Diversification through food manufacturing

We’ve been in San Francisco this week, visiting the Fancy Food Show. Fancy food manufacturing is a potentially lucrative activity for restaurant brand extension. We’ve seen this at the enterprise level. For instance, Wolfgang Puck, The Cheesecake Factory and the California Pizza Kitchen all make products for resale in supermarkets.

Now we're seeing the same phenomenon among mid level and small businesses.

Last post, I began to talk about catering as a potential new sales opportunity for restaurants. As today ( Jan 20) was a special day - rather than just write about food manufacturing as a possible diversification strategy, we made a homemade movie about restaurant companies that we came across in the show that are doing just that.

My experience is that a company's day-to-day involvement in a spun off factory operation can range from completely hands on to almost completely hands off, with consultants and professional services companies filling in the gaps. There are, if you like, two basic avenues: co-packing/white label production and making-it-yourself. We touch on both here:

The video was fun to do; like I said, homemade.

The take away here is that some restaurant operators are seeing that their brand is extensible to the shelf, at the grocery level. It has everything to do with packaging, and the selection of distribution channels.

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Tags: fancy, food, grocery, products, restaurant, retail, sanfrancisco, tradeshow


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Comment by Erle Dardick on February 5, 2009 at 8:09am
Thanks so much Kettledog.... you are absolutely right! This is a whole new business with a whole new set of challenges, processes and resources. Really appreciate your thoughts.
Comment by kettledog on February 5, 2009 at 7:37am
I work on the manufacturing side. I develop new products for our own lines as well as for customers that come to us. I see everything from the huge grocery chain looking for a full line of private label products to the guy down the street who has the best sauce ever and wants to put it on the shelf.

"Food manufacturing is a potentially lucrative activity for restaurant brand extension" might be a bit misleading. There is quite a bit envolved in getting product out to the market. First off, what market? Are you aiming for the upper end specialty world or would you like to see your sauces next to Preggo or Newman's on the grocery shelf. You have to have the product manufactured, are you going into that business or is someone else going to make it for you, handling the regulatory and safety issues but also taking a bite out of your margin. Then you'll need distribution and someone to commit to selling the product.

I've seen as many different models as you can think of to get this type of dream going. But I gotta tell you, that in this hunker down economy, channels are narrow and tough to manuever. If you think you have a great model that will work with great products (which need to be converted to more industrial ingredients to make manufacturing profitable), then go after it. Just be warned that it's a different world (I came from the restaurant biz). Feel free to contact me if you have questions/comments.

Good Luck!

Product Development Chef




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