it before.

01:54
Daniel Scharff
And he'll either reassure me and help me get back to sleep, he will drop the hammer and tell me it's really as bad as I think it is and help me try to figure it out. So Jamie, first of all, any reflections about today's episode that everyone's about to get to hear?

02:07
Jamie Valenti-Jordan
Oh my goodness, this is all over the gambit. I mean, we've got things that happen in plants, we've got things that happen in distribution. It's heartbreaking to hear some of these stories, none of which are necessarily unique, but it's always difficult to hear when one minor mistake led to a cascade of problems that took, in some cases, several weeks to fix. So I like to call them war stories, honestly. And when we sit down, you know, those in the industry and drink a beer. This is what we generally talk about. Did you hear about the time that this happened? And oh my goodness, Jamie, what is.

02:37
Daniel Scharff
The stop, drop and roll when you're in an ops nightmare and something just, it goes so wrong regardless of whatever it is. What's the like? Breathe now do this. Your version. Your advice to people when they're in.

02:47
Jamie Valenti-Jordan
This sure thing, I mean, honestly, it's taking a step back and looking at the world in general. Is the mistake going to kill people? Start there if it's not going to kill people. Okay, that's great. Let's take a step back. Is it going to kill my company? Well, maybe. But if it's not going to do that, it's just going to be cash. Okay, well, now we've limited the universe of possible problems so we know what the possible solutions and where we can start to trade off on short term, medium term and long term fixes to these types of problems. So sometimes it's a simple mistake that gets caught and just is working through all the hoopla to kind of fix it. And some of the things are a lot more involved.

03:26
Jamie Valenti-Jordan
You know, you need to get food safety scientists, you need to get a lawyer on the phone, you need to get like how big is this problem going to be? But most of the time these ops nightmares do not lead to actual situations of potentially killing people.

03:38
Daniel Scharff
I like your order of will it kill people, my livelihood or cost money? I think that's a good rule for life problems also. So, I mean, I've been in a lot of these situations and I just freak out right to the max immediately no matter what it is. So I think that's going to help me also in the future. And Jamie, do you mind just telling a little bit about yourself to everybody so they know why you are the first person I always call.

03:59
Jamie Valenti-Jordan
Oh, right, yeah, I forgot about that. I'm Jamie Valenti Jordan, CEO of Catapult commercialization Services. It's a group of folks that help with all sorts of brands out there, from startups all the way up to the big guys. And we work in not just operations nightmares, but we've got developers and marketers and food scientists, engineers, packaging, quality, regulatory like we get into all of this. But the other thing that I am now doing this is a recent evolution is I public announcement. I have moved my day to day expertise of time over to the Food Finance Institute, which is out of the University of Wisconsin. So it's actually in Madison.

04:38
Jamie Valenti-Jordan
And the idea there is I'm actually giving more of my time to working with smaller emerging brands in order to help them understand how the cash flow of incoming and outgoing expenses and costs actually build a business that will generate cash over time and not just be a hobby. I like to call hobbies. Anything that costs more money than it makes, so.

05:00
Daniel Scharff
All right, well, that's great, man. Really exciting to hear this, your drop about Jamie's new role. I got a new hype button. I just. That was my first chance to use it. So thank you for that opportunity. I hope everyone really enjoys today's episode. There is some incredible stuff in here.

05:16
Jamie Valenti-Jordan
Enjoy.

05:20
Daniel Scharff
All right, here's another segment of Ops nightmares. We've got Katherine here. Do you mind just introducing yourself and your company?

05:26
Katherine Harvey
Sure. I'm Katherine Harvey. I'm the co founder and CEO of Bare Bones Ventures, and we make instant and liquid bone broths.

05:35
Daniel Scharff
All right, tell me a little bit more about that. Who is eating all the liquid and instant bone broth these days?

05:40
Katherine Harvey
My gosh, everybody. Everyone who is looking for an intermittent fasting solution, something to break their fast. Lots of keto consumers, paleo consumers. We call them wellness seekers. So people who are just looking to add nutrients to their life.

05:58
Daniel Scharff
All right, amazing. I'm very interested to hear more about that, but I am especially interested to hear about your ops nightmare. So please hit us with the worst of the worst.

06:07
Katherine Harvey
Oh, my God. Okay, so this started in 2019. We were just launching our instant bone broth in partnership with Costco, a specific region of Costco. And so one of our investors introduced us to what we believed was a turnkey co manufacturer. Things were a little weird early on. That seemed like they weren't really giving us straight answers on pricing, volume, tiers, when they could start pilot runs and productions, and when they would have samples ready for us. So it wasn't a really strong start initially, all the estimates were coming back to us with the dimensions and specs just all over the place. There was no consistency, and it looked like these quotes had been mocked up like a word document and then just PDF. It was just strange.

06:55
Katherine Harvey
Then things got more weird when we came out for our first production run, and the name of the facility where were producing was different than the name of this company that we had been working for. And our account manager had a visitor badge on. So it became kind of clear to us that they were an outsourced operations outfit and they were just brokering this deal for us. But it was the end of 2019 when things really started to go off the rails. We had a successful rotation of our instant beef bone broth item at Costco, and they wanted to do a rotation of a new item that were launching in partnership again with this co manufacturer. We got all the packaging design done, ordered them, film, had all the ingredients delivered.

07:39
Katherine Harvey
We received guarantees from this co man that they would run this product in time for a November rotation with Costco. And they missed the deadline. And they missed the deadline again. And next thing you know, everyone's breaking for the holidays. So we're now looking at a January production for what was supposed to be a November rotation. Then Covid hit, so were six months late delivering this product. Of course, Costco didn't want it anymore at that point. And then they messed up one of our instant beef bone broth productions. They used the wrong film that was not up to spec. We had never approved it. And they shipped it directly to Costco. And it looked like a paper bag had gotten crunched up. So ruined a relationship with a really key Costco region for us.

08:23
Katherine Harvey
And it took us about six months to disentangle ourselves from that relationship and get all of our raw materials back. And when we did get them back, we moved them to our new actual co manufacturer, and they found a rack inside one of the bags of ingredients. So their quality control is just shit on top of everything else. I don't know if I'm allowed to curse on here.

08:46
Daniel Scharff
I don't either.

08:48
Katherine Harvey
It was trash.

08:49
Daniel Scharff
And who introduced you to this master co man broker again?

08:53
Katherine Harvey
So this was one of our investors, one of our newer investors, and he had a pre existing relationship with these guys. They did a lot of work with liquid id, like a big brand, so they had a good reputation.

09:06
Daniel Scharff
Oh, gosh. So he had worked with them, or he just had their name. He's like, oh, he was these guys.

09:10
Katherine Harvey
Like, he just had their name. Yeah, I don't think he had worked with them before. And of course, when were trying to negotiate getting out of the relationship, he jumped on the calls and he was trying to hold their feet to the fire and hold them accountable for delivering and doing what they had said they would do, and they just never did. And then the owner ghosted all of us. We never heard from him again.

09:31
Daniel Scharff
Oh, my. This is like a worst case scenario. Pretty much everything has gone wrong. You have no control over anything. You're screwed. Your ingredients are screwed. Everything's going off the rails, potentially compromising a really important long term retail relationship. And you're just going to lose, like, all that money. There's no recourse for all of this stuff?

09:52
Katherine Harvey
No, I mean, we just paid them for a lot of the raw materials and ingredients that they had already purchased on our behalf and, like, just cut loose. And now we control our supply chain a lot more closely.

10:05
Jamie Valenti-Jordan
I may get up on my soapbox on this one, because I can't stand people who don't represent what it is they actually do in the food industry. I lose my ever loving mind on these people when I find them. We encountered one earlier this year who told us that they were a coman. They could do X, Y and Z. They had this machinery, they had this capability. Come to find out he was just an old guy in retirement trying to farm work to other people. When I found out, I was like, listen, I got no problem if that's what you're doing, just be honest about it. We're not going to go into a brokerage relationship with you because that's not the type of deals that we engage in. We believe that the relationship is between the brand and the command.

10:44
Jamie Valenti-Jordan
We don't need to be a part of that for the following three years, which is typically what the kickback timeframe is for those types. People, I've seen the engagement paperwork. They usually get a percentage of every product that gets made for the following three years, which usually ends up costing you anywhere from ten to 30k by the time it's all said and done. It wasn't a 30k relationship. It wasn't worth that. So between that and the fact that the people that they introduced you to were not able to maintain a safe environment for your product, let alone comply with FiSMA, which would require traceability of all of your ingredients and understanding of who your co packer and who your actual relationship is with. Like FISMA was specifically passed to put this type of relationship out of business.

11:27
Jamie Valenti-Jordan
It's not real, it's not functional, it's not adding value to the consumer, or to the brand or to the co man, it's predatory. And I'm sorry for the long diatribe on what is effectively your opportunity to shine here, Catherine. I can't stand these people.

11:40
Katherine Harvey
No, I can't either. And I think that's a huge lesson. And we vet our co main manufacturing partners so much more closely now. Like there's a site visit in the initial vetting phase. There has to be.

11:52
Jamie Valenti-Jordan
There always has to be. Yeah.

11:54
Katherine Harvey
Yeah. It was kind of nuts. I never would have expected this kind of an outcome, especially the fact that they just ghosted us. And it was bizarre.

12:03
Jamie Valenti-Jordan
This was a party out of the northeast?

12:05
Katherine Harvey
No, unfortunately, southern California.

12:08
Jamie Valenti-Jordan
Okay.

12:08
Daniel Scharff
The only thing I would know to do in this situation is just lose my shit on them on social media. Be like, look, obviously I have no power in this thing, but I will tell the whole world what happened here. And anytime somebody googles you, it's going to come up. Jamie, do you see that ever being effective? Is that a crazy thing to do? You're just going to get sued.

12:24
Jamie Valenti-Jordan
Like, in all likelihood, you're not going to impact their audience that significantly at all. Better effect would better business bureau for the next person who comes along who's going to do even the smallest amount of vetting and totally trash them on there. And it demands arbitration to some extent, even though, like, they have to reply where they get dropped by the better business bureau. Right.

12:43
Katherine Harvey
Well, it looks like these guys have shut down their co manufacturing plant. Like, it's just the individuals now.

12:51
Daniel Scharff
And why did they run out of rats?

12:55
Katherine Harvey
I don't know. It was so weird. I didn't even get into the vent. There were numerous acquisitions that happened during all of this, and that was their excuse for why they couldn't give us solid answers on pricing and timelines.

13:08
Jamie Valenti-Jordan
They were likely burying their liability from a previous relationship as well. So it's not uncommon to do that.

13:13
Daniel Scharff
By the way thing. I just remembered I actually visited a coman once, and I don't know so much about it, but I do actually have a pretty good ability to read people, I think. And I was talking to the guy, they were scaling fast. That's what made me think of it, too, as a coman. And I was like, what about, you know, this one thing that we need, like, tonal pasteurization? He's like, oh, yeah, we have. Yes, over there. But he also, like, touched his head while he was doing it. He did kind of one of these, like, comb back your hair moves, which I know to be something that people do when they're uncomfortable with what they're saying now. It's kind of like, interesting. All right, noted.

13:46
Daniel Scharff
And then only later, like six months, I finally met the brand, who was like, oh, yeah, we produced there. You know what doesn't work? Their tunnel pasteurizer. It totally screwed a bunch of our production because it overheated everything or whatever. I'm like, oh, so there you go, scaling fast. Anyways, all right, well, Katherine, thank you so much for this excellent ops nightmare. That is a horrifying one. Maybe the one that will actually give me a real nightmare. So thank you very much for joining us.

14:15
Katherine Harvey
My pleasure. Thanks for having me, Jamie.

14:18
Daniel Scharff
I know you've heard stories like these before from brands like that who have not working with you guys, of course, but just ended up in some disastrous coman situation. Missed timeline. Stuff doesn't happen. Ingredients are wasted. Right?

14:31
Jamie Valenti-Jordan
Yeah. I mean, it sucks when that happens. Honestly, I don't know too many places that would stick by their coman past two or three delayed dates. Kind of impressive, honestly, that they were able to string somebody along for that long. I get so upset about these things. This is not how our industry works. Our industry does work, by the way. Yes, it's handshakes and things like that, but that's because you should look somebody in the eye and you ask them, hey, can you actually make my product for me? Right. And if they're legit and honest, you'll know when they look at you and say, yeah, we think so. Because that is always the right answer. The answer is never. Yeah, of course, no problem. We'll get it done by the end of the day.

15:06
Jamie Valenti-Jordan
Or like, that's somebody who doesn't know, somebody who does know who's seen all of these problems that we've talked about as a part of this series, will look at that and say, well, I think so, because I don't know all the crazy stuff that can go wrong. Right? The people who are the most sure are not the ones who actually deal with these sorts of operational problems that we have.

15:25
Daniel Scharff
Yeah, but I can totally understand it too, because I've been in that situation where the Coman is stringing you along. In my case, it was a scenario around a certification and like, oh, yeah, we totally can get that. And they could not get it. And we just sat there twiddling our thumbs for four months with a whole team just ready to go and make the product and sell it with all of the overhead of that, because it just didn't happen the way they told us it was going to happen. And they were slow and didn't respond. Then finally, fortunately, we gave up on them and I think they never got it.

15:53
Jamie Valenti-Jordan
Who knows? All right.

15:54
Daniel Scharff
I really sympathize with how I know. It's a good. That's a very scary nightmare.

15:58
Jamie Valenti-Jordan
Yeah, no joke.

15:59
Daniel Scharff
All right, perfect. Let's move on to the next one. All right, here we go. We've got Brady on the line here. Brady, welcome to ops nightmares. Let's just jump right in. Do you mind telling us about yourself and your brand first?

16:13
Brady DeLong
Yeah, I've been in the natural CBG space for about 1415 years now. Was in salty snacks for a while. And now I am in the personal care space brand that I'm working with is clean age and we're the all natural, very sustainable, packaging focused personal care brand. Kind of designed for teens, Gen Z young adults as they begin their own personal care journey.

16:38
Daniel Scharff
And would you care to tell us about your ops nightmare?

16:42
Brady DeLong
Yeah. So early on days with clean aids, we actually got a opportunity to launch in a couple thousand Walmart stores. So very exciting times. Obviously for an emerging brand, you're excited about that there's tons of setup and little bits and pieces you have to make sure line up. And we had a very honest mistake that resulted in our pack change being incorrect or our packet setup being incorrect. In Walmart system in personal care, you actually don't sell like full cases to stores. If you're in fulfillment centers, sometimes they'll sell your inners or even beaches to store. So you had to have it set up.

17:22
Daniel Scharff
But why is that? Is that because like the value is a lot higher than cases of beverage or whatever so they don't want to carry as much inventory or it's not as high velocity, tends to be combination.

17:33
Brady DeLong
Of both, but predominantly just, you don't need twelve sticks of deodorant on the shelf at like the same time when you can have three and replenish every other day or multiple times a week from your own fulfillment centers. So that was a learning curve for me coming from snacks where everything was case specific. So we set these up. We thought were done. We got our initial round of pos in. When you go direct with Walmart, theres about 42 distribution centers that youll ship into. And were working with a consolidator on this launch. So they had all the products, we already had item codes, Walmart item numbers. And we got around to Pos in and I started looking at them and I was like, these numbers dont add up. Theres something wrong here.

18:15
Brady DeLong
So went back to our broker firm and the consolidator and realized that they were ordering in what they thought were each but were actually cases. So if they were ordering twelve, it was actually 144. So everything was multiples of twelve which were like, this is far too much product. This does not make any sense. We were able to figure out what the issue was pretty early on and communicate to the buyer, hey, we think this is wrong, what should we do? And replenishment team from Walmart came back, made some fixes. In the meantime, when youre going through a consolidator, things moved very quickly. And product got put on trucks was the right amount of product. So we thought it would be okay. But Walmart, instead of like werent able to update the existing items, so we had to start from scratch on items.

19:08
Brady DeLong
So we had all new item code. So all the Walmart item numbers that were on, the cases that were on the pos were wrong. So Walmart canceled all the pos. So he had essentially about two truckloads worth of product going out. I think it was like 170 different purchase orders that ended up getting canceled. And with Walmart, they call that troubled freight. So we had to get all new purchase orders, reissue with the right item numbers, and thankfully our replenishment buyer was like on it had experience. This is not the first time it's happened to a brand, but they literally had to call every DC. They communicated with every DC and they have to give them the reference number of the old PO and update them with the new PO number, new item numbers and all of that.

19:57
Daniel Scharff
So did you have to get all the product back or it was still on its way to all the. And did, was it just go to one place or you had like 45 different trucks going different places or they handle that?

20:07
Brady DeLong
It was 45. So we 42 distribution centers that were going to, but there were about three to four pos for each one. That's just Walmart's their way of doing things. So there was like an initial one that went out, one a week after that was scheduled. And some of them were able to catch before they left, but the majority of them were already on trucks. And were like, we thought it was all going to get trashed, thrown away, end up somewhere, not be accounted for, show up as missing, and we didnt have enough inventory. If they place another round of pos to fulfill those, that was 75% of the inventory we had at the time. So we cried a little. I was actually also out of town at the time.

20:51
Brady DeLong
I was on vacation with my family in Michigan with like the worst Wi Fi ive ever had in a home, and having like meetings, constantly calling into Walmart, calling into EdI, calling, like, there was a lot.

21:04
Jamie Valenti-Jordan
So you were able to rescue all of that inventory from the trucks because it was all fixed before the trucks got there.

21:09
Brady DeLong
So it was not all fixed by the time the trucks got there. Our rollout ended up being. It was a week 30, which is supposed to be end of August, 1 week of September was when everything was supposed to be landed in stores. Ended up taking about an additional four weeks for all the pos to be found, transitioned, and updated. And we didn't break a 90% in stock rate until probably like the first week of October.

21:34
Daniel Scharff
So what happens if you don't catch that and fix it? Is it them just ordering way too much product but also paying for it? Or is it them thinking they only owe you 8% of what they actually owe you for that amount?

21:47
Brady DeLong
That's a good question, Daniel. I don't know how they would have necessarily handled by the time you would have invoiced, they would have been like, wait a second, we thought were buying this much and you're invoicing us for like $2 million.

21:59
Daniel Scharff
So it doesn't have a dollar amount on it when it comes in. It was just quantity.

22:02
Brady DeLong
I mean, it has a dollar amount, but that we're not invoicing until product gets delivered. So they wouldn't have seen the dollar amount difference until invoices would have been set.

22:13
Daniel Scharff
You're a good man, Brady DeLong. Some other people out there, you know, maybe not me, but some other people out there would have seen that $2 million figure and just gone for it. Like, Walmart has money, they can pay for this. It's cool. Like they'll sell it someday. They're Walmart. But you didn't do that. You were like, no, I'm going to screw my whole vacation in Michigan and try to get this thing fixed.

22:33
Brady DeLong
Well, and my founder, this was her first big national launch that shed done. And so Im sure left a pretty terrified taste in her mouth for future launches. But now weve got a lot more protocols and steps in place, checkboxes that we reference quite regularly when were launching new products now.

22:54
Jamie Valenti-Jordan
And its amazing how much you got right along the way. I think theres a lot of kind of glossing over all the things that went right and the fact that one little piece of this was simply a misunderstanding that created this huge issue. I mean, honestly, the fact that you got all that right and there wasn't a second error in there somewhere as well, that would have just screwed the pooch with, you know, Walmart completely. That's impressive. I mean, I got to admit, launching with Walmart with only that being the problem, which was major. I mean, it's a testament to you and your team. Great job.

23:25
Daniel Scharff
That's a good point, Brady. Let me just ask you just to wrap up here. What's a good way for people to follow along with you, learn about your products more and maybe even buy some?

23:33
Brady DeLong
Yeah. So we are on Amazon, obviously, we actually have brand new listings coming out on Amazon. That's been another ops nightmare. Never use your actual products UPC when you set up on Amazon. Don't ever do it.

23:50
Daniel Scharff
What does that mean?

23:50
Brady DeLong
So whenever you add a product to Amazon, you should go to GS one or wherever you're buying your barcodes, hopefully GS one, and create new barcodes specifically for Amazon products. It really helps with resellers, so they're not able to show that they actually have access to that new PC.

24:09
Daniel Scharff
Oh, interesting.

24:10
Brady DeLong
Especially if you're doing like a multi pack. So we nightmare there. Different call, but. So Amazon will have some new products coming out soon, but you can also find us on target.com. Not in store, just on.com, walmart.com, and a good amount of Walmart stores in the midwest. Fresh time. Me personally used to be active on LinkedIn. Not so much anymore. We got a lot going on around here, so I keep my days pretty full lately. I've actually been jumping back into the old startup CPG, Slack channel.

24:41
Daniel Scharff
Welcome back. Water's just fine. Come on back in.

24:45
Brady DeLong
I really enjoy playing around in there and then having conversations, but I kind of try to find questions or topics that, but I'm like, oh, that one's interesting. I actually know something about that one, so.

24:56
Daniel Scharff
All right, perfect. Well, great. Brady, thank you so much. This has been a fantastic and terrifying ops nightmare for us. So thanks a lot for joining us today.

25:05
Brady DeLong
All right, thanks for having me.

25:07
Daniel Scharff
All right, so, Jamie, I really liked that episode one just to imagine the what if he hadn't. But also, like, for me, having run a brand, I've had so many of those days where you wake up and you're like, oh, I'm gonna have a great day today. It's a normal day. Things are chill and you're like, wait, no, my day is f, and now it's horrible and everything's gone wrong, and all I'm gonna do is sit here and panic and try and figure it out, and I don't know if it's gonna be okay. So in his case, it sounds like that spanned for a while, but then I guess they got it resolved eventually.

25:36
Jamie Valenti-Jordan
I mean, I think, honestly, this is where the origination of a lot of CoO roles out there really begin because this is something where for founders that usually want to live in the cooze role, the Coo would be the one who handles this at 04:00 a.m. And continues through all day, gets his whole team on it and things like that. But, yeah, I mean, I think at the end of the day, there are a lot of ways to kind of resource this as needed. But once you're in crisis, it's already too late. So, yeah, I think leveraging some expertise in this area can offload that stress.

26:06
Daniel Scharff
Yeah, it's also one of those things. As a former CEO, I would have had my CEO. Oh, like, you can't blame it on that. This is like some crazy thing that happens and it's like. Like it's nobody's fault. But now it is all of our problem. Like, we would both have been going into the office and trying to figure this out all day together, calling you, calling other people. I wonder, I don't know if they were using, like, an EDI and if that was able to help speed things up at all. But since this episode is sponsored by Crystal, the modern Edi, I'd be interested to hear their take on it too, if something could have helped fix that faster. All right, everybody, a little show break. I am here with Teva from Crystal, which is a modern Edi.

26:41
Daniel Scharff
And, you know, maybe with them you'll have fewer ops nightmares. I don't know, but they were really kinda enough to sponsor this whole episode where we get to hear all of these ridiculous stories. So, Teva, thank you so much for joining us. First, I just wanted to ask, could you please explain Edi to everybody?

26:55
Teva Vogelstein
Hi. Yeah, thank you so much for having me on this podcast. Very exciting to be here and to be sponsoring this episode and hopefully reducing Ops nightmares for many brands. So EDI is electronic data interchange. The simplest way to think about it is if your brand selling to any retailer, wholesaler, distributor, the retailer will require you to receive your purchase orders and send back any associated documents through EDI. So it's just a data connectivity mechanism. It's been around for a long time. It's not going anywhere. And it just ensures that every part of a supply chain is in check. So your order will come in to your EDI system and then you can just send back your shipping notices and your invoices, then anything else through the platform so it can help reduce manual data entry and reduce errors.

27:39
Daniel Scharff
Okay. And as I understand it, early brands may not have to worry about it their first couple accounts, but they might get a bigger retailer or distributor that will ask them that dreaded first question of, are you Edi compliant? Which makes them start looking into it. Right. What stage do you typically think brands need to really think about EDi?

27:57
Teva Vogelstein
So it depends on each brand and each retailer. Some retailers will tell brands from the start, they need EDi even to receive that first order, whereas other retailers will be more lenient about the requirement and say they can wait a few months down the line, order volumes are bigger and then some other retailers will just consider EDI as optional but highly recommended if the brand doesn't have that large of order volumes. So the best way to think about when a brand would need EDi would be for them to just think about how long they're spending doing that. Manual data entry.

28:26
Teva Vogelstein
If they are receiving orders from a retailer, an order can take, let's say 2 hours a week for filling out those shipping notices and invoices and things to send back, and then on top of that, entering that data into your Quickbooks account, into your shopify account, into your wms, all those other tools that you need. So using an EDI platform can really cut back on that time. So as your order volumes increase, it's definitely highly recommended, even if it is optional. On the retailer side, it's highly recommended to get on an EDI platform and make your life easier.

28:55
Daniel Scharff
Yeah, and I think one of the benefits I see to it is just like the confirmations, like, yes, you can electronically, in an automated way confirm that thing that I think was supposed to happen, actually happened. Like it got picked up or they received it, which if you don't confirm that, which can be very manual, to actually do that and have to send all these emails, definitely can reduce headaches and confusion.

29:14
Teva Vogelstein
Yeah, exactly. So easy also for things to just get buried in an inbox, you know, as everyone's receiving so many emails every day, then, you know, if the retailer changes anything, if they want to cancel an order or change something in the order to make sure that you send back exactly what they're asking for to reduce chargebacks.

29:29
Jamie Valenti-Jordan
Yes.

29:29
Daniel Scharff
And if the person who got that email is out to lunch also, then, well, that's another delay. Okay, so Teva, why should emerging brands check out Crystal as an EDI option branch?

29:39
Teva Vogelstein
Check out Crystal because we are a modern option in the space. We're built with modern technology, so we can seamlessly integrate with any tools you need to run and grow your business. We also have best in class onboarding and customer support. We even have shared slack channels with our customers. So we are right there by your side as you're just learning how to use this new technology. We're right there with you. We also make all your data totally accessible and sync seamlessly with anything that you need. So just makes your life a lot easier.

30:06
Daniel Scharff
And then lastly, what kind of an Ops nightmare might a brand have before they come to you that makes them realize they need EDi?

30:13
Teva Vogelstein
Yeah. So we've had several brands come to us because of Ops nightmares. For instance, if invoices that are sent back either via email or with whatever other EDI provider the brand is using, they get lost and they are trying to get in touch with their contact at the retailer or with their contact at the EDI provider, and they're receiving no responses. Is this can lead to huge chargebacks, the brands aren't getting paid, and something like that with Crystal, you will never need to worry about. We're right there. Always very responsive. And beyond that, you know, your data is always right there in the platform, so definitely makes it easier for you to reconcile everything.

30:47
Daniel Scharff
All right, thank you so much. All right, everybody, now back to the episode. All right, we got Brett. How's it going?

30:57
Brett Perrotta
Yeah, how are you guys doing?

30:59
Daniel Scharff
Good. Doing good. All right, well, I'm very excited. This is a product that I love. I'm very excited to hear the not so pretty side, though, of the Ops nightmare. So do you mind just start off? Can you just tell us who you are and all about your product?

31:14
Brett Perrotta
Of course. My name is Brett Perrada. I'm one of the three co founders of chubby snacks. We recreated the traditional uncrustable with better few ingredients and back in 2020, and it's been a wild ride ever since, like everybody in CBG. So I'm sure some people might be aware of this, but others not. When we originally started this company, we started by self manufacturing in a kitchen that you guys partner with now called amp Kitchens in Los Angeles. So we always wanted to recreate the uncrustable, and the best way to stand out within that product is using, like, a better few jam, because that's where all their sugar content lies, obviously, peanut butter and bread, it's very hard to stand out with your taste profile compared to getting that traditional scale providers to help you out with that.

31:58
Brett Perrotta
So we always stayed away from the seed oils and the peanut butter. It'd be different than the uncrustable. The bread was always a clean label. Whole wheat bread. And then jam is where we slowly started with a simple recipe using whole fruits, chia seeds, dates, date paste to be particular, and then some lemon zest. And then once we started growing very rapidly in retail, we quickly realized that this recipe was going to be very scalable with the current landscape. So, like I was stated, we made that by hand for about seven months. Our basic recipe then we hired a consultant named Mercenary CBG to create, like, a more scalable recipe that we started on our own. And then we had to do some trial runs before we could submit that to a co packer at Mercer.

32:41
Brett Perrotta
CBG helped me out throughout this entire process using, creating kitty ingredients. So say, if we have to use 80 pounds of chia seeds, you work with their suppliers to have them come in ten pound bags so that they're opening up eight bags instead of opening up eight and a half bags. So then you have that scrap lying around. Created detailed sops. On our first production run at scale, we did two production runs of each flavor, which would be enough for about 200,000 sandwiches. And unfortunately, they didn't follow the SOP. They didn't follow anything in the instructions. They completely dumped everything into that kettle, the 500 gallon kettle. And the grape came out like soup. And the strawberry was just barely usable. When you're a young brand, I'm sure you guys are aware of this.

33:23
Brett Perrotta
You had to make a hard decision to move forward with that strawberry jam or grape jam. And unfortunately, we had to scrap the entire grape jam, which is about $10,000 worth of ingredients. And these comments. So the funny thing is, we still work with them to this day, and they've never messed up since because we got rid of day paste. A few other things that I went out there for a production run. I told them not to hire any laborer, and I actually ran the whole thing myself just to show them that it wasn't a formula issue, it was a process issue. And after that point, we've been best friends since. So it did take us to lose $10,000 to get to that point. But it was a learning process in this scaling of food manufacturing.

34:02
Daniel Scharff
So, I mean, that is horrible in the grand scheme of things. I feel like ten k to become best friends with your co man and have everything go right is actually a good investment. We've had way worse stuff go wrong.

34:16
Brett Perrotta
But so my biggest advice to other founders that are outsourcing on the go there for the first run, I tell everybody that I wish I could go back in time and go there because I would oversee everything and be able to, like, make tweaks their sob because you never know how they're filling that kettle with water. You don't know how long they're laying that sit there with the heat on it. A bunch of factors that they would never relay to you when you're outside of their production balls.

34:39
Daniel Scharff
And even you guys are a special case because you were doing your own manufacturing. So before that, so you really know the process. You developed it like not every founder would have that. But still there's a lot to gain from just going so that when you're talking to the command, you know what they're talking about. Like you've seen the equipment, you've seen the size of the tube and the layout and you met the people on the machines.

34:59
Brett Perrotta
Exactly. If we didn't have to start this by ourselves, I don't think we would because you save yourself all that hardship. But everything that I learned inside of ant kitchen walls made us get to where we are today. Now when our sandwich manufacturer calls and has an issue, I can at least try and help them problem solve instead of just saying, hey, you guys are the experts here. Can you help figure it out? Even though its our machine?

35:21
Speaker 7
Exactly. And thats what I think everybody in the industry says is really you should know your own product. And your contract manufacturer is not a black box into which you insert money and get out product. They are production partners. They are representing your brand. They are developing your products in the sense that they are literally manufacturing them so you have something to sell. Even if you are not a production person, you're not an ops person. You need to spend a few minutes at least meeting the people that are taking your baby across the line. Right. You need to know what it is they're doing, how they're doing it, so that you can have that intelligent conversation. If you just call them up and say, hey, im not making any money on my product. Can you make it cost less?

36:06
Speaker 7
What are they supposed to do with that? You need to be able to say, hey, were thinking about pulling out. Were using a three starch blending system for building our viscosity and whatever were going to knock it down to one in an effort to make it easier for you to manage which one or two are causing you headache because theyre so hydroscopic, theyre clumping up and you cant actually get them dispersed. That is the right production partner, right. That's where you're modifying your product to fit their line so that they can run more efficiently. Because at the end of the day, the coman is very effective at running their equipment.

36:42
Brett Perrotta
And then the day they get another run per day based on our output from my device and they're going to give me a cost break on my toll.

36:49
Speaker 7
Exactly. So they're going to make whatever they're going to make in a shift because they're going to batch everything in shifts is how they're going to think about it, right? Because that's where their cost basis is. So their cost basis of their direct labor and their depreciation of their assets and everything else is all done on a per shift basis. So if you can get more product out, its dividing by a larger number. The efficiency gain is where you gain your cost breaks, things like that. Yes, exactly.

37:16
Brett Perrotta
And the biggest thing is meeting that labor. If you have a same wine cook on that kettle every time, and you go there and you say, and half the time, I dont really have an ego in this industry. Some people, and I won't even tell them that I'm the founder. I'm just, hey, I'm an ops guy. I'm here to help you out for the day. And at the end of the day, that production manager might be like, that's the owner of Chubby snacks. And then they're like, why are you helping us right now? And you could be out there doing other things. I'm like, this is the most important part of our process is making sure that jam every time tastes so good that when you bite into a chubby, it's like it's a pop of flavor.

37:48
Daniel Scharff
Jeff.

37:49
Speaker 7
Yep, exactly. Just if, even if nothing else, you're getting your labor to agree to the fact that, hey, this is actually the most important thing, because our most important person is literally spending time making sure that they understand what you're doing, to see you can figure out how to help optimize what it is that they're doing. I mean, sometimes sops get written poorly. They do. Sometimes people have to follow sops that don't make any sense. But if you go out there and learn what it is they're doing and why and how, then in many cases, you can simplify those and say, actually, that doesn't matter to our product. This is what matters to our product. Do this right, and we'll be fine. And all of a sudden, efficiency goes up by 20%.

38:31
Daniel Scharff
So, Brett, what happened with the $10,000, though? Did they eat that? Did you eat it? Did they try to give you credit?

38:38
Brett Perrotta
So we ate that. I will say, when you're a younger brand, I'm sure you both know this, you don't really want to set up an agreement in the beginning, because then it might hold you liable to something, too. So, unfortunately, we had to heat that cost. But they weren't able to rush another production run, so we didn't hit miss like retail launches, because in the beginning of chubby snacks, we focused on blueberry and strawberry jam. But when we switched over to full scale, we decided to switch over to grape and strawberry. So we got rid of blueberry. We needed that to launch for Whole Foods. So it was pretty dire needs for that run.

39:10
Daniel Scharff
That's a.

39:13
Brett Perrotta
Another thing to jump into. Jamie's point, especially about stickiness, is one thing that I didn't realize at full scale is when we're using day paste in a 40 gallon kettle and amp kitchen, I'm using a weed whacker, the immersion blender, and I can hyper focus on every area. When you're in a 500 gallon kettle and you're using something like date paste, it's very hard to like blend into the mixture and not have any clumps because when you're hot filling jam out, you can't have clumps in there. It sort of makes the immersion blending component stick to it and it causes issues with their equipment. So really understanding your ingredients and what's going into that product is really going to help too with that output and make the labor a little less like, hate running your product.

39:53
Brett Perrotta
Its all about labor at the end of the day.

39:55
Jamie Valenti-Jordan
Exactly.

39:56
Speaker 7
And this is why you use a group thats so good, like mercenary CPG, who can see that ahead of time and help you kind of build towards a more scalable solution before you even get to the plant in many cases. So yeah, at some point, yes, theres a lot to be said about bootstrapping, but theres some real value from some targeted kind of expertise that can really help you accelerate into a new manufacturing relationship.

40:20
Brett Perrotta
Oh, for sure.

40:20
Daniel Scharff
Yeah. That was my learning from being, from going at it, from scratches. We were trying to be really scrappy. Boy, I wish we had spent a little bit of money upfront on some people who had a lot more experience than we did. It would have saved us a lot, a lot of money.

40:37
Brett Perrotta
Mercy. And those guys, they're amazing. They've helped us out throughout the process. But at the end of day, we are the founders of the company and you need to know your product better than they do. So that's why they always relied on us to run that first production, run a jam in amp kitchens and see the process through and through. Otherwise you wouldn't be able to help with that math scale like I keep going back to.

40:56
Speaker 7
That's right.

40:57
Daniel Scharff
All right, well, Brett, can you tell us where everybody can find chubby snacks?

41:02
Brett Perrotta
So right now, in 2024, we're in about 2500 grocery stores across the country. Our biggest retailers are Heb whole foods and sopac. We have Target and SOPaC biggest concentration is definitely in soap back. We're actually launching to the fresh market in October this year, and we're trying to really expand our east coast footprint this year.

41:22
Daniel Scharff
All right, Brett, thank you so much for joining us for Ops Night View. Daniel, good luck to you guys.

41:27
Brett Perrotta
Have a great day.

41:28
Daniel Scharff
All right, cheers.

41:29
Brett Perrotta
Bye.

41:31
Daniel Scharff
Okay, so, yeah, I feel like that's, again, another instance of like, it's going to go wrong. The first, like you should plan on something going wrong. I don't know if I had to.

41:45
Speaker 7
Tell you how many times I had to fight that battle in large corporate America where they knew that day in and day out, they knew the first one was going to go wrong and they still would plan on it going right. I'm like, listen, we get three trial runs. Three is our corporate standard. The first one, we assume we get nothing of value out of other than learnings. The second one, maybe we get some go to product, but nothing even in quantities for sales samples. The third run would be where we commit to getting sales sample volume, which would be ones that we present to buyers so that they could know whether or not they wanted to bring it in before we even put final labels on it.

42:22
Daniel Scharff
And that's probably different by the kind of product, right? Because let's say, okay, in beverage, I felt like most comments I ever talked to were like, I'm going to nail this. You don't even need to be here. We know how to make a formula. Its going to be fine. Versus when we both worked at Hampton Creek called then they had mayo and dressings and plant based eggs. And there were so many variables there and the technology and the way it could go through and so many product attributes and the thickness and creaminess. So many more variables, I would say, that can go wrong.

42:56
Speaker 7
Id say from the beverage side, really all the technologies and the flavoring compounds most of the time. And so you see that iteration of one, two, three take place at the flavoring level because they're doing mock up formulations so you can actually taste it. You can't taste the flavor by itself.

43:12
Jamie Valenti-Jordan
Right.

43:12
Speaker 7
So you got to do it in a formulation. So that's where I see that. On the beverage side. Yeah, the commercialization is a lot simpler, a lot more standardized. So it's, yeah, it's a lot. It ends up being more streamlined on the beverage side of things than, let's say, a canned soup or a plant based hard boiled egg.

43:32
Daniel Scharff
All right, lesson learned. Another nightmare. Are you looking to sell in retail but need help complying with each retailer's unique requirements. Meet Crystal, your modern EDI provider. Designed to eliminate workflow bottlenecks and drive growth for your brand, Crystal offers a user friendly platform that seamlessly connects you to a vast network of retailers, distributors, and tools you need to run your business. Grow your business with ease, reliability and automation. That's the Crystal promise. Crystal is a preferred EDI provider for sin seven and Crystals public shopify app integrates seamlessly into your operations. Brands like Natural Patch, Neuro and Amorpho Trust Crystal to manage their vital partnerships with industry giants like Target, UnFi, Kehe Grove and Thrive Market. Now it's your turn to experience the same seamless growth.

44:19
Daniel Scharff
Are you ready to elevate your brand crystal so and let them know you heard about them through startup CPG for 25% off your first annual subscription. That's Crstl so the links in the show notes. All right everybody, thank you so much for listening. If you enjoyed the podcast today, it would really help us out if you can leave a five star review on Apple Podcasts or Spotify. I am Daniel Scharff. I'm the host and founder of Startup CPG. Please feel free to reach out or add me on LinkedIn. If you're a potential sponsor that would like to appear on the podcast, please email partnershipsartupcpg.com and reminder to all of you out there, we would love to have you join the community. You can sign up at our website, startupcpg.com to learn about our webinars, events and Slack channel.

45:15
Daniel Scharff
If you enjoyed today's music, you can check out my band it's the super fantastics on Spotify music. On behalf of the entire startup CPG team, thank you so much for listening and your support. See you next time.