If We Build It They Will Come
The Business of Food
by Jennifer Barney
If We Build It They Will Come
AG GROWTH BEYOND THE CORE PART II
2-min read
The Build
My first partners in Barney Butter were my almond suppliers. An independent grower processor, they had been my exclusive supplier for over a year. When we came together in partnership Barney Butter had distribution in several Whole Foods regions and was the first specialty nut butter on Amazon before Amazon even had a grocery strategy.
My almond partners and I complemented each other perfectly – they would run operations and I would run the brand. One of the first things we set out to do was leave the co-packer and build a manufacturing facility. They were great at this. They engineered the line, did the installation and all the integration. It wasn’t without problems but no problem was too much for them to handle and in 6 months’ time we were up and running.
The thing was, we over-engineered the line. When the mill was backordered but a larger mill was available, my partners went with the larger one. This one move shifted our minimum run rates and maximum capacity at 2X plan. But they thought it would be OK because “if we build it they will come”.
Almond handlers in the mid-aughts experienced unprecedented global demand for almonds. The nut’s popularity meant higher production value in the form of prices back to the farm. Free of capital and cash flow constraints, investing to add more value to almonds would be a step toward capturing more of the demand.
They didn’t come
The idea was to market our blanched almond butter as an ingredient to drive volume. But breaking into this new channel proved challenging. My partners tried leveraging their overseas relationships (a domestic market hadn’t been developed yet) and discovered that a similar, cheaper product already existed in Japan and Europe for baking and confectionary. Since the costs of manufacturing this similar product are much lower than in the U.S., whatever we thought our unique proposition was wasn’t enough for them to pay more.
Introducing a related product through existing channels is a great idea. But you have to understand 1) the customer's economics and motivations and 2) the market forces which effect supplying them efficiently.
The luxury of patient money
Some years later the trend towards alternative dairy opened up demand for almond value adds into things like alt milk, creamers, and yogurt. In these categories, as a manufacturer and not a market maker, you either fast follow other suppliers or get technical and partner in development with your end user. Either way, actively following markets as they develop and placing bets at the right time is the game of growing beyond the core.
All my best,
Jennifer
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I'd love to hear from you- get in touch at jennifer@3rdandbroadway.com