[00:00:05] Melissa Traverse: Hello, and thanks for joining us. I am Melissa Traverse, Director of Community at BevNET CPG Media. And this is the How Do I Build This podcast for CPG Brands, where we share practical advice for building stronger businesses. Visit nonbase.com, BevNET's platform for the CPG community, where you'll find this podcast, educational courses, and more tactical content to help you grow. If you're scaling a food or beverage brand right now, your supply chain is probably one of the things keeping you up at night. And the more innovative your product, the more complicated that gets. Today we're talking about what it actually takes to build an operations infrastructure that can grow with you without the product quality, shelf life, or ingredient supply falling apart along the way. Kendall Kransdorf is the founder of Cotto, a whipped cottage cheese dip she launched in March that's already in over 75 specialty retailers across the Northeast and growing very, very quickly. She's navigating cold chain challenges, shelf life, a co-manufacturer in Colorado, and onboarding with a major distributor all at the same time. And Mary Kate Kloeblen is a supply chain consultant who has spent her career as the first or second ops hire at early stage CPG startups, and now she runs her own consulting practice helping brands and manufacturers solve exactly these kinds of problems. So thank you both so much for joining me today. I'm excited to get into this conversation. And this is a really interesting one. So let's get it going. Let's start with a couple of introductions. Kendall, give us the quick story on Cotto. What is it? What's been exciting about the growth so far? And what are some of those Ops challenges that might be keeping you up at night right now?
[00:01:53] Kendall Kransdorf: Yes, thanks, Melissa. So happy to be here. I'm Kendall. I'm the founder of Cotto. We make whipped cottage cheese dips that are naturally high in protein and made with clean ingredients. We have three classic flavors, French onion, garden ranch, and buffalo, and they're all meant to be a better for you, a higher protein alternative to the creamy dips that you might've grown up eating. I started Kato after I had some health challenges, had to cut a bunch of foods out of my diet, And as a result was really prioritizing whole food, clean sources of protein, cottage cheese being a main one of them. And I was bored of eating it plain, bored of the texture. And so I started blending it into these dips really for myself first, not thinking it was going to become a product, but quickly realized I was not the only one doing this. There was tons of people on social media doing the same thing. And I saw an opportunity to bring a product like this to market. And so I started off early days in a commercial kitchen, making it in New York and now have scaled into a manufacturer. And with that comes a lot of challenges on the supply chain, especially with a cold chain dairy product. You are very hyper aware of the shelf life. And I think as we grow, I become more and more aware of how quickly that shelf life gets cut down as we have to promise a certain amount of it to our distributor and then to the retailer. even if you have 60 days, it's not actually 60 days is my learning. So that's one piece that is definitely tricky to plan around. And then another thing that we have been navigating is with all the demand around cottage cheese, it becomes a tricky ingredient to source as it's in a bit of short supply in the US. So definitely navigating some challenges around that and figuring out the best path forward so that we are not forced to say no to opportunities as a result of not having our core hero ingredients. So that's been something that has been top of mind for me, for sure. Another challenge we've been dealing with as we scale is cottage cheese with all the demand. Obviously it becomes a little bit tricky to source as an ingredient in our dips. And so making sure that our growth is not constrained by cottage cheese supply has certainly been top of mind for me as we grow. So would love to get into some of those challenges a bit more with you all today.
[00:04:09] Melissa Traverse: Thank you so much, Kendall. I think I tasted it first, maybe at Expo West, but it really does, like the ranch tastes like ranch. It's such a tasty product and definitely on the cutting edge of innovation with the whipped cottage cheese. So we're going to get into everything you just mentioned. Mary Kate, thank you so much for joining us. You've seen a lot of brands at this exact inflection point. When a founder like Kendall describes a situation like she has, what are some of the first things that you want to understand before you even start solving any problems?
[00:04:47] Mary Kate Kloeblen: Yeah. Well, thanks for having me on the podcast. Very excited to get into this. When I talk to a brand that comes to me for support, honestly, the first thing we do before we even start providing solutions or consulting is really getting a big picture from the high level and also kind of from the in the weeds level as well as to what all is happening. And usually the first places we look are inventory levels. Is there out of stock risks? Are there opportunities where cash is tied up too much in inventory? Is there a high spoils rate? And for me personally, I like to look at inventory first because so much can kind of be trailed back from that in terms of the kind of contributing factors to some of those problems. Kind of backtracking from inventory, depending on the level of issue, we kind of dig in a little bit further from there. understanding the fulfillment network. How does your product actually get to consumer and customer? Understanding the ingredients and where they're sourced from and how they get to your co-man. Understanding your co-man's process. What are the pain points there? So along the way, like I mentioned, supply chain usually all comes back to inventory and your ability to deliver from customer, but start high and drill down from there.
[00:06:10] Melissa Traverse: All right, well, let's start with inventory. Kendall Kato is a cold chain product, as we've mentioned. It has a short shelf life because of the nature of the product. And your manufacturer is in Colorado, whereas your retail footprint is in the Northeast. So I can see some serious complexity there. What have you found in terms of inventory levels and maintaining the level that will allow you to accommodate the businesses that you're currently dealing with?
[00:06:42] Kendall Kransdorf: Yeah, it's definitely been something that's tricky to manage because we don't have the flexibility. If a PO doesn't come through or something doesn't come to fruition as soon as you thought it would, it's not like you can just keep the inventory in your warehouse until the opportunity comes. You really have to have somewhere else for it to go or it will spoil. it's definitely a harder thing to plan around especially when you're in these or maybe it'll continue to be this challenging but in the early days especially when we're really in these independent stores that we're selling into in the beginning directly now we're working with the distributor but To predict the demand is very tough and you have to be as close to accurate as possible because our shelf life is so short that we don't have as much flexibility as say a shelf stable product might and so that's something would love your take Mary Kate Kloeblen is how to understand the balance of making enough inventory where you're giving yourself room to grow and not saying no to opportunities because you don't have the stock, but also not producing too much or banking on too many things that haven't actually landed in your inbox yet, but you think are going to happen, and then ending up with spoilage on the other end of it.
[00:07:58] Mary Kate Kloeblen: I mean, it's a really tricky problem to solve, especially with your product. You're dealing with a hero ingredient that's in short supply already. And again, like you mentioned, the freshness, short shelf life factor of it all. In those situations, I like to do a couple of things. To your point, it all starts with demand planning. It's hard to supply plan well if your demand plan isn't well informed. But that being said, a forecast is a forecast. It's never going to be 100%. But in those instances, what I really like to do from a contingency standpoint is, you know, understanding where the constraints are within your manufacturing environment and kind of the raw ingredient. side of things. So I think first and foremost, like what I would look at is putting things in place with your command agreements, etc, where you're guaranteed line time with a certain amount of notice, giving them different scenarios of forecasts so that they can be prepared to react. And then therefore helping you kind of shorten some of that lead time in terms of understanding that you have an opportunity or potentially have an opportunity to actually getting that finished product to fund it. The second piece in terms of the cottage cheese and just how tricky of a market it is, where there are opportunities to kind of apply redundancies and contingencies in there. I think certain things I would think about is putting contracts in place that allow you to pull certain amounts of volume at, you know, different times of the year and kind of lock you into having a guaranteed supply. Depending on how specific of a spec you have for the cottage cheese, is there a world where like an alternative spec could work? Is there like an alternative formula that could work with that? The alternative spec would get you a similar, if not same quality result. So those are the things I would think of in terms of not even just the planning piece, but just within your supply chain, like how you make those pieces more flexible. When it comes to the actual planning itself, I think the name of the game is always, what are my scenarios and what are the risks to each of these scenarios? I often say like a good S and O P process isn't necessarily resulting in 100% demand accuracy. It's resulting in like 100% alignment in terms of like how you're going to handle. all these potential situations. So I think from that lens, I'm a really big fan of running several scenarios, kind of pressure testing them in a safe kind of manner before you're actually putting the cash up front and figuring out like, what areas can you be more flexible in? Like I said, it's also looking at your supply chain. Where is it rigid that it's not allowing you to grow? holding you back, making you order a ton of inventory up front. Thanks to that nature.
[00:10:56] Melissa Traverse: Kendall, how are you handling demand planning right now? Like how are I know that that's tricky and you're growing so fast. How are you figuring that out right now?
[00:11:05] Kendall Kransdorf: Yeah, it's definitely tricky and there is some guesswork involved to an extent for sure, but pulling on my BCG days and modeling in Excel for the most part with a little bit of AI mixed in, but really taking our historical sales data as we have it, which we don't have much yet. So the more and more we have, the easier it is to predict the future. But really taking that, understanding our production constraints and how much we can produce at any given time, and then mapping in when we produce, kind of when this inventory is sellable up until, and understanding what the demand in that window will be based on our historical sales plus whatever I think will be new accounts opening in that next kind of phase. And to some extent, you don't have 100% certainty on all of those, but giving a best estimate based on what's happened in the past, conversations I've had with those retailers, and any kind of forecast any of the larger retailers are able to give me. I think the tricky piece with some of these smaller independent retailers is you really don't get a great forecast of what your sales are going to look like. So you just kind of learn over time what your product does in different environments. So the more data we have, the easier it is to predict the future. But really what I'm doing is taking into account all of our past sales data, as well as what I predict will open up in the next period where this production inventory will be good. and planning our production days and how much we're producing around that.
[00:12:39] Melissa Traverse: Mary-Kate, do you have any notes for Kendall? Any suggestions, any questions that might help us understand if there is anything that could be helpful in helping her smooth out that process?
[00:12:53] Mary Kate Kloeblen: From what you described, Kendall, you have a great base. From what I've seen, honestly, a lot of it will come down just to getting the basics done really well in forecasting out demand. Other things you could consider, especially as you onboard larger distributors, larger chains, is also putting in a level of understanding the inventory that those distributors or retailers own and kind of understanding their velocities. trying to forecast out what you think you're going to have to ship to them and then back that into your own demand. Obviously, that's easier said than done when you're launching into new distributors and figuring out, you know, what your velocities are truly going to be long term. But that would be another level I would add in as you start to add more scale.
[00:13:42] Melissa Traverse: Kendall, let's talk a little bit about your manufacturer. So you mentioned that your manufacturer is in Colorado. Actually, why don't we hear a little bit about how you chose this manufacturer? Is this the first manufacturer that has made the Cotto product?
[00:13:58] Kendall Kransdorf: Yes, this is our first manufacturer still that we're working with. And in the beginning, I was looking for someone that could really work with me and be flexible on our minimums primarily, especially as I mentioned, we have a short shelf life product. So we don't have the flexibility to produce a ton at once. It's not just managing cash tied up in inventory, it's actually managing that that inventory will spoil. And so it's even another level of making sure that we're not way overproducing and having to ultimately donate or get rid of inventory. So really finding a partner that would be flexible, able to prioritize me, even though I had really small quantities. When you're working with a manufacturer, they have tons of other clients as well. And if you're really the smallest fish in that pond, it's going to be hard to get their attention, Like you were saying earlier, Mary Kate, when you want to shorten the lead time because you have a big opportunity, you're not necessarily going to be able to move things around as much when they have much bigger clients. So it was important to me at least to start that we had a partner who we weren't necessarily the smallest fish in the pond and they were used to working with smaller brands. They could do smaller quantities, have flexibility, and also someone who really saw the vision and saw what this could be and was excited to partner and grow with me. And so that has been our experience so far. And while Colorado might not be the ideal geography for distributing in the Northeast, at least for now, they've been a good partner in getting us to where we're at, because of that flexibility and the ability to produce smaller quantities at a time, especially in the early days.
[00:15:38] Melissa Traverse: And Kendall, what has that distance cost you in terms of shelf life, product quality and planning complexity?
[00:15:46] Kendall Kransdorf: Yes, it's challenging for sure. In the beginning, I was traveling to Colorado a lot to make sure I was there for our production runs, especially as we were tweaking and changing the process to get it perfect. It was really important that I could actually see what was going down and try the product as it was coming off the production line and all of that. Now we've gotten to a place where we're in much more of a rhythm and I will still go periodically, but I don't necessarily have to be there for every single production run, which is very nice. just takes a lot of time to be there when it's not driving distance. So that's super helpful. But in terms of other costs, I think, as we ship the product back to the Northeast, we're shipping LTL refrigerated shipments, and we don't have control necessarily over how quickly those get to us. So we've been able to find freight partners that are getting it as quickly as possible, given the circumstance. But even still, we lose a minimum four days Maximum could be a full week or even more just depending on the route that the LTL trucks are taking and so I have to factor that in in our demand planning to know that we're not getting that inventory at its full shelf life ever because it has that transit time and then also just I'm not as close to the production all the time. So there's a lot of you get a little bit less control over every moving piece, especially as you start to work with distributors and other partners who are selling your product for you in some circumstances, it's tricky to not be as close to the production at all times.
[00:17:26] Melissa Traverse: And what is your shelf life right now?
[00:17:29] Kendall Kransdorf: Yeah, so right now we're 60 days from production. So not 60 days by the time we get it, but 60 days from production.
[00:17:37] Melissa Traverse: I can see how if you really do hit that week that can really hurt. Mary-Kate, I'm sure you've seen so many brands Justin Kendall's exact situation. What do you do when you have a manufacturer that's a really great partner for you, but they're not nearby and you are incurring all of these charges? Are you thinking about a second manufacturer? Are you thinking moving to a larger manufacturer? What do you tend to see founders do when they're at Kendall's stage?
[00:18:07] Mary Kate Kloeblen: It's a great question. And I think one that can be solved in a million different ways. What I have seen work really well is kind of figuring out, especially for a short life product, figuring out other regions where you could manufacture and kind of shortening that transit lead time. I know it's tricky, especially when you're doing an innovative product to be able to just like jump and do that. That takes time and trust and development and all of those fun things that come into play. But I think for the longterm, usually for shorter shelf life products, co-location is a huge unlock for brands as they're growing.
[00:18:55] Melissa Traverse: Kendall was talking about the shipping time in the summer. It gets really hot and it's a refrigerated product. And Mary-Kate, you know, we already talked a little bit about shipping time. What are some, and then, you know, certainly during the warmer months that comes into play even more, what are some quality processes and traceability systems that early stage brands like Kato could be putting in place right now?
[00:19:23] Mary Kate Kloeblen: Having that lock code traceability is obviously part of regulatory and what you need to do for a product such as this one, but also something that you want to keep a very close handle on, I think. regardless of what size you're at. Other things as well, I would look at really understanding and collecting COAs, reviewing them in close detail, making sure you have a strong filing system for them. I would look at doing things such as temp checks. So when it leaves the manufacturer versus when it gets to the final location, were there any opportunities where potentially the temperature varied. So understanding also from your freight provider, if they have any sort of reporting that allows you to understand how consistently refrigerated your product was. Trying to think of other things, there's probably so many, but I think ultimately as you're getting started out, just really making sure you have the right amount of traceability. You're really making sure that your documents are ticked and tied, really making sure that you're understanding the variabilities that can inevitably happen when a product that's fresh is in transit. Those are the simple, basic places I would look to first.
[00:20:44] Kendall Kransdorf: It's kind of one of those open-facing fridges, so the refrigeration might not be as good. There's definitely a need to be very, very diligent about where every lot of your product is going so that if something does come up or you need to look into an issue, you know where all that inventory is.
[00:21:02] Mary Kate Kloeblen: love that you solutioned like a temptail kind of situation. I mean, I think, honestly, when you said LTL refrigerated, I was like, ooh, that is tough. LTL not refrigerated or climate controlled can be really tricky to kind of monitor the quality of the shipment. And that's where, you know, you come into things where you see a pallet that's like completely crushed. So it's like already so many unknowns, so many pass offs, plus it needs to stay at a certain temperature. It's like a double whammy. So I love that you have thought through that and have like actively put solutions in place because it makes a difference at the end of the day.
[00:21:45] Melissa Traverse: So we've talked a little bit about how you think about manufacturing when you're at Kendall's stage and, you know, maybe finding a secondary co-manufacturer or finding another manufacturer. Mary-Kate, when somebody like Kendall has a brand with a truly unique production process, when they go ahead and take on a new manufacturing partner, What should she do to protect the brand? You know, what should she know about tech transfer, formula documentation, and who owns what when the manufacturing itself is part of the IP?
[00:22:22] Mary Kate Kloeblen: Yeah, it's a very tricky situation if you're not really thinking about it from that longer term lens as you're making these changes and getting started out. I think moreover than anything else, it always comes back to having really strong agreements in place. And so honestly, that's where you start with any kind of process with a different co-man or an existing co-man is really ensuring that you're reviewing the IP aspect of your supply agreement. It's very clear who's owning what, it's very clear you know, what changes are happening and those things are being documented. And I think truly just protecting yourself legally. And I know that's not necessarily a supply chain answer, but I think just any good business practice, especially with an innovative product. I think what's tricky when you have a product where the process itself is innovative is like who owns IP to the actual manufacturing. And so That line is always super great because your formula like made up of your ingredients is a little bit easier to transfer around the actual process can be really difficult. I think in that lens again it's like airtight supplier agreement. You know, ensuring that there's a line of of kind of demarcation in terms of who's owning what you don't want to steal IP necessarily from your co man but you do want to have the right to have, you know, your supply chain be flexible. So on that lens, I think also during the tech transferring process, some of it might have to be slightly redeveloped depending on who you're going with. And so I think going into those processes as well with your eyes open as you're actually getting into the tech transfers that it may take a little bit more R&D to redevelop, you know, with a different co-man. And maybe the core of the process is the same, but the co-man is going to have, you know, slight variations depending on their equipment and know-how. So I think, like I said, two things, like the legal aspect, like protect yourself, protect your IP, make it very clear early on, no matter what size you are, those are the things that come back to bite you later. And then secondarily, just really viewing the tech transfer as not a simple transfer of, here's our formula, have fun. But really, there is going to be R&D behind it and some differences. So you really need to suss out, will that new co-man provide that support? It's going to be a longer process in terms of making sure you're really happy with the end result.
[00:25:02] Kendall Kransdorf: Yeah, that's a good point. It reminds me also, I mean, we came into our manufacturer with all the formulations. To your point, that piece is a little bit more clear cut, but the process that we initially proposed did not end up working. Our product was too thick to get through that point. And so we had to pivot the process and that was a collaboration between us and the co-man to actually get to that current process. And so it's certainly something to be thinking about as you grow and scale, how you transfer that process and that knowledge that maybe was a collaboration between you and that partner.
[00:25:39] Melissa Traverse: And Mary-Kate, I'm sure that if contracts are a big part of the process, do you recommend brands go to any CPG lawyer that specializes in CPG? Like how would you find the right lawyer to help you make those decisions if you do have a unique product and the IP is a big part of what you're trying to protect?
[00:25:59] Mary Kate Kloeblen: It's a great question. I would say, from what I've seen early stage typically what you want to look for in a law firm, when you're just getting started out is one that has like that IP expertise like and by. has that IP expertise. I mean, they have like patent lawyers and like kind of a division that handles that and that might not be the same person that you're dealing with with, you know, your regular contract side of things. So I would say really just ensuring that you have someone who's an expert in that world, ensuring that you have someone who's an expert in your particular space, you know, a personal care product is going to be very different than a cottage cheese based dip. So I think really making sure that you have someone who understands the food space and to our point earlier that there are sometimes very specialized processes when it comes to these products and it's gonna vary by industry and different industries also have a different lens on them too. So I think someone who specifically plays in your world and realm is very helpful.
[00:27:07] Melissa Traverse: cottage cheese is your hero ingredient, and it's not exactly easy to source, especially now that cottage cheese is blowing up the way that it is.
[00:27:16] Mary Kate Kloeblen: Do you have multiple suppliers for the cottage cheese? Has it been tricky to source them? How has that process been in terms of your own network that you've been building for this ingredient?
[00:27:31] Kendall Kransdorf: We have one reliable supplier, I would say. There are others, and I've been trying to build redundancy into our supply chain so that we're not dependent on just one. It is a very tricky and ever evolving landscape and so even when people commit and say they'll have cottage cheese, my experience thus far is that is not always the case and it's usually not the case. And so trying to build in flexibility where possible and I think something that I've been trying to do even more so is really figure out where our formulation might have flexibility. So today, we are using conventional cottage cheese, but clean label cottage cheese, clean label is really number one priority for me, I don't want to use cottage cheese that has gums or stabilizers in it, which a lot of cottage cheese does, but really is not aligned with our brand. And so that's really the priority. But everything else I've been more flexible on. And so something I'm trying to figure out if we can do, and I do think that we are able to do, is flex a little bit on the fat percentage of the cottage cheese, for example, and tweak the formulation in other ways to still give it the same mouthfeel, tastes just as good, but we don't necessarily need exactly the same spec of cottage cheese as long as it fits within certain parameters.
[00:28:51] Mary Kate Kloeblen: That makes complete sense. And I think, too, like, The flexibility and formulation is so important, especially as you scale, because it may actually unlock some cost savings for you as well in different ways. So super interesting and amazing to hear that you're thinking through that and kind of tweaking that side of things. I think kind of the next question I was going to ask was, I mean, I don't know the cottage cheese realm very well, but are there lots of different kinds of specs of cottage cheese? I know you mentioned like clean label, but is it even as simple as like different curd sizes? Are there different kind of factors of it that maybe matter less outside of content?
[00:29:36] Kendall Kransdorf: For sure. I would say the primary characteristics of cottage cheese would be one, whether it's clean label or stabilized cottage cheese, which has the gums and stabilizers in it. Two, whether it's organic or conventional. Three would be the fat percentage. So like low fat, 4%, 6%, there's different fat percentages. And then the last one would be the curd size. So yes, you're right on that. There is smaller curd cottage cheese or larger curd. For us, we do have flexibility there because we blend the cottage cheese. It actually doesn't matter so much what the curd size is, which is helpful because if you're selling a finished cottage cheese product like any of the brands out there, that is really a part of your finished product. As you're making the cottage cheese, the current size is the finished product, what you'll see in it. And for us, it's not that because we blend it, we break it down regardless. So we have a little bit more flexibility there as well.
[00:30:32] Mary Kate Kloeblen: If you're using clean label cottage cheese, are there things that you can do to extend the shelf life? For instance, can you freeze cottage cheese? Does that do anything to it?
[00:30:44] Kendall Kransdorf: Yeah, I have tried it. It's a great question. I've tried freezing our end product. I haven't tried freezing the cottage cheese on its own and then using it in the product, but I have tried freezing our dips. And honestly, I was surprised it was better than I expected, but it does change the texture a little bit because as it defrosts, it gets a little bit watery, which we already deal with some scenariosis or water separation as a result of using clean label cottage cheese. We don't hold it all together with the gums. And so I'm trying not to add more liquid to the situation than necessary, but it's something probably worth exploring more. I think there's a couple other things too that we can potentially try around natural preservatives. So things like extracts and nothing that would alter our clean label profile, but things that might get us a little bit more shelf life. And then also working on things like the pH, which can help naturally kind of extend the life of the product as well.
[00:31:46] Mary Kate Kloeblen: Ultimately, it sounds like When this market is so tight, and I think this goes for any ingredient, it's really like, where can I expand my horizons? I think the other aspect that would be interesting or something that I've seen done really well, especially as brands hit scale, and I think you have a great growth story, so I think this kind of ties into it, but really setting contracts up with those suppliers to draw from, those blanket POs, even depending on how large the brand is, like, is there an opportunity for you to get exclusivity, you know, mutual exclusivity to their supply and then supplying it to you? So things of that nature that are again, like more legal based or more like agreement based, but I think offer some of that safety net. Again, you can use your growth story to like support you with that.
[00:32:43] Kendall Kransdorf: Totally. I think the more growth we have behind us, the hopefully easier conversations those will be. I think right now it's tricky because a lot of the cottage cheese manufacturers also have their own retail brands of cottage cheese, which are higher margin products for them than selling bulk cottage cheese. So the priorities are not necessarily aligned in the current state, but the more traction we have, I think the easier those conversations become. And the other piece that's tricky is the dairy world is to some extent a handshake agreement, boys club. And so getting in there as a female founder who is on the younger side can be a little bit tricky. So navigating that and also building relationships with people who might have spent more time in the dairy world and have those connections already is very helpful.
[00:33:33] Mary Kate Kloeblen: It's funny how supply chain is like so much of an art and science in that way. But art being like those handshake agreements and figuring out how to build those relationships.
[00:33:44] Melissa Traverse: Kendal, it sounds like you are in the middle of a lot of changes now, which is so often the case when you've hit a period of rapid growth. So I know that you're currently using a DSD for some of your Eastern accounts, and you're also onboarding with UNFI right now. You know, my first question is, how are you navigating some of the evolution that you're applying to Cato? you know, with changing around the fat percentage, maybe changing around the ingredients, changing things around, like, how are you thinking about getting some of those things in place before you submit all the paperwork and get set up in UNFI? It can just be so tricky to change, you know, ingredient panels and sizes and stuff like that. How are you thinking about that?
[00:34:31] Kendall Kransdorf: It's definitely tricky and something that's ever evolving too. It's not like I can formulate a backup formulation with this one specific fat percentage and necessarily know that's going to be the backup option I need. So it's very complex. I would say right now at least, We've built in flexibility on our packaging by using a label on the container instead of printing our packaging, knowing that a lot of these changes might need to happen, whether I would like for them to or not, just so that we can actually have a product. And so that's one piece that's been, I mean, it's definitely more expensive when we think about our costs, but it is helpful to have that flexibility as we grow and scale. And I think as we get into distribution and have another partner in the mix before we get to the retailer, it's all the more important to really keep the relationships both with the distributors, but also with the retailers. I started off going to all of our stores directly, not all 75 that we're in now, but all of the stores that were in at the time directly and building relationships with the people in those stores so that now when something does come up or something needs to shift, I still have that line of communication for the most part, which is really helpful to get ahead of those changes. If we're thinking about doing something and want to kind of feel out how that would be perceived. I've got some retailers that I've personally worked really closely with for a couple of months now and have built that relationship with so I can float that with them. And then also, as we haven't officially started working with UNFI yet, but working with our DSD partner keeping the relationship and the communication open with them as well so that I can understand exactly where our product's going, if there's places I need to jump in and help anywhere in terms of starting demos in those stores or sharing on our social media that we're now in those stores. I think it can be challenging to lose all the visibility as to everywhere your product is at all times, but it's also a necessary part of growth. I know that I have people who have understood the whole story and are not just getting a last minute email from me saying, hey, this product needs to change right now and that's it. But they actually might understand where it's coming from, which is always helpful.
[00:36:43] Melissa Traverse: What has been one of your biggest challenges as you're approaching a big distributor?
[00:36:49] Kendall Kransdorf: To your point earlier, understanding all the change that might need to happen at some point with our product, but also making sure that we're not slowing down these processes because we know that a change might eventually happen. So ultimately I have to, at some point kind of decide, okay, by the time we are actually up and running with UNFI, this is most likely going to be the version of our product that's on shelves. And that's the target state. If something else happens, I'll figure it out at that point. but you can't wait forever for your product to be perfect in its final state because ultimately you just don't have time to do that if you want to keep growing your business. So making the best decision I can with the information I have right now and just trusting that I will figure it out if I need to and communicate it properly with the people at Unify and also with our retailers if we do need to make changes later on.
[00:37:47] Melissa Traverse: So we talked a little bit about requirements. It sounds like Kendall is managing those well. What are some of the requirements that catch brands consistently off guard, especially if you have a cold chain or a highly perishable product, you know, are there audit certifications, infrastructure requirements that people just don't see coming?
[00:38:09] Mary Kate Kloeblen: I think what's really surprising is the compliance piece, to Kendall's point, the food safety. It's about going a few levels deeper than you might expect, going to your commands, in some cases, where you get your raw ingredients, ensuring that you have the right documentation chains to kind of have those things in place to kind of rely on and submit and make sure they're up to snuff for a Unifi or a Kahi. So I think that piece and just how extensive it is and like how document heavy it is, is honestly something that throws a lot of people off guard.
[00:38:54] Melissa Traverse: And remind us, so if you have a packaging size change, if you have an ingredient panel change, those are things that you would need to change in UNFI. What things require a brand to change their UPC?
[00:39:09] Mary Kate Kloeblen: net weight changes is a big one. So even if it's the formula stays the same, but it changes I think by plus or minus 20%. That's a new UPC. I believe also when certain claims change as well on the packaging, it needs to be updated. I'm pretty sure also different formula additions or subtractions need their own UPC. So those are the types of things. Other things that people kind of wouldn't think of first is like the actual inner pack structure. If you do provide inners, master case structure, if you change the number of units in the master case. So those are also not like the direct item UPC, but just other aspects as different retailers come up, different packouts come up. You also have to think about things from that level too.
[00:40:05] Melissa Traverse: And so do you recommend that brands buy like a big pack of UPCs so that your numbers aren't so different? Like how do you figure out, how do you figure out how many UPCs to buy at one time?
[00:40:17] Mary Kate Kloeblen: I think first and foremost, like I've had brands that I've worked with full time or have consulted in where they've bought their UPCs from kind of untraditional providers and that ends up being a mistake in the long run. So first and foremost, like GS1 is the standard. Don't deviate from them as a provider. Just there's a reason. Secondly, to your point, yes, like purchasing more UPCs than you think that you'll need to ensure that there's some uniformity is also very important. And honestly, too, really just keeping those kind of the GS1 database, like up to date, making sure you're doing a scrub of it, what's inactive, what's no longer relevant, what was like a UPC you created for a product that maybe didn't go anywhere. So I think, honestly, just having it well documented and a scrub often is also very important.
[00:41:17] Melissa Traverse: Kendall, this is, I mean, this is definitely BevNET's nerdiest podcast, I guess. UPCs are one of those things that like they seem like they can cause so many problems. And oftentimes it's like one of the smallest things that you ever think of. Kendall, what's one thing you've learned about UPCs that maybe could help other people out there?
[00:41:36] Kendall Kransdorf: That's a good question. I actually had some exposure to UPCs before I started Cotto because I was at another consumer startup beforehand. And I was the one who was actually making the UPCs for all of our various products. And we had way more products than Cotto has. So I can very much relate on what you're saying, Mary Kate, with making sure that you are keeping them organized and the ones that are no longer active deactivating those because we would have Amazon only UPCs and then UPCs for everyone else. We would have all these little gift with purchase items that all had their own UPC and it can get chaotic very quickly. So keeping very organized is important. But I think also, I mean, I don't know if this actually bites anyone in the butt, but I always practice scan before I print anything actually out, making sure your part code really scans. Because even if it looks good on your packaging, sometimes the design can mess with the scannability. So you can get a free scanner app on your phone and just test it out before you send it to print is always a good idea.
[00:42:38] Mary Kate Kloeblen: I had an experience earlier this year where a brand I was working with had set up for a retailer their pack structure. So MasterCase, Interpacks, individual product in Interpacks. Somewhere along the line with our co-man, the Interpack communication fell off or dropped off, and so they all showed up. not shrinked into inner packs or labeled. And so very quickly to your point, it's like those small things actually make a huge difference. Like we couldn't send that product. We had to go get it reworked like very quickly. The organization piece and making it very clear like what is what, doing like artwork version numbers, double, triple checking, having MMRs from the supplier too. It all makes a difference in the end.
[00:43:32] Melissa Traverse: Well, those are some excellent tips. Kendall, I mean, you've grown so fast. You have so many things figured out and running well for a brand that's so early stage. If you were to look at your operations, let's say 12 months from now, and you know, were to feel like things were in a really good place, what would that actually look like? What does a well run supply chain for Cotto need to have in place?
[00:43:58] Kendall Kransdorf: I think on a broad scale, probably myself not so deep in every part of them and having a lot of things be reliant on me, which I think is a natural state for a lot of early founders. But ultimately, I quickly have realized that things really don't run if I'm not constantly checking on them. And things will fall through the cracks, which is not a good place to be in. So as much as possible, building systems that can operate without my direct input every step of the way, and making sure that as we scale, our processes are very clearly documented, everyone has an understanding of what needs to happen every step of the way, because the more I lose that direct touchpoint, the more important it is that the partners you're trusting with parts of your supply chain have really clear direction and instruction and you are all aligned on what every part of the process should look like. So it's kind of a big high-level answer, but really having things not so dependent on myself and being able to put systems in place where I can really trust our partners to operate without me, which is not the way that I want it to be. But it is kind of the current state right now.
[00:45:11] Melissa Traverse: Well, I am wishing you all the luck in the world with that. Mary Kate, for any brand in our audience that's scaling a complex or an innovative product right now, you know, what are a couple of things they should be doing to protect themselves operationally before they even need to?
[00:45:28] Mary Kate Kloeblen: Yeah. I think I've mentioned this a few times, but contingencies are the name of the game. I always say this, operations, there's always something going wrong. That's just a Tuesday morning for us. But what makes those things that go wrong from just a blip to an actual emergency is not having a backup plan. That can mean a few different things. I know we've talked about this ad nauseum, but backup suppliers, having forward-looking contracts for ingredients that you might need that might be tricky. But also, there's other aspects as well, and maybe not fully related to Cotto verbatim, but as you scale up and you have different sales channels and you're kind of distributing in different markets and whatnot and regions, you know, just having redundancies with fulfillment, like where inventory is, how it's going to get to customer. I've talked about this ad nauseum, and I feel like I've said the word contingency like 50 times today, but backups, which may not seem pursuing because everything is fine in the moment, but there will be a time that comes up where it might not be fine. And so if you at least have something identified in the background, you can pivot and pursue it to kind of, again, make it a blip, not a full blown meltdown, so.
[00:46:57] Melissa Traverse: Well, thank you so much to the both of you for joining the Non-Based Podcast. Mary-Kate Klobelin, you are a supply chain consultant. What's the best way for people out there to get in touch with you if they have any more questions?
[00:47:12] Mary Kate Kloeblen: Sure. I'm very active on LinkedIn, so you can find me on LinkedIn just by searching my name. Additionally, we have our website with contact form. It's goldenthreadoperations.com. between those two channels, you'll reach me or my business partner.
[00:47:29] Melissa Traverse: Excellent. And for folks who do want to look up Mary-Kate, her last name is K-L-O-E-B-L-E-N. So definitely reach out if you have any Justin Kendall Kransdorf, founder of Cotto. Thank you so much for joining. I think we've been talking about this show for a while now and I appreciate all of the smart questions and solutions you've brought to this discussion. So thank you both so much again and to everybody in the audience, thank you for listening to the Non-Based Podcast and we will see you next time. That concludes another episode of the Nambase podcast. If you enjoyed the show, please leave us a review and follow us on your listening platform of choice. You can also watch and listen to past episodes on nambase.com. And don't forget to join our Nambase Slack at slack.BevNET.com for company updates, industry networking, and community discussions. See you next time.
