Welcome to Season 11, Episode 5, of the Troubleshooting Innovation podcast. Joanie Spencer, editor-in-chief for Commercial Baking, is spending this season with Jennifer Steiner Pool, president and creator-in-chief of Steiner’s Baking Co., about how to turn a special family recipe into a commercially viable brand. Sponsored by Puratos.

In our final episode, we look to the future of Steiner’s and talk about portfolio expansion beyond coffee cake.

Learn more about this season here, and tune into Troubleshooting Innovation on Apple or Spotify.

Joanie Spencer: Jennifer, thank you for joining me for week five.

Jennifer Steiner Pool: I can’t believe it’s week five already.

Steiner Pool: I really enjoyed it as well, so thank you so much for inviting us to be on.

Spencer: Of course. Okay, so last week’s discussion was really interesting about marketing for a gluten-free product, and we touched a little bit toward the end of the conversation on the idea of “Does gluten-free equate to better for you”? Which, not necessarily, it all depends, but there’s something else with this “better-for-you,” and it really came out of the pandemic.

People sought comfort in food, and people started really giving themselves permission to indulge, and so there’s this shift of this consumer perception of healthy versus indulgence, and they’re really no longer mutually exclusive.

So, gluten-free aside, how are you seeing this trend of indulgence as part of self-care? Do you think it has staying power? And how do you see Steiner’s products playing into that as a gluten-free product?

Steiner Pool: It’s a great question and an interesting place.

It’s actually a quite a personal issue for me. Over the course of my grownup life, which you could argue maybe I’m not a grown-up yet, I’ve struggled personally with restricting what I eat and the concept of how to be skinny and what is healthy and working out obsessively. That’s just a personal thing that I deal with all the time, so the concept of responsible indulgence is near and dear to my heart and very authentic to the brand and what we are trying to accomplish with our serving sizes.

I think where we’re going — which is a much healthier place — is this idea of moderation. You and I talked a little bit last week about what is actually healthy for each individual is different because we are all dealing with different things, and our bodies don’t all work the same way necessarily. And I think the concept is really this idea of moderation.

It’s not about restricting. I mean, there are probably some things people should not ever be eating and some diagnoses require you not to eat things — such as gluten — then you layer on top of that moderation. So, if you love bread — my mom loves bread — she could eat bread every minute of every day. Now she’s a celiac, right, so it’s frustrating to her. Often the bread she’s eating she feels is disgusting.

If we can’t get Canyon Bakehouse — throwback to last week — she gets very frustrated, but she loves bread. She knows that she just can’t eat bread all the time, right? She has to do it in moderation. And that, I think, is going to become more and more the way in which people allow themselves to enjoy things that aren’t necessarily “healthy” for you.

So, a chocolate fudge brownie — I guess a doctor would say isn’t healthy for you. It is not going to do any harm if you are not allergic or a diabetic. Nothing bad will happen to you, but you probably shouldn’t eat brownies all day every day. What I really want you to do is just have the brownie bite. It is a responsible portion size. It is chock full of real ingredients, and it’s just delicious. And you can feel good about eating it because you’re not over-indulging, and you don’t have to carry the weight of feeling bad about yourself.

I don’t ever want someone to eat something of ours and then sit back and say, “I shouldn’t have eaten that.” So, the way in which I can help a consumer avoid that feeling is by being a responsible manufacturer. Everyone pushed me at the beginning to make our coffee cakes in the jumbo-size muffin portion, which is probably 30% bigger than our current snack-sized coffee cake. And I looked at it and I said, “You know what, I can’t even really eat a whole current size portion that we have. I can’t imagine adding another 30% to this. It doesn’t feel right.”

So that’s authentic to our brand. That is who we are, and I said, “No, we’re not doing that.” In fact, one of the things that we have on our lists to do is to produce our coffee cake bites. So I want to go smaller, and I also think that it’s easier for kids, also. These bite-size are great for kids, and it’s a much more, sort of, transportable indulgence — again, in a proper size.

This concept of moderation is where I go with this balance people have of wanting to indulge, partake in comfort foods, bake for their families. During the pandemic, our flour sales really increased because people were coming back to their roots at home, gathering around the table. That’s an important part of family life, and while we crave convenience, we also crave connection. We learned during the pandemic that we want things that are yummy and make us feel good and give us comfort. But we need to do it responsibly, and we can do both at the same time.

Spencer: Okay, so I was so happy that in your narrative about people wanting you to do the jumbo muffin size to hear you use the word “authentic,” because I was thinking that very word — like, “Wow, this really plays into the authenticity of this brand.” When you said, “I can’t personally imagine eating my coffee cake in a size this big, so I am not going to sell it to my consumers that way,” I don’t think it gets any more authentic than that.

Steiner Pool: And listen, we were really pressured. There’s a lot of pressure because those baking pans are commercially available and easier to get than the ones I need for the size that we produce.

So it was really tempting, right? It was going to be much easier for me to walk into a co-man who had those pans already. It was going to be much easier for me to source and procure those pans, and I said no. And I think, ultimately, the other benefit of it was I didn’t love the price point. When we took the product up to that size, I felt that it made it inaccessible to our consumers at that price. And I think consumers need to feel that products they love are accessible, and what we’ve seen over the past four years, which I’m sure you’re very familiar with, is a decrease in size and an increase in price.

Spencer: How are you reading my mind? Accessibility was the other word that I was thinking about.

Steiner Pool: We wanted the product to be accessible, and so even over this period of inflation, we have not raised our prices.

Spencer: Oh, wow.

Steiner Pool: That means we have taken a little bit of a hit on our margin. However, I think in the long haul, it was the right thing to do for our consumers. They just can’t take another increase. They’ve had enough.

I didn’t want to jump in there. Even when, 18 months ago to almost two years ago, eggs and butter like went through the roof, we didn’t move our pricing.

Spencer: Wow.

Steiner Pool: I just said we’re going weather it, and I can’t do it to them. I can’t. I think that was really important, and whether they noticed or not that we didn’t increase our prices, it’s hard for me to say. What I can say is that I feel good about that.

Spencer: Okay, I want to talk about product development. So, Nancy … aside from being the consumer research lab rat for you, is it fair to say she’s sort of the idea machine?

Steiner Pool: Yeah. Again, we all know what our jobs are. That is not my job. That is her job. Yes.

Spencer: So, can you talk about some of her ideas? I heard something about gluten-free cheesecake.

Steiner Pool: Yes. My mom has a lot of ideas. She wants to put in a new product on the market every week, which I have had to give her the smackdown and say, “We’re not doing that right now. We’re staying focused. Take notes, practice, keep refining your recipe. I’ll get back to you.”

So yes, she has a lot of ideas and so a few different ways in which we want to go. Number one, I think there are some great opportunities for additional flavors in the coffee cakes. We do need to make sure that we always are using real ingredients. For instance, our raspberries are freeze-dried raspberries. I’m thinking maybe a peach. The blackberry could be good. I’m wondering if there’s a maple situation.

So, there’s lots to come on the coffee cake side. Outside of coffee cakes — the brownies and the ginger snaps — the brownies are just emerging as a commercially available SKU for us. And then next will be the ginger snaps. We have a lot of R&D to do just on the mass production side of it. As you know, it needs to be scalable, so I’m really toying with that being a ready-to-bake product versus ready-to-eat.

I love the size of our ginger snaps, and I hate to give that up, so we’re really looking at ways to make it happen. But I am also very conscious, as we just discussed, about price point, and the labor involved does concern me. We have to see if we can get it there. And then outside of that, which is tied to the gingersnaps, is our cheesecake. We have a great partner on Long Island. He reached out to me actually over social media … fabulous guy … and he is a cheesecake guru.

And again, I gave him my rules. There can be no additives or preservatives. With a lot of cheesecakes on the market, you can’t pronounce anything that’s in them, so I said, “This has to be real ingredients if we’re going to do this together.” He is a cheesecake guru. I don’t know anything about cheesecake. I don’t want to know anything about cheesecake except that it’s delicious. I’m not going to make cheesecake, personally. I said, “I’m in it with you. But here’s how it has to happen.”

So, he uses our ginger snaps as the crust, and it is off the charts. The ginger snaps, you know, they have a snap because we use real crystallized ginger that’s chopped up in the cookies, which is part of what makes them so good. And that contrast with the creamy, neutral palette of the cheesecake itself is so good, and we came up with a great size so it’s accessible, responsible.

I actually think even the size we have you would share with a friend. Cheesecake in and of itself is pretty rich, so I can’t wait. This is going to be great. The banana bread is off the charts. We only use real bananas. We don’t use any natural flavorings or imitation flavors or flavor enhancements or any nonsense. It is real bananas in our banana breads. It’s my grandpa’s recipe, but as we discussed, focus is critical.

We have to really be good at what we’re doing now. We have to become a part of the consumer’s home. We have to be wanted, not just known, and with those accomplishments and those milestones, we will have permission to extend the line. It’s capital intensive. As you and I discussed, we don’t have a ton of working capital, so I have to be quite judicious in how we extend the line and move forward.

The first step was being a good listener during Mondelez and pivoting the brand to Steiner’s Baking Co., which then now I have permission to get the brownies on the market, to get the ginger snaps on the market, to push the flour out. It’s all coming to sort of fruition as we look towards the backside of 2024. I can only go as fast as the capital is that I have right, so that’ll get our speed.

Spencer: So then, in terms of that R&D, what does ideation look like in terms of a team or a process? Do you have a dedicated R&D team now? I mean, it used to be just Jen.

Steiner Pool: Well R&D is Nancy.

Spencer: It’s all Nancy.

Steiner Pool: It’s all Nancy. She’s in the kitchen. She’ll call me. I’m like, “Okay, write it down.” I’ve learned so much in the past six years about production lines by working with this gentleman Michael who is brilliant and helps me work through efficiencies on the line and our equipment and labor configurations … I can say to her “Okay, mom, that sounds delicious. You have to figure out how to make it this way.”

Whatever those constraints might be, like biscotti. If you talk to a real pastry chef, biscotti, I believe, is like three different turns in the oven. You have to turn them over. I don’t know anything about making biscotti, but I’ve seen my mom do it, and that’s not happening on a production line.

Spencer: Exactly. Not unless you’ve got tons, tons of capital.

Steiner Pool: Yeah, exactly. So, I’ve said, “These are delicious, mom; now make 10,000 of them.” Like, think that way. So that’s how I push her to adjust her recipes. So then what happens? Mike and I look at it, and then we sit with the co-man and he says, “Okay, well, now you have to layer in packaging equipment. You’ve figured out how to make it, but now you have to package it.” And that’s where we bring in the team from the co-manufacturer who has the expertise on getting what I’ll call the “last mile,” right? You have to wrap this thing up and get it ready for transport and that’s where they’re invaluable.

So mom’s starts at the starting line, then Jen and Mike look at her crazy idea and say, “Okay, go fix this,” and then we go to the co-manufacturer and say, “Okay, how many pieces do we make per minute? What’s the packaging solution going to look like?” And then you go from there. All kidding aside, it’s not just Nancy. It’s just that she’s the ignition point, and then we have to work with the rest of the team to get it over the finish line.

Spencer: I’m sure you have either read and/or listened to some of my conversations with contract manufacturers. One point of discussion is that a lot revolves around co-manufacturers. They’re not just plug-and-play anymore.

They are really part of the innovation and coming to their customers with ideas. So, it sounds like you have that relationship with your contract manufacturer as well, where you can really say, “Okay, how can we innovate with the end of the line and get it packaged efficiently?”

Steiner Pool: Listen, they have three generations of experience. They just know so much more than me and my mom could ever hope to learn in a lifetime. We have to collaborate with them, and I would say if you’re an entrepreneur and your co-man is not collaborative, isn’t interested in helping you be better, that’s a red flag.

You don’t want them to “Yes” you to death. You need to trust them, and they need to know that you can hear them because they have to make money, too. They don’t want to be in business with you and not be able to run an efficient organization. You have to be a good client, and you have to be aware of that.

So, when the co-man comes to you and says, “Listen, this particular part of the process is killing us; we have to find a different way to do this,” you can stand by your principles, like for us, “That’s fine, guys, but you can’t add any additives to this, so you got to find another way.” You can still hold on to the principles of what makes your brand authentic as you’ve defined it, but you also have to be flexible, and you have to see that you want to make money, and they want to make money, and they want to make a product efficiently and safely.

You have to let them bring that expertise to the table. And if they’re not offering it up — as I said — you need to stop for a second. Because when you’re in the startup phase, and you’re trying to scale production, there is a feeling of desperation. You are very, very hesitant to consider walking away from your co-man. It’s frightening because the idea of starting over is nauseating, so you want to look for these things upfront in the relationship.

If you come to them, and they say, “Oh yeah, we’ll just make it this way,” there’s no way they don’t have some improvements for you. Either they’re just going to charge you an arm and a leg to do it, perhaps the least efficient way, and they don’t care, or something else is going on there that would make me very hesitant. I don’t know what I don’t know, but I know I don’t know a lot, and if my co-manufacturer doesn’t have anything to say about what I’m doing, that’s a little scary.

Spencer: That’s true. That’s very true. So, what about your ingredient suppliers? Do you take inspiration or troubleshoot ideas with your ingredient suppliers?

Steiner Pool: It depends which ingredients you’re talking about. So for things like butter, eggs … I actually have a dream, which I hope I can make it happen by 2025, to have a pretty sophisticated relationship with Organic Valley.

I’m dying to work with them, and I went to them when we started the company and I said, “I want to source all my eggs, sour cream and butter from you guys.” New York, great principles, clean products, etc., etc., and their MOQs (minimum order quantities) are just, as you can imagine, huge … far surpassing what our current buying capacity is, but they’re there. That is huge for me, so while I can’t take advantage of their exceptional products now, I look at ingredients, as you and I’ve discussed in other episodes, I’ve learned my lesson that not all butters are created equal. Not all sour cream is created equal.

So, if I always go back to what a strategic imperative is, it will help me make good decisions. So, no additives and preservatives help me vet any ingredient that’s coming in from a current supplier. And then, of course, the flour is a whole different thing, but goes back really to the same principle. We have a great relationship with our blender. It’s quite collaborative. And our recipe is very, very simple. And we don’t compromise on anything in that regard.

Spencer: Right. So I wanted to talk about the Steiner’s team. You rely on your suppliers and a contract manufacturer, but do you have plans to build your team?

Steiner Pool: So obviously, working capital continues to be my gate. Of course we need to expand the team, it can’t just be Jen forever, but there are creative ways to do it so that I’m being fiscally responsible. I do have fiduciary responsibility to our investors, and I want to make sure the company remains healthy.

So for instance, sales. We are now working with two fabulous sales ladies out of California. They are amazing. I met them at the Good Food Mercantile trade show in New York last year. And our recent successes … it’s all them. So sales is number one.

Number two will be marketing. I need more support underneath me for the marketing. I can go out there, and maybe you’ve learned over the past five weeks, I can sell ice to Eskimos as they say, but I can’t do it all myself, and we need to be more connected to our consumers on social media. We need to have regular conversations with our wholesale clients, and restaurants, cafes, coffee shop owners. I like to have a relationship with those folks. I’d like them to feel that they’re really taken care of. I can’t do all of that on my own. So that will be the next group of folks that we really need to look at bringing on and enhancing that bench.

And then our 3PL partner, Hall Street, is fabulous. That’s like seven people at my disposal. I love those guys, so I don’t see us hiring full time in that capacity. I think if we needed bench strength there, then we would do it through them. And I think our co-man and my pseudo-director of production are fabulous. They’ll grow with us. They can take three shifts a day. We have a lot of capacity to grow into on the production side. They’re the subject matter experts.

I can’t be good at everything. We need to know what we’re good at. I think Canyon Bakehouse ended up building their own bakery … maybe out in Colorado, I think he did that. That takes a ton of capital, and I and my brother have always said we’re never going to build a bakery. Now, every time I say “never” then something happens, so I do think there’s a lot of value in developing a relationship with a group of people who are really good at what they do. It’s kind of like the flour blenders. Am I really going to get into the blending business? That is a huge lift. I’m not sure it’s the right place to invest. Maybe in three years when we’re an $85 million company. I’m just not sure that’s the right place to focus.

Spencer: I was looking at your website and you do something really cool speaking of sales … you sell direct-to-consumer through your website, but I noticed something very interesting that some of the products have a subscription option. So that is a little bit different. How successful have you been with the subscription option? And then in working with a co-man, how does it impact production? How does that work?

Steiner Pool: So the subscription option is fairly new for us, and it is a direct-to-consumer offering. The reason we did that is because as we start to lean into folks who have celiac disease and are gluten intolerant, we wanted to make it easier for them to purchase.

So imagine as a small brand, we’re driving our penetration into the retail environment, and we’re not yet readily available. Consumers across the country are struggling to have access to our product as we’re growing. So we wanted to make it easy — and back to that word accessible — for our consumers to purchase the product. What that does for us as a business?We can now project better, of course, what the demand is on the consumer side and manufacture and manage storage against those shipping obligations. It also allows us to offer the product at a more accessible price to the consumers who are subscribing, so it’s a win all around.

Ultimately, the company is a business-to-business model. Eighty percent of our revenue will come from our wholesale clients and 20% from direct-to-consumer, so we wanted to design it so that as we grow, it’s easy to service those consumers and it’s easy for them to buy and fall in love with our products. I think ultimately, as we gain awareness within the gluten-free community, they will love that. And we’ve seen that. Those who know about it, love it, and they never ever leave, and that’s great. And we hope to build that business for sure.

And part of where you were also headed with your question that I just want to hit on is I wouldn’t say one-time ordering versus subscription, that one is better than the other. I think the strategic point of view is you have to let consumers shop the way they want to. So you have to give them permission to buy the way that works for them. We all shop on Amazon. You see it on Amazon. Amazon could force everybody into subscriptions because everyone just does what they say, but they don’t. You always have an option, you either one time order, or you subscribe. That is the platform.

So I don’t need to reinvent the strategic wheel. Go out there and look at what the big guys are doing and what’s clearly successful for them. It is because they’re letting consumers shop the way they want to shop. And I also think when you’re looking at the gluten-free community … this thing that I can’t wait to ignite with newly diagnosed and loved ones supporting those that have been newly diagnosed … that’s a one-time order construct. That’s a gift. I don’t think there is just subscription versus one-time ordering; it’s not one or the other. I think you have to have both to be successful. And, in theory, you should be leveraging your one-time order population into a subscription, which is ultimately the best business model; however, you have to know that that’s not going to work for every consumer.

Spencer: Right. So I feel like it plays into this idea of accessibility and providing that comfort and being a resource for someone who is celiac, so it serves them. But then from a marketing perspective … I don’t know because I don’t know anything about back-end details … but does it allow you to collect demographic information or to gauge turnover from one-off-purchase to subscription and figure out the demographics of your most loyal direct-to-consumer shoppers?

Steiner Pool: This is an interesting question. Data right now is such a hot topic, so I must say that we don’t share any of our data with anybody. I do product demos, which are the most valuable thing any brand can do. If you’re not doing them and you own a company, or you’re running a brand, and you’re not out there doing demos, shame on you go do it. Your engagement with consumers and their reaction and the conversation that they have with you, which inevitably happens … sometimes I’m demoing 60 people, and it’s everybody’s coming at me … you still have those little moments with each person.

If you’re really listening, you learn more from that then you would from analyzing the statistics of how many people are 35 and live in California and blah, blah, blah. Now, that may influence your media buy for sure, but I’m never going get the kind of information I get like I get at a demo. So I’ll use the demographic information to influence media buys. I can’t even really use it to influence messaging unless I’m really dialed down into response rates against paid media, but I kind of already know what messaging resonates with the gluten-free community.

And once the product performs in their home, it starts working for itself. We do contests on every box. You can register to win a set of goodies that we do every week, and I’ve learned more from that. So there are ways in which we accumulate data so that we can make smart media decisions, but I often think the psychographic information is the juicier side of it. The demographic information is just the hard facts, but to be known and wanted, you have to understand the psychology, which you don’t get out of the numbers.

Spencer: So you’re a qualitative person like me.

Steiner Pool: I am, yeah.

Spencer: I got my master’s in journalism, and it was all qualitative research. Because if it’s A, B or C, and I’m like, “Well, what if it’s somewhere between A and B, or what if in a certain circumstance, it would be C?” I just always think about the “What if?” around the quantitative. I know the quantitative is important, but my brain functions qualitatively, too.

Steiner Pool: Yeah, I agree. I don’t want to poo-poo the quantitative; it’s just the qualitative is what motivates the brand construct and product development. The quantitative reinforces that the decision is suitable for the business to grow. But you’re not going to figure out that raspberry coffee cakes should be invented from quantitative data, but I can tell you from the quantitative data that they are far surpassing all sales, and now we should look at other flavors.

Spencer: Yeah. Okay. I have one last question to finish out these five weeks. You have dreams to become a household name. So, what are the milestones? What do you see as the milestones that you have to hit in order for Steiner’s to become a household name?

Steiner Pool: I hate to say that it goes back to working capital. I have to be able to invest in the brand. If you build it, they will not come. Okay, just because we’ve created these great products, just because we have a brand that is authentic and solves a problem and is reliable in terms of product quality and consistent food safety, etc. that doesn’t mean people will buy it.

We have to get it out there. We have to do that work, and it’s hard work. It’s capital-intensive work. To achieve this goal, number one, we have to have sales, and our sales velocity right now is mind-boggling. It terrifies me. The ladies out in California are doing a fabulous job, and sales beget sales. We will continue to grow on top of those sales.

We have to invest in that. We have to go out and tell people we are now on these shelves. We have to invite people to try the product. We have to be invited into their homes. And that’s work we have to do, and that’s where I shine, right? That is where I’m ready to do that work. I’m eager to do it. I needed to get manufacturing locked down so I could pivot back to my strength, and that’s where, if I can raise this capital and we can be in a position to spend into the brand, we will become a household name. With the strategic pivot we made because of Mondelez’ influence and our commitment to product and the having the co-man in place, if we now can push into the brand we will be in your freezer soon. We will get there.

Spencer: I just have to say, all the years that you spent watching your mom try to figure out the flour so that she could make Betty’s birthday cake for herself, and you knew and you watched and you waited … this was not a six-month process or an 18-month process or a three- or four-year long process. It was six-plus years or more. And you believed it and you knew it. I have no doubt that you have the wherewithal and the tenacity and the instinct to achieve this goal of becoming a household name. No doubt.

Steiner Pool: From your lips, I mean, I hope everybody can hear you. I’m determined. I think the product speaks for itself. I just have to get it to people. That’s my job. And thank you for the support. Thank you for including us in your podcast journey. And this is a part of the story. Now you’re a part of our family.

I have to say to everyone who either enjoys our products or is a part of our supply chain, you’re a part of our family. Our name is on the box. We take that very seriously. We’re very proud of that. And it’s Grandpa Malcolm Steiner; he is our inspiration. I wish he was here to enjoy it, but I’m sure it’s somehow in the spiritual ether. He knows that we are crushing it, and mom is faithfully carrying on his tradition.

Spencer: And I love, like you said a couple of weeks ago, that if he would have watched your mom do this, he would have said, “This is blasphemous. Get out of my kitchen.” But now I think he would be so proud. I think he would have tried to kick your mom out of his kitchen, but I think he is so proud of Nancy and of you and what you have created with his name, his recipe and something that he loves so dearly.

So, congratulations on all the success that you’ve had thus far. This is such an interesting journey, and it was absolutely an honor to walk through this journey with you and understand what it took you to get to where you are today. Jennifer, this was amazing.

Steiner Pool: Thank you and keep your eyes on us. Much more to come.

Spencer: I absolutely will. You take care, Jennifer.

Steiner Pool: You, too.