Episode 115 – Investing to Meet Industry Capacity Demand

 

 

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Joe: On this episode of the "CPG & CBD University Podcast," media market demand, how investment in people, processes, and facilities is helping to bridge the gap between industry demand and total market capacity. This is the "CPG & CBD University Podcast," and it starts right now.

I'm Joe Agostinelli, host of the "CPG & CBD University Podcast." Welcome back to our podcast. And if you haven't done so yet already hit that subscribe button, wherever you get your podcast. And don't forget, you can always watch full video episodes on YouTube. The link to our YouTube channel is in the description of this podcast. And, hey, it's no secret. A simple trip down the grocery aisles at your favorite retail location, even in the pharmacy, you'll see that gummies have quickly become a staple of everyday health and wellness routines. And over the past year and a half, we've been helping to bridge the gap between the industry demand for great tasting gummies and total market capacity. I welcome back to our podcast from our contract manufacturing division, Clay Rahmberg and Mac Norton. Welcome back. Deja vu.

Together: [crosstalk 00:01:28.236].

Joe: Yeah. For those of you who don't know, you know, every now and then, we have to do a second take of a podcast, so that intro, I may have to do a second time. But, hey, we're all pros, so we're good. Those watching the video version, of course, recognizes I mentioned both my guests today. So let's first start off with the latest trends in contract manufacturing side. We've seen both the hemp-derived cannabinoid side and the health and wellness side in recent months really take off when it comes to gummies. What are you hearing from what the market is looking for in gummies?

Clay: Yeah, I'll take that one, Joe. One thing that we've been focused on heavily along with CBD, which we're still heavily focused on but something that we've seen a big rise in and it's no secret, is multivitamin gummies, functional gummies, single-ingredient gummies, or multi-active ingredient gummies. Just a study, I'm gonna read this off my sheet here. But a recent study from Allied Market Research group says that the gummy vitamin market specifically will grow roughly at 6.5% to 12%, I know that's a big range, compound annual growth rate, so annual growth rate from $5.7 billion a year to $9.3 billion up till 2026.

So there's a lot of market share to be had. A lot of people are realizing that these functional gummies are a better way to take your vitamins than take any capsule. It's a lot easier to get your kids to take them. They're much more enjoyable to take. They taste good. They don't get stuck in your throat. I think Tony Little was on here and said that he can't take capsules because they get stuck in his throat. He's gotta chug water to get them down. So we've seen just a rise in functional gummies as a way to take your health and wellness products. And it's really exciting for us because we've pivoted from being a CBD-only company to being able to work with a lot of these larger multivitamin companies, as you mentioned in the intro, that you'll see on your everyday store shelves at your major retailers.

So, these are brands that we're working with, that we're actively taking on, that we're actively in discussions with. So it's opened up a huge door for us, the contract manufacturing team, to work with some of these larger brands that aren't CBD specific but that might want to work with a multivitamin company and they can add CBD. And then to touch on the other cannabinoids, we all know now that CBD is not the only cannabinoid that you can put in a gummy. So some of our team members in the contract manufacturing division and in the wholesale team are working with other minor cannabinoids that there are claims to support that they help with other ailments.

Mac: CBG, CBN.

Clay: Exactly. So that's been really exciting, and it's opened a huge door for us. It's allowed us to expand tremendously to work with other companies outside of the CBD realm.

Mac: Yeah, I'm gonna get a little more specific, but diet and weight loss gummies, right? You think, "Oh, that's kind of 1990s, take a pill, watch the pounds fall off." But it's really interesting because you get them to taste good, right? Like heavy hitters for gummies, B vitamins, caffeine, green tea extract. And it's kind of hard to manufacture gummies with those ingredients, but it's something that we've done a really good job of. People are a little bit more focused on weight loss, right? Wanna be able to lose the weight? You have a weight loss story, you have a weight loss story. How many gummies have you been eating? Fistful of the weight loss gummies?

Clay: Yeah. I've been chugging a couple bottles of them a day.

Mac: Yeah. But, no, people are paying attention.

Clay: And watch the pounds fly off.

Mac: Yeah, it's weight loss. And another one's functional mushroom space too. So Lion's Mane, Reishi, Chaga, and they're good for memory support, and nerve support, and things like that. But they've been tough to manufacture with as well. I mean think, you know, I'm a mushroom, it's not a great tasting ingredient, right? So think chai flavored, coffee flavored Reishi or Chaga gummy, which is really interesting. I mean, Sarah and Michael, that whole team has done an amazing job there. So from a little bit more specific perspective, I think those are really two spaces that we're gonna see some ingenuity in for 2022.

Clay: Mm-hmm. Agree.

Joe: And you talked about some of the other cannabinoids, you can go back to the previous episode in your podcast stores to hear more about those other cannabinoids that our team is working with. That episode dropped just prior to this one. And, Mac, you mentioned the '90s, when were you born?

Mac: '94.

Joe: Oh, okay.

Mac: But you know what I'm saying? You know, take a pill...

Joe: I was 11 by the time 1990 came around so...

Mac: I know, I know. But think about it, right? I mean, Clay mentioned the capsules. I mean, it's not enjoyable to take a capsule and not be able to swallow it, right? To make a good tasting gummy, that's really important. And, look, everybody wants to lose a few pounds. Who doesn't wanna lose a few pounds? Yeah. You know, the '90s, I was around in the '90s, Joe. Just not, you know, in middle school or anything.

Joe: Yeah. Thanks.

Mac: You're welcome.

Joe: Moving on, middle and high school, anyhow. With the industry demand for gummies, obviously, comes the challenge of meeting that demand. And the way to do that is increasing capacity. We've talked a little bit about this on past episodes, but lots of investment over the past year and a half. And you've had a firsthand opportunity to show this to some of our prospective, now clients.

Mac: Absolutely.

Clay: Yeah. So I'll talk about plant six specifically, which is where we're at right now. This was the original facility at least for manufacturing infused gummies. And when Mac and I started, I think maybe a year and a half ago, we only had one gummy line. So just to give the viewers an idea of our expansion and how quickly it happened over the last year and a half, we've expanded that to roughly how many gummy lines?

Mac: Seven gummies.

Clay: Seven gummy lines. Not all of them are located here, and I'll let Mac touch on the other facility soon. But what we've been able to do here is expand our gummy manufacturing and then automate our packaging. So in order to work with some of these major retailers and some of these large CPG companies, we had to automate. We were doing hand filling and that just doesn't work for large scale. So we've reduced our bottlenecks by implementing automated bottle fillers. And we have a few of those, and these major retailers have pretty stringent demands on when they need product, and we have to deliver when they need the product. So these automated bottle fillers, expanding our team has really allowed us, again, to open those doors, to work with some of these major retailers. And we've really found that, you know, the lead times in the market are dense. They're six months, eight months at best with most of our competitors in the market. We've been able to condense that down to three months, roughly three to four months on delivery from initial project. So we have people knocking down our door every day, wanting to work with us. We're, kind of, the new kids on the block, but I think we're overcoming that hurdle. And I'm letting Mac touch on that. But...

Mac: Yeah, I mean, plant six too, this is how we showcase our operation. Right? We have a lot of our employees here. We have a gummy room. There's two, but plant seven's been a massive buildout for us, a gummy-specific buildout. Eighteen months ago, that was a distribution warehouse, right? We set a roadmap. We're like, "This is where we're at. This is where we need to be." And we've exceeded everyone's expectations, including our own about, you know, the investments and where things are at. But a high-level overview, so we've got five high-capacity gummy lines over there, two bottling lines, multiple bagging lines, depending if the client wants a bottle or a bag.

Clay: That's at plant seven.

Mac: At plant seven, that's correct. At plant seven. And it's totally self-contained. So what was a distribution warehouse, no manufacturing, like, 18 month ago, right, is all compounding. So all the raw ingredients go in there, our manufacturing of the gummies, our conditioning, which is a really important part of the process, drawing the moisture out of gummies, making sure you have a quality finished product, and then packaging, right? Everything's palletized squared away. So we can get, you know, shipped to plant nine, which is our distribution facility I think we'll talk about in a second.

But it's really us showing our commitment to being able to scale with partners. Clay mentioned, you know, this buildout has been two years in the making. We've been doing this for six years and we are serious about attacking good partnerships and serious about going to the client saying, "Hey, if you get an order from a major retailer, if your volumes pick up, that is no concern for us whatsoever. Here's the equipment to prove it, right?" Everything's operational, everything's there. We have, like Clay mentioned, a really talented team of professionals that are on the lines.

Gummy manufacturing is hard. I know Kevin talked about it in the Tony Little podcast. It's not an easy thing to do. You have to have the equipment, you have to have the trained personnel, and you have to have the knowhow. And all those things really come together for us in the past, you know, 24 months, and we're super excited about plant seven. So just another way we can support our partners and showcase what we're about at Global.

Joe: And don't forget that you can go behind the scenes of our manufacturing facilities and distribution facilities by visiting our YouTube channel. The Global Widget YouTube channel has our "Meet the Machine" series that we did at the end of last year to showcase some of the efficiencies we have made throughout both of our plants. So go behind the scenes on the Global Widget YouTube channel. What has been the feedback you guys have gotten, you know, from our contract manufacturing partners after showing them around the facilities?

Clay: Oh, man, it is outwardly positive. So just the fact that we're willing to bring partners in before we actually establish the partnership and showcase our facility, we want them to come down and we encourage people to come visit. There's a lot of, again, competitors out there that won't...they keep the veil drawn. They don't want you to come see the operation. They don't want you to have access to the quality teams. They don't want you to have access to the compliance teams. So the feedback has been outwardly positive in that we encourage our partners to come down. Our retention rate is extremely high with partners that we develop relationships with. And one of the reasons, Joe, is that we answer the phone. One of the biggest complaints that I hear and I'm sure Mac hears is that they can't get their manufacturer on the phone to answer their questions.

And when you're working with major retailers like this and major brands, they can deal with a slight delay. They can deal with the occasional bad news, which we make sure that it is occasional bad news, but it does happen. It's manufacturing. There are delays that does happen. All they wanna know is what's going on. And here at Global Widget, we make ourselves available. I work directly with my partners, Mac works directly with his, and I know that we're answering calls outside of working hours to make sure that they have their answers when they need them. And that's the biggest thing we've seen is that our clients stick with us. And again, we have people lining up to work with us because they hear that people of Global Widget are responsive. They hear that they have access to multiple departments within the organization. So, I've seen nothing but positivity from the partners that we work with.

Mac: Oh, that's true. I mean, you can have an R&D to R&D conversation, quality to quality conversation. You can even meet the owners. I mean, you know, we've had them on the podcast. Like, this is a real thing, you know? And like Clay mentioned, you know, we've been doing this for six years, and we're passionate about getting new clients, and we're serious about being able to show people, you know, what's going on here. Because there's no secret sauce. It's really hard to do but there's no secret sauce. We want people to know that, but the feedback's been overwhelmingly positive and people say, "You guys are a breath of fresh air. Where have you guys been? You know, this is great. Other manufacturer doesn't share these details." So we think about that and we say, "Look, we need to double down on this essentially. How can we be better partners for our clients?"

But Clay hit the nail on the head. I mean, the feedback's been great, and we have to work hard as an organization to ensure that that stays the same way, but that's our intention. That's the ownership's intention. Everyone here is very client-focused. And that I think is what really makes this place tick, is that, if a client needs something, we understand that it's urgent or that it's important and we get there, right, which is why we get the good feedback that we do.

Clay: I can tell you real quick just to segue off of that, the organization that Mac and I both came from was a very sales-focused organization in the sense that we were having to call people and ask them for their business. And I don't want this to sound cocky at all, but what I found here is that we do such a good job of making a quality product, we do such a good job of giving the customer what they want, and delivering on their expectations, that we're to a point now where we're asking questions from our partners about what we can expect from them on deliverables and how well they'll perform with us, because it really is a true partnership. It's not us calling people, asking them to buy what we have to sell. It's us auditing a partner and them auditing us as a manufacturer. So with that said, it's a true partnership. And I've found that to be one of the biggest changes from the previous organization I was at, is that here, we're really talking to each other and finding out what makes them tick, and what makes us tick, and does that align. And for most mid to large-sized brands, we find that we fit the mold for most of those brands.

Mac: Yeah. Sure.

Joe: And to wrap up, in addition to all of this, and obviously, another important point with our partners is we recently shared on a press release announcing our Florida food hemp permits, a new distribution center in Tampa. But first, before we go on the details of what you alluded to as plant nine, what about those... You know, we talk about whether it's Florida food hemp, or kosher, some of the other certifications that we've gotten, some of the other certifications we're currently working on that we hope to be sharing pretty soon. How important are those certifications, you know, in registrations to these partners along with the new distribution facility?

Mac: Yeah. No, it's a show stopper for some clients, right? I mean, if they can't have that certification, they can't sell their product. So I mean, you know, obviously, pursuing an organic certification, pursuing an NSF certification, obviously, Florida food hemp permit, GMP certified, all these things are really important for us as a company, right? Because if we can't provide that to our clients, they can't sell their products and, in turn, they can't order more from us. Right? So, it's just our commitment to have high quality here because we are working in, and everyone knows this, an unregulated industry. Right? Although the FDA has some guidelines, you know, they can come audit us and stuff, you know? They're not coming in and saying, "You absolutely can't do this. You absolutely can't do that." And so we have to...

Clay: Specific to CBD.

Mac: Correct. Yeah, yeah, yeah. Correct. But, you know, I mean, it's up to us to have the quality standards, right? And those things like, especially the food hemp permit, really help with that, you know? And it just helps for an awareness too. But plant nine that you mentioned is a distribution buildout, which is huge because we talk so much about formulations and where things are at. It's like, "Where do you store all this stuff? Like, where's it at?" You know, it's 100,000 square feet of space that we have, right? So we store finished goods there, everything's palletized ready to ship. We manage every part of the process. We procure, we manufacture. Why should distribution be any different, right? We spend all this time in the quality of the finished product, we need to be able to control where it goes.

Gummies are super sensitive, you know? And so we wanna make sure that they're protected from heat, make sure that... because we spend all that time, that they get to their destination really safely. Sometimes we're talking hundreds of thousands of bottles, right? Things can't go wrong because they gotta hit a shelf reset at a major retailer, right? Another thing that we do there is shore...excuse me, store safety stock for our clients, right? So we have all these raw materials and if they need palletized finished goods that we hold onto and ship later, we can do that or just raw materials for their own projects. So if someone calls us up and said, "Hey, great news, I'm selling past my, you know, capacity or volume and we need more stuff," we say, "Hey, not a problem. We have more on hand. We can push it into production," and things are squared away. So it's really helping us come full circle as a company and, kind of, a little bit more of that vertical integration and controlling each process, right, individually. So we have total control because if we're gonna mess up, it's gonna be on us, not somebody else. And that's the thing that we want, right? So, it's just another way that we're supporting our partners, and it's super exciting to have that amount of space to do it with.

Joe: And you'll see some of our brand new behind-the-scenes videos featuring the distribution facility on our Global Widget YouTube channel. Once this podcast is published, it'll take an inside look at our newest addition, our distribution facility located in Tampa, Florida. I think we covered everything guys. That was spectacular. Hold on. But wait, there's more.

Mac: Wait there's more.

Clay: Just a quick call to action for any potential, you know, major brand, midsized brand out there, an established brand that might be having problems with their current manufacturer, that wants to know more about us and wants to come down into our facility, you can get on gwgummies.com, and there's a form to fill out. We receive those almost instantly. And we'll give you a phone call or an email almost immediately so that we can discuss you guys coming down, bringing your team to visit our facility. So if there is any brands listening to this podcast that are interested in learning more or visiting our facility, gwgummies.com. And you can fill out a submission form, and we'll review it and get back with you and get you a tour scheduled.

Mac: Those forms go directly to me, but Clay doesn't get any [crosstalk 00:16:04.131].

Joe: Mac Norton, Clay Rahmberg, thanks for joining me on this episode on "CPD & CBD University Podcast." Fun is always with you guys.

Clay: Appreciate it.

Mac: Appreciate it.

Joe: Well, Clay stole the thunder, as he just mentioned, go behind the scenes of the work here done at Global Widget by visiting our website at gwgummies.com. You can also visit our YouTube channels. I mentioned throughout this podcast, the links to both of those in the description to this episode, and don't forget, hit that subscribe button, wherever you get your podcast video episodes available on YouTube. I'm Joe Agostinelli host of this "CPG & CBD University Podcast." Thanks for tuning in.

These statements have not been evaluated by the food and drug administration. CBD products are not intended to treat, cure, or prevent heavy disease or condition. Of course, consult your personal physician about CBD and you using CBD products. CBD should never be used by anyone under the age of 18. This podcast is not intended to provide legal advice regarding the legal status of CBD and CBD products.