[00:00:05] Melissa Traverse: Hello, and thank you for joining. I am Melissa Traverse, director of community here at BevNET Anosh, and I am excited to welcome you to the Nombase podcast, a podcast built to help CPG owners and operators navigate growth challenges and grow more profitable businesses. Be sure to check out Nombase.com, BevNET's platform made for the CPG community, where you can find this podcast and so much more. As beverage brands begin to scale, there is often a pivotal moment in their growth. A major retailer says yes. A national program is suddenly on the table. And almost overnight, the expected volumes change dramatically. It's exciting, but it also raises some very important questions. Are your systems ready for that kind of growth? Is your team structured to support it? And is your current co-manufacturer built for where the brand is going next? Today, we are going to explore that inflection point with operations experts, Paul Verdu and Mitch Wedemeier at Octopi, a highly versatile and technologically advanced co-packing partner backed by Asahi Group that focuses on helping brands scale production as they grow. Paul and Mitch, thank you so much for joining me today. It is such a pleasure to have you here.
[00:01:21] Paul Verdu: Thanks, Melissa. It's great to be here.
[00:01:24] Mitch Wedemeier: Thank you very much.
[00:01:26] Melissa Traverse: Paul, let's start with you. Could you tell us a little bit about your role at Octopi, what the company focuses on as a beverage co-manufacturing partner, and how that partnership with Asahi Group came together and shaped the business?
[00:01:40] Paul Verdu: I am the managing director of Asahi Beer USA, which we have two lines of business, our branded products. such as Asahi Super Dry and Twisted Shots, and recently Zetake Shibori, an Asian-inspired RTD. So we have that side of our business, which is our own brands. And then we are also the proud owners now of Octopi, which is a large Madison-based beverage co-packing facility. We acquired that business in January of 2024. It's been just over two years. We feel both lines of these businesses are equally important. We're certainly focused on growing our own brands, but we also are very proud of being a reliable co-packer for many, many clients across the beverage landscape. It's been a great couple of years as we've ramped up. Asahi has invested over $35 million in our facility. So we've been a co-packer for over a decade. But with Asahi coming in, $35 million in investment in capacity, driving initiatives, capabilities, quality work that we've done, and also on safety initiatives. So really, somewhat transformational in the last couple years about our overall business.
[00:02:54] Melissa Traverse: Today's conversation is about helping brands figure out what operational changes they need to make as they scale. Octopi specializes in helping brands navigate those challenges. How do you do that?
[00:03:08] Paul Verdu: We have the size and overall capabilities to help brands navigate that growth journey. So we're not the largest co-packer in the country, but we're by far not the smallest. And we're sort of in that middle tier where we're a hundred percent big enough to help a brand scale for years, whether that's through a new program at a large retailer or expanding for regional to national. But at the same time, we're not so big that a client that would come in to work with us would feel like they're at the end of a very, very long list. So we're quite selective about who we work with, and we want to help people grow, help brands grow. And so we have highly flexible, long list of capabilities, an amazing quality program that we execute across all of our clients. We're focused on our employees' health and well-being and safety. And so we're sort of a nice, well-rounded kind of a co-packer for that business that's maybe outgrown the one they have or they need to add another. I think we are perfectly placed to be successful in that space with Octopi.
[00:04:15] Melissa Traverse: Is there any way that you can quantify the size of brand that makes sense for you just so those folks who are out there listening can understand if it's a fit or not, whether that's revenue or minimum order quantities, that kind of thing?
[00:04:28] Paul Verdu: We can talk later a little bit about specific minimum order sizes, but I think when a brand is sort of Getting into the hundreds of thousands of cases towards a million case mark, and then beyond that, I think that's where we come to play. We have some clients that are 10 million cases a year and some clients that are approaching a million cases a year. So it all depends, but we're certainly interested in those brands that have a great track record of early success that are looking for the next big thing.
[00:04:56] Melissa Traverse: Mitch Wedemeier, let's hear from you. Can you tell us a little bit about your role at Octopi?
[00:05:03] Mitch Wedemeier: Absolutely. My primary role at Octopi is the director of planning. My focus goes from talking directly with the clients, understanding their needs, and then figuring out how that most efficiently fits into the pipeline of Octopi. How do we get all of the needs of our customers met as quickly as possible, and at the same time as efficiently as possible for us.
[00:05:29] Melissa Traverse: And am I right to understand that you're oftentimes kind of in the weeds with customers trying to help them figure out some of the challenges that they're experiencing?
[00:05:39] Mitch Wedemeier: Absolutely. My involvement starts as soon as we start talking to a new client and it's everything from focusing on a new format, either new for them or new for ourselves, a new product that they're trying to launch, new requirements that they're looking into, so we can get very, very granular with them very quickly to understand what do they need to be successful and how can we ensure that we hit that requirement for them.
[00:06:05] Melissa Traverse: Well, we are here today to talk about some of those issues that come up when a brand lands a major event. Oftentimes, this is working with a national retailer, maybe a club like Costco. Mitch, when a brand has a major event like this and realizes that their current setup may not be enough to accommodate this win, What are some of the operational realities that they often underestimate that could be around documentation, equipment, certifications, packaging? What are some of those things that brands tend to underestimate?
[00:06:39] Mitch Wedemeier: A lot of these things get underestimated as what's required, whether it's certifications that you need, say for Costco, can your co-packer that you're currently with handle those things? Other things that kind of come with that is scaling up in regards to your packaging formats that you're doing as well. You might be doing things like digital printed cans, and you want to move to pre-printed cans because your volume now hits those things. There's a lot of hoops that you have to jump through that you need to take the time to really think about, but often gets missed.
[00:07:10] Melissa Traverse: Well, Mitch, it certainly sounds like you and Paul work with brands all the time who are moving from a smaller co-manufacturer to a larger one. When a brand realizes that it needs a bigger co-manufacturer, what are the first operational gaps or risks it should assess before making that move? Because it's a pretty, it's a big move.
[00:07:30] Mitch Wedemeier: The biggest one that always comes down is how quickly they need the product. When certain things like this hit, say you get a Costco deal or a Sam's Club or Walmart, whatever it is, typically they're wanting the production in 12 weeks, maybe 16 weeks if you're lucky. And you need to ask yourself, is my current co-packer able to handle that stuff? If they aren't, do I need to offload some of this volume to another co-packer? not only do you have to find the co-packer that is best for you right now but also in the future to minimize changing from one co-packer to another because that is cumbersome and it's a lot of work but you need to make sure that whomever you're moving towards is ready to take on the challenge of going from zero knowledge about your product to producing and sending it off to Costco for you in three to four months. That's often the situation that we find ourselves in.
[00:08:28] Paul Verdu: The earlier you get ahead of that, if you anticipate success and you start to think about your current co-manufacturer or plural, co-manufacturers and your network, you have to anticipate what that future is going to look like and start those conversations with a potential new co-packer as soon as possible, because the earlier the better. And then it's a measure, cut, measure twice, cut once kind of scenario, where the more conversation you have up front about expectations and volume and ingredients and whether or not you need full turnkey or just someone to come in and do the actual packaging. And by turnkey, I mean, We at Octopi can do everything from procurement all the way through all the raw materials, packaging materials, ingredients, etc. So understanding what you're looking for in your co-packer. So the earlier the better and the more detailed the better so that you're prepared for what the future might bring as opposed to being kind of caught off guard because you might not have another chance to say yes to a opportunity like Costco or Target.
[00:09:37] Melissa Traverse: To drill into that timeline a little bit deeper, let's say a brand is planning a new format or expansion. So it's not necessarily landing a Costco because that's more of a panic event. You just have to get it together in order to meet the deadline. If it is more of a planned event, again, like a new format or an expansion, What does a realistic onboarding timeline look like if a brand knows that they are going to need to onboard either an additional manufacturer or perhaps just transition to a larger co-manufacturer?
[00:10:09] Mitch Wedemeier: That can vary quite wildly, to be honest with you. It's going to come down to how quick is this client ready to move and how eager is your co-packer willing and ready to work with you on this project? For example, we could be ready in as little as 12 weeks. That's the lead time for cans and cartons often. So it often comes down to how quickly you're ready. And one of the things that we kind of see a lot as we go down this stuff is as you're moving on a new format, you need to ask yourself, do I have the right team to be able to take this on? Do I have the right supply chain process and my business as a client to be able to run through everything from getting new prints for your cartons or your cans, whatever it may be, finding the right manufacturer for your cans, cartons, et cetera. And then getting that information to your co-packer as well. If you have the right team, you can be very, very quick. If you are still understaffed, and it's a lot of situations where it's maybe understaffed is the wrong verbiage there. But if you're still a small team where it's the founder and one or two other people, your process is going to take a little bit longer. And if you're okay with that, it's perfect for you. But when you're ready for a big blow up of an expansion, new format that you really think is going to hit, Being ready from a structure standpoint internally is just as important as every other avenue when doing this.
[00:11:40] Melissa Traverse: The link between teams and timeline makes so much sense. And we are going to talk just about teams in a little bit. When you say 12 weeks, Mitch, do you mean. Is that when Octopi, for example, would be ready to run? Is that a trial run or is that, what does that 12 weeks get a brand to?
[00:12:00] Mitch Wedemeier: We often stick with that 12 to 16 week timeline because that is often the amount of time it takes for the client to have all of their raw materials, packaging materials in-house. It takes time to get the prints ready for your cans, getting the plates done for your cans, and then by the time you place an order, you're looking at potentially 8 to 10 weeks there. Obviously, volume and who you're Current vendors are varies wildly and some are faster, some are slower, but a lot of it comes down to that. And what Octopi specifically likes to do is work within the constraint of your materials. As soon as you have materials here, we want to be ready for you. We don't want to be the holdup.
[00:12:42] Melissa Traverse: Let me pose a scenario to you. So I'm a brand Costco just said, we want to do a rotation and let's say they say three months. Is that six months? Is that typically what you see from brands who are planning for an event like that?
[00:12:59] Mitch Wedemeier: In my experience? Yes. I know sometimes there's a little bit more planning, but often not. You know, clients are already working with Costco and trying to get their foot in the door. But by the time they say yes, and they find out what that volume is going to be, to the time it needs to be in the store, yeah, you're looking at 90 to 180 days.
[00:13:19] Melissa Traverse: So I'm super excited. I'm a brand. This is what I've been waiting for. And I'm realizing that my current manufacturer isn't going to be able to fill the order on its own. What do I do next? Do I find a manufacturer to be able to supplement what I'm doing? Do I find one to just transition to? What are the next steps?
[00:13:45] Paul Verdu: One, you try to avoid that, but if you can't, I think the best bet is to try to find someone who can work with you quickly, but I think that co-packer would probably like to talk to you also about what that means longer term, right? So a one-off project to get someone out of a little bit of trouble is one thing, but hopefully that would then lead to a much longer conversation around, you know, As a co-packer, you deliver, you make it happen, find a way to get it done quickly. Once you have success with that, I think both parties at that stage would hope that it could become a much longer term partnership. So I think it's just being, like I said, we cannot predict the future, but the more you are prepared, the better. I think a lot of this talk about the excitement of getting a Costco reminds me, and it probably ages me here, but about the movie Jaws, right? So they're on the boat and Brody for the first time sees the beast swim right up to the boat and it freaks him out. He's got a combination of excitement because he's never seen anything like it, but he's got anxiety and fear. and wants to make sure and he goes back into the cabin and says we're going to need a bigger boat. Finding someone who can help you navigate those tricky waters and actually turn the excitement into reality as opposed to the anxiety into something that manifests. So it's never too early to kick the tires. It's never too early if you see a growth trajectory on your brand to start looking at other co-packers that are maybe bigger, more sophisticated, have more capabilities, can fulfill orders. So as much as you can anticipate what that future looks like and have conversations, kick the tires of multiple people, multiple companies that can maybe help you get out of the space. But worst case scenario, you need something in three months. If you've had conversations and dialogue with a handful of co-packers, maybe one of them can help you and turn it around quickly.
[00:15:35] Melissa Traverse: That is the perfect analogy, by the way. Do you ever see brands negotiate the timelines with retailers? You know, I think you guys have such a unique vantage point because you are working with these clients every day. So you can see some of the behaviors that can really help brands cement strong relationships with their retailers. Do you ever see brands push back and say, Hey, listen, I can't do it in three. Can you give me six?
[00:16:03] Paul Verdu: One of the challenges as a, let's say you're a beverage founder and now you're starting to get calls from Target, from Costco, from Walmart, the bigger the client, it's not very common that the easier they are to work with, their demands actually go up and increase. And so unless you have an extraordinarily strong and compelling proposition, something that the consumers are beating down the doors to try to get their hands on, it's probably difficult to negotiate a delay with a large retailer. So again, a lot of that comes back down to your brand and what's like happening in the marketplace for it. But as long as both parties remain flexible, but the more sophisticated your retailers get and the bigger they get, the more demanding they are. And that's back to our original thing, like having a co-packer who can help you navigate all the requirements, whether those are lead times, pallet configurations, quality, carton specs, literally like this is like the right kind of carton durability and those certifications we talked about, whether that's SQF or places like Costco, et cetera. So making sure that the more you work with bigger retailers, the more you understand the complications and finding a co-packer that takes a lot of that pressure off your plate as a business owner and founder and, or, you know, the marketing team, the sales team, they're out building the brand. A small group is working with the co-packers and they're taking care of all the nitty gritty behind the scenes. I think that's a, an important balance.
[00:17:32] Melissa Traverse: Well, making those timelines and meeting deadlines is of the utmost importance, certainly to brands. And one of the things that likely holds up being able to execute on time is documentation. You know, we're talking about specs, recipes, processes, quality expectations. What documentation needs to be fully locked in to make sure that you have a smooth transfer between two co-packers? Because certainly that's something that larger retailers are even more strict about, I would assume, as a brand scales.
[00:18:07] Mitch Wedemeier: Oftentimes you don't know who the other co-packer is. You as a client does, but your co-packer does not know that your other co-packer is X or Y or Z. So a lot of times we are getting information that's new to us and there's very little knowledge share in that. Getting your co-packer to understand your product, the requirements of the product and the specifications is the most critical part to start out. That might be, here's how we make this beer or this soda, RTD, etc. But these are the specifications that matter the most to us. These are critical. And if you're doing something like claiming kosher or organic or anything like that on your product, getting those certifications from your material vendors to your manufacturer as quickly as possible are critical as well. That stuff takes time, especially organic certification. it takes time to be able to get those things up to speed and ready to go in an already tight timeline often not. So being critical and detailed with those things is the best way to get the right foot forward as quickly as possible.
[00:19:18] Paul Verdu: What you find if a brand scaling quickly, they're moving from operation A that might have a certain set of equipment and capabilities to maybe a larger co-packer that has more capabilities. And so sometimes a straight lift and shift of a formula or a process to a new copacker isn't automatic. It has to be translated into the new environment, right? So again, it could come down to the type of pasteurization being used or how fast the line runs or the carton specs required to run on operation B's line is different than operation A. So I would caution any beverage brand against thinking they can just lift all of those things and shift to a new co-packer, because there's actually a translation exercise that has to take place.
[00:20:10] Melissa Traverse: I mean, I know that it's probably case by case, but do you have any overall advice for folks out there who are negotiating that process and working with a different set of efficiencies, equipment, capabilities in order to make that process as smooth as possible?
[00:20:30] Mitch Wedemeier: Two of the biggest ones that I encourage my, well, the one that I encourage myself the most is getting yourself to that co-packer. Have them walk you through the processes start to finish because again, the co-packer does not know who you're currently with unless if you tell them that, but often not that is kept confidential for reasons. So taking the time to walk through it and having technical people from your team walk through how to make your liquid, how to package your liquid is the best way to quickly ensure how it gets done. And what really sets some clients apart from others in my experience is as soon as you start asking for this documentation, you can tell how prepared they are for these next moves. We have worked with some clients in the past where you are getting very little information from them because they're still learning this stuff themselves. They're still focusing on the growth and that's their biggest thing is how do we get this made, not necessarily all of the granular details. They're looking at a big picture. And then there's other clients that we've worked with Some I absolutely love where they just have an Excel file with 30 different tabs on there, giving you a link to every single thing, things that the co-packer may not even require. But having that information, that really sets apart how detailed and ready you are to grow with a co-packer and move on to a new co-packer, showing how detailed you are with all of your documentation, having that ready to go.
[00:22:07] Melissa Traverse: I am picturing that Excel file. Tell us what you love to see on there. When you open that thing and you see these tabs, what are you so relieved to see?
[00:22:17] Mitch Wedemeier: A lot of times it comes down to the material documentation. That seems to be the biggest challenge that I have personally dealt with in my five and a half years in this industry is getting your COSHA certifications, your material data sheets, your technical data sheets. third letter of guarantee, et cetera, from your vendors, that takes time. And when a client already has that stuff ready to go and linked in a Dropbox or an Excel file, it's incredible to have that information because it shows us how ready the client is. And it shows at a technical level that they are on top of their game.
[00:22:58] Paul Verdu: And this is where you would say, this is why I do what I Verdu and Mitch does what he does because that Spreadsheet with 30 tabs seems a bit much for me, but it's probably not enough for Mitch.
[00:23:11] Melissa Traverse: I'm sure you're both the yin and the yang at Octify. So we talked about this just a little bit, but I would really love to pick this apart and hear what you both think about team structure, keeping in mind that so many brands are bootstrapped and it might be just a founder or two co-founders, and then they slowly incorporate fractional labor in, and then they slowly make internal hires as they can. So as a brand scales, what is the ideal structure for its supply chain or operations team to manage the manufacturing relationship? Again, especially considering that we're trying to be careful of resources and how are they able to grow that team in stages?
[00:23:56] Paul Verdu: The interesting thing in my theory, my philosophy, and I think this is very fascinating about the industry now, there's so much innovation. And I think people are smartly outsourcing the manufacturing side so that it reduces your startup costs and your cash requirements up front. And it's unleashed a level of innovation that I've never seen before that I think is happening in the beverage space. And I think the one without me getting into the specifics of what roles need to be filled by the client, I think One of the advantages of coming to a bigger copacker that can kind of take a lot off your plate from an operational standpoint, allows the founders, the heads of sales, the heads of marketing, the commercial organization, it allows that company to spend their time, a lot of their talents and their money against building the brand and building the business, which, you know, in a crowded marketplace, I can't emphasize enough, I've 30 years as a marketer, 21 years in building beer and beverage brands across the globe. The number one most important thing a new brand and a brand that's scaling up can do is focus on their brand itself and make sure it's staying engaging with consumers and make sure they're meeting retailer demands and have an amazing story to tell behind it. The last thing they want to worry about as they're doing that is all the stuff behind the scenes, making sure product gets from point A to B. Now, they definitely worry about it, but it should be they should find confidence in their co-packing network that can take a lot of that pressure off their plates. Now, it doesn't mean they're not staffed to manage it. And so in my opinion, like the ideal clients that we work with have a small supply chain team, maybe someone who's really experienced at the top. And depending on whether they're turnkey or they want to provide all their own ingredients and materials, they would have a team working on procurement and a team working on logistics and transportation and so on. But the day to day nitty gritty grind of get cranking out the beverages on time and in full and with high quality, that's that should fall on the co-packer. So I think to me, that's in an ideal like business sense, how it works well.
[00:26:06] Melissa Traverse: Do you see any winning formulas for brands in terms of how they're using fractional labor and internal labor for operations?
[00:26:16] Mitch Wedemeier: We have worked with clients that have outsourced the operation side of things where they have a third party who is working directly with the co-packer to plan out the production, the supply demand production planning aspect of the business. We've also worked with. clients who have outsourced the supply chain side of things to where, like Paul said, you have one person at the very top focusing on the supply, demand and production, but then they've outsourced to a third party who's procuring all of the materials. I've seen that work very well and I've seen it work not very well. It really comes down to finding a team that works really well for you Oftentimes you can find co-packers too who are happy to take on that level of responsibility for you as well where maybe they'll be fully turnkey and they can handle the supply chain side of things when it comes to procuring materials. Maybe they can help out with some 3PL or shipping to your distributors so you don't have to worry about those pieces. So again, all you're focusing on is do I have product because we're going to Costco.
[00:27:31] Melissa Traverse: And Octopi can provide fully turnkey services, correct?
[00:27:37] Mitch Wedemeier: Yeah, absolutely. We, Octopi prides themselves in being able to do anything that's thrown at us. So we try to be versatile when it comes to being fully turnkey or the exact opposite. We're ready for those processes.
[00:27:52] Melissa Traverse: And do you find that sometimes as a Brandt Gehrs with you, is it common or does it make sense sometimes for a brand to move from fully turnkey to tolling as they're growing out their team and as they're growing their supply chain?
[00:28:09] Mitch Wedemeier: We've actually dealt with that a little bit with clients in the past, you know, again, in the five and a half years I've been here, there's been some clients that have come in where we are supplying, you know, 50, 60% of the materials for them. And after several years, they're now supplying 90, 95% of it. Because during that time, not only have they grown as a brand, but they've grown as a team as well. And they might have three or four different co-packers. And at that point, it makes sense to centralize that rather than relying on your co-packers sometimes, sometimes not. But in the times that it does, where you have several co-packers, you know, appropriately placed throughout the United States, I think it makes sense to bring all of that stuff in-house to yourself, because now you can have that overarching kind of look at every one of where things are, where things are kind of happening amongst all of your co-packers.
[00:29:08] Paul Verdu: That consistency across multiple co-packers is really important. And so centralizing the procurement makes great sense. Also, it's sometimes a simple math equation as a Brandt Gehrs big and scales up, they can actually do consolidated purchasing of supplies and materials and get a better price than some of their co-packers could. So really, there's a lot at play there, but a lot of it comes down to a financial and capabilities conversation.
[00:29:35] Melissa Traverse: Paul, just a little bit earlier, you were talking about how, you know, brands are often well suited to focus on the sales and marketing aspect of their business. How do you recommend brands balance investing in their sales and marketing growth while still maintaining tight forecasting and supply chain oversight with a fairly lean team? I know that forecasting is oftentimes just, you know, the most difficult thing to be able to do. How do you see that work well?
[00:30:05] Paul Verdu: been in this business a long time and there's only one thing I know about forecast is that it's slightly wrong to sometimes very wrong. A lot of clients coming to us are going through a pretty explosive growth phase, which in which forecasting gets even more challenging. So it's absolutely critical to invest in the right tools and people to make sure you're as good as you possibly can be at that. Because in our case, like it's not something We work best when we work with a client that's coming to us with a well planned out forecast and that we can make sure it's integrated into our plan. So I call Mitch part of his job as a planner. He's constantly playing Jenga with our capacity, right? So you got to move this here and this there to fit this in here. So when we have a partnership with a client that has really good forecasting, or they've gotten to a point where it's a little bit more steady, the whole thing works better. Now, when you're in a hyper growth mode, in addition to investing in sales and marketing and all those things, you definitely need the back office to support it to make sure you're as accurate as possible. But that's also where having a co-packing partner that's where you're not like their 10th client and you've pushed them over capacity so that if you need to respond quickly, that co-packer can't do it. So that's part of the importance of understanding how flexible is your co-packer, where are they vis-a-vis their capacity on an annual basis, where do you fall in into their list of clients in terms of your size, scope and importance so that you can, even if you've missed a little bit on the forecasting side, rely on that partner for some flexibility to help you get out of a jam. So, um, I do think that the technology, the tools and the people to be as good as you possibly can be at forecasting is important. Cause again, if you're brand new and a target or a Costco, and you slip up in a significant way in the first six months or year, And you get, as we say, put in the doghouse and maybe you're out. It's hard to get back in.
[00:32:08] Melissa Traverse: We talked earlier a little bit about documentation and certification requirements or something that really come into play as you launch into major retailers. You just mentioned Costco. That's certainly one. Can you talk about some of the certification requirements that oftentimes surprise brands when they land a large national or club retailer?
[00:32:31] Mitch Wedemeier: I don't know if there's any that really surprise brands. Again, I say this from my perspective, not theirs, but I do know as clients are talking with companies like Costco. some of the first things they're covering is, here's what you need to have to be able to produce with us. But as you're growing, you get into Target, Walmart, Costco, etc. They all have their own rules and regulations. All of them that I just discussed require SQF certification, for example. But then Costco also has its own kind of separate level of certification that's needed. So if you do ever anticipate getting into Costco, make sure that your co-packer is able and ready to do that without going through processes. Now, if it's a great co-packer and you don't want to leave them, they have the capacity, but they're not Costco ready. start those conversations with them right away so you have six months plus to be able to prepare for that so they can do that for you. It's about finding the right co-packer that will work with you long term that wants to get certifications such as organic, kosher, and SQF to be able to grow with you.
[00:33:44] Melissa Traverse: In which certification requirements can octopi meet and why are they important?
[00:33:51] Mitch Wedemeier: just about all of them. For example, Octopi is organic, kosher, SQF certified, and we are ready for Costco production as well. Those are the primary ones that we see with kosher and Costco ready being the two main ones that we see the most.
[00:34:11] Melissa Traverse: All right, let's talk a little bit more about what can surprise brands. What do you see comes up for brands around things like packaging specs, pallet configurations, and lead times when working with major retailers? What are some of the surprises that come up that they're suddenly going to need to be able to accommodate?
[00:34:31] Mitch Wedemeier: I think lead times is probably the biggest one. it's always yesterday when you need something done. So the lead times are never long enough or short enough, I should have said, in order to have things like your packaging materials in-house, understanding, you know, what kind of specifications you want on your dye line for your cartons. You want to make sure you're getting cartons that can hold up to everything you're working on. You want to make sure that the specifications inside the can such as CO2 is at a level that's perfect for your product and your clients are happy. There's sometimes a lot of fluctuation in that stuff as a client is growing. So again, it's about finding out what works best for you with things like dissolved oxygen specifications or CO2 as well, but then also understanding what the dye line is that you're working with for your trays or your cartons. Will that work for you with whatever retailer it's going into? So you don't have to worry about changing it.
[00:35:37] Paul Verdu: Those things that Mitch pointed out, it's not necessarily like hard and fast rules that will be new to a brand when they enter like Target and Walmart. I think it's ramped up expectations. And so again, in a hyper competitive beverage world, you have to be reliable as a supplier to those retailers. And that includes quality of the product itself, like Mitch was saying, dissolved oxygen. And when you start scaling from a smaller to a larger co-packer, you could probably be even more demanding as a client, right? We need to do better on this aspect of the product development or less TPO, less dissolved oxygen, better stability of our cartons that we're choosing. So you can go to a new co-packer and probably have, you should have higher expectations around the quality that's being output and the reliability. And so avoid getting in the doghouse with a major retailer. So have the highest quality products you can in the best packaging that you can afford, that makes sense, that drive consumer appeal in the right pallet configurations at the right time. If you're late with a bunch of orders, that's also getting you in the doghouse. So There are, for every successful beverage brand, there's five right behind it knocking on the same door. And so, if you have hiccups on any one of those areas, once you get to major retailers, you may never make up for it. So, that's why choosing wisely when it comes to your co-packing partners is super critical.
[00:37:03] Melissa Traverse: And those initial launches are not just important from a retailer relationship perspective, of course, but from a customer relationship, you're oftentimes, you know, sharing your product with folks who have never tried you before. And if they try it once and it's not great, then they're probably not going to buy you again. So it really is so important to get it right.
[00:37:24] Paul Verdu: We talk about this all the time on our own, on our own brand, right? So, like I said, we have two lines of business, but if you think about Asahi Superdry, Literally most our trial is so low, our number of people who really know about it actually in the grand scheme of things. But so I tell our team all the time, imagine the first, the beer that we're putting out there is the first one that anyone has tried. And it better be good.
[00:37:46] Melissa Traverse: And, you know, because we've been talking about Costco so much, I have to ask about variety packs. What are the surprises that come or come up there? Are there anything that brands can do to head off any unwanted challenges?
[00:38:00] Mitch Wedemeier: I think the biggest thing that I see with. variety packaging is understanding the needs. Honestly, it's the exact same as packaging when you really think about it. Whether you're going into Target or Costco, Walmart, et cetera, they all have their own unique requirements. Costco needs shut pallets, for example. It's making sure and understanding that however you're setting this up, it's going to work for all of your co-packers. Whether it's a label requirement that you need to put on your tray, that way you don't have to worry about custom trays for Target, custom trays for Costco, etc. That is a hassle for you to have to manage. You know, I'm going to use these trays for this Client or this retailer these trays for this retailer But then all of a sudden your sales for Walmart aren't as high as you want you want to pivot volume Well, it's in the wrong tray potentially or the wrong carton So making sure that these things can work for both of them depending on what your retailers require that's really one of the biggest things to kind of step back and make sure is this going to work and variety packing is so interesting now because I
[00:39:12] Paul Verdu: It's the model, right? If you, we do a lot of non-alcohol products, just functional beverages, et cetera. Um, but the model is you launch or you have, let's just say four flavors and then you have a couple of a variety pack. So this is beyond being a co-packer, but being smart about what you put in a variety pack, definitely don't use a variety pack to get rid of a flavor. You don't like nobody likes, cause that will not work. I've been around variety packs my whole, my whole career. And there's just some that work and some that don't. should be all your best stuff. But from a co-packing perspective, I've seen a lot of companies where they'll have a co-packer package and can the product and put it into like what we call loose trays or just trays that then get shipped off to a to a different location for variety packing, adding cost, adding time, adding, creating a lack of flexibility. So if you can find a co-packer that has onsite variety packing, where you're literally running it on one line, taking it off and putting it on the variety packing line. And it's like, you don't miss a beat. It's close by, it's the products right there. It creates flexibility, it creates cost savings, et cetera. And of course, I'm happy to say that Octopi is one of those types of places where we can We can fill your cans and send them over to our VP line, which is right there and off and running. It has financial and flexibility benefits for the client.
[00:40:41] Melissa Traverse: It sounds like a layover or making a stop on a flight. Like you just want to go direct.
[00:40:48] Paul Verdu: That's exactly right. Yeah.
[00:40:49] Melissa Traverse: All right. So we've spent the last 45 minutes talking about that initial launch. Let's say we got that initial PO out. We, you know, we overcame that first hurdle. How can brands stay ahead of, you know, what can be unpredictable reorder cycles and avoid costly out of stocks while they're adjusting to a retailer's planning cadence?
[00:41:11] Mitch Wedemeier: It's all about predicting the unpredictable. I mean, it's when you go into a brand new retailer, you have no idea how well it's going to sell. So you don't want to, you know, say your order is 10,000 cases. You don't want to produce 20,000 and assume that it's going to sell. What if it doesn't, and you're stuck with agent inventory, but you also don't want to produce 10,000 and reorders are coming up two weeks later. And your co-packer has a lead time of say eight weeks. Now you're, you know, stuck between a rock and a hard place. So it is such a challenge. And I believe Paul said it earlier is when it comes to forecasting, you're either wrong or you're really wrong. There's not really any month where you were dead on with what you wanted to hit. So putting as much focus as you can into that where you have your sales team and your forecasting team. Those are probably the two most important pieces that a client, a brand should be focusing on because that's going to help them in the long run understand what are reorder points going to look like as soon as they go into Costco and being ready for that.
[00:42:22] Melissa Traverse: So what is the equation you use in order to figure out what you should be producing? Is it overshooting your existing inventory by a certain amount? How do you, how do you math that out?
[00:42:36] Mitch Wedemeier: That's a tough question for me, honestly, because I am an optimist and a pessimist at the exact same time. So if, if it were up to me, I'd always produce too much stock and then I'd be stressed out and anxious that, Oh no, I just made too much. What I really. enjoy seeing is where brands and your co-packer can work together to say, hey, order's $10,000. We're going to make $12,000. This might take off. order in. And it's just not necessarily having the finished product ready to go, but having time blocked off that can be flexible and having the materials already in house. You know, it's a lot cheaper to just have the raw material sitting in a warehouse than it is the finished product. So it's all about that balance of here's what I think is going to happen, but in case it exceeds my expectations substantially, what do I need to do to be ready for that?
[00:43:34] Paul Verdu: this concept is a function of like understanding product shelf life, right? So can you make, should you make extra of a product just in case, will it last? And then very much related to that is where would you, do you have a place to store it? Is your co-packer large enough that they can hold product for you? We utilize two warehouses right here. One about a few miles away and one right across the street. But we make sure we always have space to store for as long as we need to with our clients. And then the last piece is more on the client themselves. Like, do they even have the cash flow to hold inventory? So a lot of clients coming our way are not exactly, they're probably they're probably still there because they're growing so fast, they're probably hand to mouth in terms of cash flow. So that's a very tricky balance that a client has to kind of manage. But what's really important, if you're choosing a new co-packer, because you're going to be scaling up, make sure they have capacity to scale with you. So if you, let's just say you go to a co-packer, and they say we have a million case capacity left and we're happy to give it to you or sell it to you, partner with you on it. But if you think in two years time your volume is actually going to be 2 million, I don't know if that's a good decision or within six months you might be having to look for yet another co-packer. So just make sure that your co-packing network has some space in it, flexibility. to be with you when you're about ready to grow faster?
[00:45:01] Mitch Wedemeier: I think a big thing to really consider when you're looking for a new co-packer as a brand is not finding a co-packer that necessarily has the room for you, you know, now and in the long run, but also find a co-packer that values this relationship that you're about to create. Your co-packers, such as ourselves, we want to grow with our clients and we want our clients to explode in volume and be wildly successful. And it's really important to make sure that you're going with a co-packer that's not going to just treat you as another number where, like Paul said earlier in this, if all of a sudden you get a huge order and you're number 10 on their priority list, you're not going to get any volume moved up or down. So it's really finding a partnership and a co-packer at the exact same time is so important.
[00:45:54] Melissa Traverse: Well, Paul Verdu and Mitch Wedemeier, operations experts at Octopi, thank you so much for joining today. You gave so much helpful information. I feel like we're leaving this conversation with a checklist of things to fully understand when you're at one of those transition points as a brand and you're taking a leap from one stage of business to another. So thank you so much for being so generous with your information. Everybody, definitely check out Octopi if you are in one of those transition points, or you think you may be looking at one down the road. They are excellent partners. And thank you all so much for listening to the Non-Based Podcast. It's great to have you here, 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.
