Welcome to Season 9 of the Troubleshooting Innovation podcast. Joanie Spencer, editor-in-chief for Commercial Baking, is spending this season with Darlene Nicosia, CEO of Hearthside Food Solutions. They’re talking about operations, culture and innovation … behind the curtain of co-manufacturing. Sponsored by Reading Bakery Systems.

In this final episode, Spencer and Nicosia unpack unique leadership perspectives, using Nicosia’s engineering expertise as a starting point.

Learn more about this season here, and listen to Troubleshooting Innovation on Apple, Spotify and Google.

Joanie Spencer: Hi, Darlene. Thanks for joining me for this last episode.

Darlene Nicosia: Hi, Joanie. Great to see you.

Spencer: I just have to tell you that I thoroughly enjoyed our conversations. I mentioned it off the air, but I think that you have a great combination of deep technical knowledge and expertise, and you are an incredible conversationalist. So, thank you so much for taking this time with me. It has been a joy.

Nicosia: It has been awesome.

Spencer: Many of our conversations inevitably harken back to how you’ve merged the worlds of brands and contract manufacturing. But I want to look at it from a different perspective. This week, I want to talk about how you’ve managed to merge the world of engineering and the world of leadership. How hard is it to reconcile what seems to be two totally different styles of thinking?

Nicosia: It’s interesting. On the one hand, engineering is so focused on process discipline and logic, while great leadership is about demonstrating empathy in creating followership. I think about it that way. But on the other hand, the only successful engineers I know have been amazing at active listening, strong vision, goal setting, communication, learning by trial and error — which obviously requires patience and persistence — and being able to collaborate and use feedback to get better. When I think about all these traits, they’re the same traits that essentially all good leaders have. So, I really feel like they come together very nicely.

Spencer: From my perspective and experience, engineers sometimes have this tendency to really look at things in a very technical way. They’re checking off each list and looking at if it is technically accurate. When I look at leadership trajectories, one of the biggest challenges they say that new leaders face pertains to their ability to let go of task-oriented duties.

Hopefully, you see the path that I’m heading down here. With your experience in engineering, when you look at those technical and task-oriented things, how have you learned to let go of those things as you’ve grown in leadership throughout your career?

Nicosia: It’s hard. Sometimes I have to pull myself out of the weeds, and there are times I don’t, and my team will politely pull me out of the weeds. I have always been extremely analytical. I like to be grounded in the context. If a team brings me a proposal and shows me the journey they went on by talking about the process, the options they considered, sharing the data to support whatever they’re thinking, and then how they reach their conclusions, I have an easy time saying, “You guys got this. I totally support the way that you’re going about your thinking and how you’re reaching a conclusion. I have your back.”

However, as a leader there are times when I’m ultimately accountable for our business and there are important decisions to be made. Then I do want to get grounded in the facts. So sometimes I might get deeper into the weeds  if I have a concern that somebody hasn’t gone through a proper process or they haven’t used data to support the decisions that they’re driving. I do see at times people will take past history as fact, and the world has changed, so in those circumstances, I may ask for more supporting data: “I hear what you’re telling me. Can you show me the data? Help me understand what supports your point of view on this.” So, then I might get a bit closer to it.

But I think all leaders must ask themselves, “Is this something that I should be delegating and having others do, or is this something that uniquely requires my skill set and time?” When I ask myself those questions and decide it requires my skill set and it is an important decision, it’s easy to try and figure out where I need to play and where my team plays.

Spencer: Do you think that’s an innate skill, or do you think that it is something that someone who has a more technical background must learn when to draw on it and when to let it go?

Nicosia: That is a really great question, and I would probably tell you that it is more learned. It is probably more of a challenge around control and how to empower people and give them the ability to make decisions. One of the things that I use in our business today is Agile for teamwork and how to solve problems. I think we might have talked about this in episode one, but what I love about Agile is the fact that it brings diverse thinking together to drive and solve problems, along with getting leadership out of your way. It really empowers a team to make decisions.

If people don’t feel empowered that they’re able to have their own thumbprint on a business, it really does start to impact their long-term ability to excel in their role, the long-term impact that they can have, and you really don’t get the exponential benefit of the people that you have around you.

I think I had to learn early on how to be a good delegator, how to trust my teams, to create an environment that allowed them to feel accountable and have responsibility to make decisions. I think the other thing that’s really important in that process is defining principles so that when people reach a fork in the road, they can use the principles you shared to make those decisions.

Spencer: It’s like you’re reading my mind because I was going to ask you how do you know the difference between technical expertise and a need for control? I love that you mentioned control because I feel like there’s a fine line there.

Nicosia: Again, control and accountability are not the same thing. In my mind, accountability is what is important and what I try to govern by in the business and making sure that if I empower you to go off and solve a problem and make a decision, then I have to hold you accountable for that decision at the same time.

But I do think that people must feel like they can use their skills to their greatest capability. If you control all the decisions they make, then they’re just a task manager. That’s not what most people want to do when they come to work. They want to give their best, make decisions and change the business for the better.

Spencer: I was going to ask you if it gets harder to make that distinction the closer you get to the c-suite. But after hearing you talk, I feel like the answer is knowing how to differentiate is the mark of someone who’s heading for the c-suite. You have to have that understanding to get to that level and if you can’t, you’re probably not suited for that high level of leadership.

Nicosia: I think that I had the benefit of being surrounded by a number of good coaches and mentors. I do remember somebody was talking to me about time management, and I just felt like I never had time to do all the things that I had to do. And they said, “Well, do you have to do all those things?” It’s a very logical question. And they took me on this talk track of I have to think about what really warrants my time. What are the things that others can make decisions on? Once you start to go through that logic, you realize you get time back, because you trust and empower the teams that you have. That’s something that does come with time.

Spencer: I think there are benefits to having that technical expertise. So, from an operational leadership standpoint, what are those benefits and how has your technical experience positively impacted your leadership style?

Nicosia: I would tell you, it goes back to that idea of being very process-disciplined, just this whole idea of having data and information to make decisions. There are certainly times when my intuition will come into play, and you’ll have maybe not all the information that you want, but you have to make a decision.

There are certainly times that I have to go on experience and that intuition. But more so than ever, I go back to this point I made earlier of making sure that you have a disciplined process that’s grounded in fact, that makes sure that you’re weighing your options, supporting a conclusion or a recommendation for how you proceed, and making sure that you have taken input from others or that you’ve collaborated with them along the way. I highly value this idea of collaborative thinking because people who can build upon a single idea and make it even better over time is really the way to get the best solutions possible. Part of my leadership style is a highly collaborative leadership style.

I ultimately will call the ball when I need to, but I do try to bring my leaders in to make sure that I’m getting a diverse point of view, and then drive a decision forward. I think a lot of that does come from that engineering process discipline background that I had both through formal training and informal experience working in technical areas.

Spencer: People are like, “They’re an engineer. Engineers don’t lead companies; they get in the trenches and do the work.” But do you think that this engineer’s mindset is like a secret weapon in the boardroom?

Nicosia: Well, boardrooms are interesting places. I would probably say, the biggest skill set that I’ve got to use in a boardroom is really this whole idea of active listening. There are so many voices going on, there are different points of view and perspectives from the different board members. They’re incredibly successful leaders, they have all kinds of insight and industry experience, both in our industry and outside of our industry, and harnessing their points of view is incredibly important in the time that I get with them.

I would say more than anything, that engineering mindset probably helps more with our customers and trying to define our value proposition by making sure that they understand that we bring in incredible technical expertise to what we do. We are passionate about their brands, but more passionate about quality and process, and making sure that we care for their business the way as if it was our own.

Spencer: That makes sense and that expertise becomes almost a selling point.

I’m going to shift gears. We’ve talked about bringing your experience from Coca-Cola into the world of co-manufacturing. We’ve talked about bringing an engineering background into the world of leadership. But one thing that we haven’t touched on that I’m curious about is engineering and manufacturing are two very male-dominated disciplines. You are incredibly approachable. You’ve got this athleticism mindset that you bring to everything you do. What is it like to achieve the success that you have, dare I say perhaps, despite your gender?

Nicosia: It’s interesting you talk about sports because that is such a huge part of my background. I still remember the first formal team that I played on was the Glenn Ellyn boys baseball team. My friend Suzy and I were the first two girls to go and sign up; they didn’t have softball back then. I had always played with my neighbors. When you’re a kid, you’re not going, “They’re boys” and “They’re girls.” I just was always playing sports. I was a tag along with my older brother as well.

It was the environment that I was in, and I didn’t know any better than to pick up a ball and shoot it or throw it. I just played with everybody that was around doing the things that I enjoyed. I will tell you, there’s a part of me that doesn’t have this gender lens. I found myself always around those environments and never giving it a second thought, quite frankly. When I got into work, I was the first female supervisor in the plant that I worked at Frito-Lay, and everybody around me was so supportive. They were great mentors and coaches, and they were all men because I was the first female supervisor out there.

I felt like it was such a welcoming environment for me. And that takes a tremendous amount of courage from the employees, the managers and everybody around. Maybe then I was a bit naïve, but as I progressed in my career it wasn’t always that way. There were certainly times in my career when I was the only female in the room. I was Coca-Cola’s first female chief procurement officer in an environment where there were times when I was left out of stuff, probably because of my gender, and it was tough. I can remember a situation that happened after an international meeting that I went to, and I was excluded from the dinner.

I had just been promoted to a big role. I was leading the meeting, the meeting concluded, and the men that I was with decided to go to dinner and they didn’t include me. I called my coach/mentor who was also the predecessor of this team and I said, “I’m really crushed by this.” He said, “Don’t have a crisis of confidence. You represent change and you represent a threat to the men that have biases. And just remember, at the same time, most men will be your strongest advocates.” He was right. My strongest advocates are always men in my career.

There are pockets in this world that still have the opportunity to drive change. But I do feel like the business world has matured and has changed so much. There are so many programs to accelerate the pipeline of diverse talent. I’m certainly spending quite a bit of my time trying to do that myself as I coach and mentor so many diverse individuals in the workplace. It’s important because everybody needs a great strong coach and advocate just like I did at that moment. I certainly feel like I’m stronger because of it and I maintain my confidence in a really tough situation.

Spencer: I’m going to throw you a curveball because you said something that triggered a thought for me. I have seen a lot of panels and discussions that asked the question, can a man be a good mentor to a woman? And the answer is, of course, yes. I’m curious when you say that you’re mentoring and coaching others, are women good mentors to men? Do men look up to women as a coach and a mentor?

Nicosia: I’m going to have to answer it from where I sit; it’s probably best to ask a man who has been mentored by a woman. What I can tell you is, the ability to demonstrate empathy, because probably the most challenging coaching events occur around some crisis or setback in someone’s career or in a situation. The ability to say, “I hear you. I understand. Your emotions and how you feel is valid. And how to see a way forward to get back up and to keep going so incredibly important.” Because just as that mentor did for me, confidence can be destroyed in a moment. Sometimes it takes a career to build. Being able to feel that empathy and that support in someone who believes in you goes a long way to helping you quickly get back on your feet and get up and take another swing at the plate.

Spencer: That is such a good point. Because nobody comes to a mentor and says, “Things are going great. What should I do?”

Nicosia: Well, like I said, sometimes it does happen and we’re happy for folks. But again, if you’re really trying to accelerate learning and really help, it typically does come in those moments of crisis.

Spencer: That’s a good point. So still reflecting on your career and those moments of good and bad when you have seen success and overcome challenges, how have you seen gender roles evolve in food and beverage manufacturing? Have you seen a change over the course of your career?

Nicosia: I absolutely have. Some of it we have had to do through really focusing on creating opportunity. To give an example, earlier in my career, we were opening a plant in Costa Rica, and we had to go through a process of creating a program that was in the community to teach people how to drive forklifts so that we could have a gender-balanced manufacturing environment. We were really struggling to get material handlers and people into the facility that had the skills we needed. They were predominantly filled by men, and we really wanted to achieve this goal of having a gender parity environment in our manufacturing.

We took the effort to go into the community and train people and sometimes it takes efforts like that to really create change. I think there has been a huge change in how people view their careers in the manufacturing environment. I think we must re-engage post-COVID, whether it’s the gig economy or whatever else, there are reasons that people walked away from great American manufacturing jobs. We have to find a way to reengage them back into the workforce. I think part of it is re-engaging in the community.

Part of it is our own responsibility to create career pathing, so that people can come into their roles and see a way to build their skill sets, grow in their roles and have a lifelong engagement in this type of setting. And if they choose to exit, we’ve built upon their skill set so that they can go and do other things. There is a huge opportunity for us to think about how we re-engage in the communities and attract both male and female talent. I think there’s more flexibility that still needs to be built into manufacturing.

 Many plants today have fixed shifts that people have to work. I aspire to see the day that Hearthside can offer more dynamic shift building, where people can nominate the hours they want to work and we have a way and a path to give them those hours and provide more flexibility. That way they can care for their own children or the elderly or do whatever they have to.

It’s more typical that it’s the female that must care for the children and with the inflexibility of the way we handle our manufacturing shift operations, it makes it really hard. There’s more to be done here. I’d love to be a leader of change in that space. Hopefully, over time, we’ll get there. But there’s more that can be done to offer flexibility for quite frankly, everyone so that American manufacturing jobs are more attractive.

Spencer: This is just more of an observation than anything. As a working mother, schedules are one thing, but there are so many other external factors that are working against it. Childcare is hard to access, even for upper-middle-class working women. Then it’s exponentially harder for the ones who are living paycheck to paycheck. I’m really thinking out loud based on what you said. Wouldn’t it be great if manufacturing could be the centrifuge of change? If it starts with flexible scheduling, maybe other things can fall into place.

Nicosia: I love your idea, but I also think of technology as a huge enabler. Technology is being used in ways that are even related to more physical jobs, where there are devices that allow you to lift three times your normal strength. And you think about how to engage all these different factors, whether it’s people with disabilities or women in the workplace that have all kinds of other demands on their time, I think technology could be a big unlock to create change.

Spencer: You’re right. I try to use my position as media to project that technology and automation aren’t designed to eliminate jobs, but it’s designed to help people do jobs that they wouldn’t otherwise be able to do, as well as accommodate for a dwindling headcount.

Nicosia: Absolutely.

Spencer: All right. So, you pretty much answered my last question before I had a chance to ask it. Because we talked last week about runway and thinking about it from your perspective and how you’ve grown in your career. What does the runway look like for contract manufacturing or for food manufacturing in general, for people to come into this industry, rise up in their careers and create a trajectory for themselves?

Nicosia: I think the very first thing is recruiting. We have to be more aggressive in trying to recruit more women into the industry. I think if they had the awareness of the great career opportunities within contract manufacturing, we would absolutely just simply change the numbers and bring more women in. But having said that, I also think as the industry has evolved, there are certainly more women coming in at entry levels.

Obviously, with the training and development that we’ve been doing, we’re looking forward to this pipeline of female talent that’s coming through at our supervisory level. We’d love to see more and more women in our manufacturing leadership positions. Today, one of our key platforms is led by a female. We have two COOs in our company and one of them is a female, she’s a fantastic talent. I would say Hearthside is very fortunate to have a stacked team as it relates to our female leadership across the company.

Spencer: Yes, absolutely. I’m hoping that I’m going to be able to spotlight that for the company in the coming months, that Hearthside is stacked, and I love that. Again, with such a traditional industry and engineering and manufacturing being male-dominated, and co-manufacturing being so behind the scenes for so long, it’s really exciting to see what Hearthside is doing to just really boldly forge ahead and make a change and be successful at it.

Nicosia: Well, I know the women that you’re going to be talking with. I think you’re going to find them fascinating with tremendous careers of their own.

Spencer: I love it. Darlene, that really wraps up this episode and this season. I just again want to extend my most sincere thanks for taking time over these five weeks to share your thought leadership and so many aspects of contract manufacturing. We talked a lot about some really important topics, and I just appreciate your time and insight.

Nicosia: Thank you so much, Joanie. It has been great getting a chance to talk to you these past five weeks, take care.

Welcome to Season 9 of the Troubleshooting Innovation podcast. Joanie Spencer, editor-in-chief for Commercial Baking, is spending this season with Darlene Nicosia, CEO of Hearthside Food Solutions. They’re talking about operations, culture and innovation … behind the curtain of co-manufacturing. Sponsored by Reading Bakery Systems.

In the fourth episode, Spencer and Nicosia take a look at what it means to be a modern contract manufacturer.

Learn more about this season here, and listen to Troubleshooting Innovation on Apple, Spotify and Google.

Joanie Spencer: Hi, Darlene. Nice to see you again. 

Darlene Nicosia: Great to see you, Joanie. How are you? 

Spencer: I am great. Thank you again for such a lively conversation last week around R&D. I’m excited for this week, and just looking at a lot of issues when it comes to what it means to be a modern co-manufacturer.  

I’m going to kick this off with one simple question: Is it just me or has the demand for contract manufacturing drastically increased over the past few years?  

Nicosia: There’s no doubt. There’s an acceleration of contract manufacturing taking place. There are a lot of reasons for it; I’ll focus on the three big reasons that I think there’s been a rise in contract manufacturing. There’s incredible demand that was created during COVID. I would tell you that what happened is that people changed their eating behaviors away from home. Everybody was locked down and at home spending more time with their families, and there was a huge demand for food at home.  

If you think about a business like ours, where we’re predominantly in the snacking side of business, we saw incredible demand for products out in the marketplace. Many of our customers called on us not only to ramp up the things that we are already manufacturing for them, but there were certain places where customers were outstripped of capacity and they asked us for help. We became a massive overflow point for them as well.  

I think you first saw this huge surge coming from COVID. But I think there are other reasons for it. You’ve never seen a marketplace like it is today. There are so many insurgent brands out there with great ideas, new ingredients, healthy, better-for-you ingredients and all types of sustainability coming into play as it relates to packaging, so many insurgent brands have come forward.  

Typically, those insurgent brands can’t afford or don’t have the expertise to have their own manufacturing infrastructures. They need to wait till they scale or perhaps they prefer to really focus on brand building. So they never really build an infrastructure from a supply chain standpoint, and they call on contract manufacturers to truly be their partners.  

Within that, you look at the cost of capital and there are choices are being made. Many of our customers would say they’d rather invest in media, advertising and consumer-facing investments versus spending it on the capital side and infrastructure. And I just think the most important piece in all of this is the expertise that really gets accelerated and brought forward by contract manufacturing. If you think about it, strong capable organizations with end-to-end capabilities from R&D through commercialization, manufacturing, safety, quality and all the things that you would want in your own internal manufacturing, but it’s external.  

That expertise is somebody else who’s invested to bring those products and skills to market. I think that capability externally has really accelerated the maturity of organizations, and the sophistication of contract manufacturing has really grown over the last several years. Our customers now have a choice, and they’re turning to contract manufacturing more and more frequently.  

Spencer: You mentioned emerging brands, and that has really been on my radar a lot lately. It just seems like there is this huge influx. Probably five to 10 years ago, most the time the story was often that my child had a food allergy that I couldn’t find a suitable substitute food for, so I developed my own and everybody liked it. Then they figured out how to scale it.  

But now, the creativity and identifying gaps in the marketplace combined with this new idea of what health and wellness looks like, consumers’ reluctance to make sacrifices for their health and wellness, and indulging in the foods that they like, and it’s all come together for the surge of these emerging brands. How is that impacting the contract manufacturing industry and is this a trend that has staying power? Is it going to have a lasting impact on contract manufacturing? 

Nicosia: You see this incredible amount of innovation coming forward from these insurgent brands. They bring to bear all kinds of great ideas; they’re tapping into ideas that may emerge at a dinner table and then they turn around and can find contract manufacturing and in weeks have product to market. 

So, they bring this entrepreneurialism and speed to the market. They call on contract manufacturers because of that speed and that capability that we can often offer to them. I mentioned that the maturity of contract manufacturing has accelerated and evolved.  

There are fewer and fewer barriers for a new brand to get to market. First, they can do direct-to-consumer very easily through digital. Just about anybody can sell what they want through a digital channel that’s easy to create. Accessibility to the consumer has been incredibly changed by technology. 

I think that the ability to manufacture in a high-quality way through contract manufacturing brings a tremendous amount of excitement into the space that we operate in. Many of these emerging brands start to grow and get the attention of the big guys, and  then they are acquired by a company that can scale them, the ability to get them distribution, shelf space and things like that. 

 So, for the winners out there, it is an exciting time. I think contract manufacturing has definitely enabled both the ability to execute and innovate in that space, but also the accessibility to grow quickly. 

Spencer: When you talk about the ones that are ultimately getting acquired, I’ve always had this theory that when you think about some authors, certain authors out there write books intentionally to be adapted to a screenplay. And I have a theory that there are entrepreneurs who develop brands to be acquirable. 

Nicosia: There’s absolutely no doubt. You can see it in the marketplace. Many of them are famous now. They have their own “recipe book”; they know how to do this and they’re great people to partner with. Certainly, they’re very innovative and they’ve got a network, which is so critically important to get brand visibility, awareness and trial. 

Spencer: So, your scope of customers is broad. You work with smaller nimble ones, and you work with the big brands. So, this rise in need for co-manufacturers and this influx of these insurgent brands, when it all comes together, what does that mean in terms of the competitive landscape for a co-manufacturer, especially when you have no brand to market? 

Nicosia: I think that we market ourselves as a trusted, reliable partner. Our reputation is determined by the quality, service and reliability that we bring. I also think value-added capabilities are what differentiates a company like Hearthside. I know in an earlier episode, we talked about our R&D capability and certainly unmatched in our size relative to some of our big customers. But if you can get the right audience and you can have the right conversation, we can bring some of that capability to complement what our big customers are doing.  

We do transactional work, but I think we do even better work when we’re working in partnership with our customers. When we get the opportunity to build those lasting relationships, we can bring more of our capabilities to bear, whether it’s related to how we do our work, the commercialization support that we bring or how we service our customers. But there’s no greater joy than seeing one of our customers truly scale a product, be hugely successful and feel like certainly we were part of that success. 

Spencer: As a mother, I feel like it is like watching your child do something great and just being in the back behind the scenes and knowing, “That is my kid, and I helped him get there.” 

Nicosia: There’s no doubt. Our employees feel like they’re an extension of the brands they manufacture every day. Whether or not their shirt says Hearthside or not, there is a tremendous amount of pride they take in what they do. 

Spencer: I love that you have a workforce that has pride in the brands that they produce; that’s really cool. 

We talked about this and we got into it a couple of weeks ago … your experience from the brand side of things … does it impact your view as a co-manufacturer and how you go to market? I know you have a philosophy that speed wins. How does that work in the context of today’s conversation? 

Nicosia: It’s funny because in my leadership team meetings, we always talk about the importance of supporting the brands that we work for and understanding what a brand stands for. Consumer expectations today are so high. They want to know that they can trust and that they are eating a quality product; those are paramount. 

We have the responsibility to ensure that all those things take place as we manufacture for our customers. They entrust us with billion-dollar brands, and we have to be the network that supports those brands in a way that maintains that trust at the point of consumption with the consumer. It’s really important for us; we talk about it a lot. When I’m with other CEOs, and talk with them about their businesses, there’s no doubt I understand the trust they’re placing in us when they ask us to manufacture their brands. 

Spencer: That’s a good segue into the next thing that I wanted to talk about. Contract manufacturing is on the radar more than it has been. One specific example is that Hearthside was identified in a New York Times article earlier this year, which led to a bit of a crisis.  

It brought contract manufacturing to the forefront in a way that was maybe unexpected, but that’s putting it lightly. I’m interested to hear your perspective on how a PR situation like that comes to light and how you learn from it and move forward from it.  

Nicosia: At the end of the day, we are in a manufacturing industry. Customers come to us for our asset infrastructure. I want to say the word “asset” infrastructure because people are assets. When I think about it, this asset infrastructure, which includes our people and, as many people know, the labor market has been tight for the last couple of years, and American manufacturing jobs are harder to fill today than they were even three years ago.  

We have a lot to do to attract more people into wanting these types of roles and give them training and help them develop so they can continue to grow in their careers. When I think about that, we’ve relied more recently on temporary workers to staff our plants, while in parallel, we’ve been aggressively hiring full-time employees.  

So, when this came to us, my first reaction was shock and disbelief. But we quickly pivoted to engaging with our temporary agencies, really to confirm they were abiding by our policy of requiring any of their temporary workers that entered our facilities to be 18 and over. We asked them to go out and validate their employment practices and confirm back to us that they were taking the proper steps, and they had the steps in place to confirm all their temporary workers were 18 and over.  

They all came back, and they did certify that to us. We also then required all of our temporary agencies that we worked with to utilize e-Verify. Some did and some didn’t; we made it mandatory moving forward. 

But also, on the customer side of this, we go to great lengths to protect the confidentiality of what we do and who we do it for. We also immediately placed calls to our customers to tell them our stance, our policies, our practices and the changes that we were making. While unfortunate, the best of relationships, I believe, are forged in the toughest of times.  

For us, I would say that was even true. The situation allowed us to get even closer to our customers and to talk with them about our practices. Many of them have known us for many years. They knew the type of customer relationship that we had had with them and they believed in us. I think that we learned a lot. We’ve made the proper adjustments to our system, and we continue to be a trusted partner.  

Spencer: From a leadership standpoint, what would you say to sum up what you learned in your first year on the job and how to move forward from such a devastating situation? How do you move forward from that and maintain those high standards that you do have in taking care of your workforce? 

Nicosia: I think the very first thing is communication. Whether it is talking to customers, employees or the values that we stand for, there is nothing that takes the place of communication. We turned to our teams and partners and talked with them about our business and what we believed in, what we were doing and had done.  

I think being able to maintain an open line of communication and knowing that you have values and processes in place are probably the biggest things that a business has to have as its foundation. But I think for me, my greatest learning was just continuing to talk to people, continuing to engage in dialogue and make sure there’s open conversation. 

Spencer: I really like what you said about your relationships becoming stronger in times of adversity. That is when you really discover the strength of the relationship when the times are bad. So one, I appreciate your candor and two, I appreciate what you’ve taken away from it and how you’re moving forward and just carrying those strong relationships through, because it’s not easy. 

Nicosia: Thank you. I appreciate that. 

Spencer: Having this conversation about contract manufacturing having a much thinner veil than it ever did, how do you see this evolution impacting things like culture within the organization or really contract manufacturing in general? 

Nicosia: I think this idea of thinning of the veil is becoming really important to my team as we talk through our ambition to be our customer’s best partner. I’m sincere in that I feel like as I came in, the business and too many of our relationships felt more tactical than they were strategic. As I’ve gotten to know so many of our customers, I’m constantly talking to them about the opportunity for us to work much more closely together, but I’m constantly also sharing my point of view on how our relationship could be different, and they would benefit from it.  

So, talking about the value equation and trying to share with them this idea of a relationship that goes far beyond CPG and contract manufacturer. It’s one of great transparency, especially in the commitments to each other for support and planning. But it’s this opportunity to also become extremely efficient, faster to market and bringing the opportunity to essentially affect their growth agenda at a faster rate. The only way that we can do that is by working more closely together and trying to really eliminate some of that tactical behavior that I think is prevalent in this industry. 

Spencer:  This thought just occurred to me: We’ve talked a lot this season about your experience leading a well-known brand. But the truth is, it doesn’t matter what brand came from or where you came from, you came into contract manufacturing not having been in contract manufacturing, and you came in at a time of upheaval.  

You have an incredibly unique perspective that is completely fresh from anything that anybody has seen on the co-manufacturing side. Usually, a contract manufacturer gets a problem and then you have to solve it and clean up the mess. But it sounds like you’re coming into this and looking forward to the industry with how we can proactively avoid those problems and streamline things so that we can be a better partner, a help us help you type of thing. Is that fair to say? 

Nicosia: It absolutely is. I do think at the heart of it, it is about helping our customers be successful. But it also is partially selfish because I see the frustration from my internal teams, and they wish they had known about something earlier because they could have helped. They saw a problem coming, and they didn’t have an outlet to communicate with our customer base, and the person that they would share it with wasn’t able to escalate it to get it to the right person in the right department. This idea of being able to be better partners creates a tremendous amount of value in everything that we do, so it really does resonate with me. 

Spencer: Talk about being a disrupter. I think that you can change the game for modern co-manufacturing. 

Nicosia: You are so kind, Joanie. We’re doing our best one step at a time here at Hearthside. 

Spencer: I think that’s a good note to end this week on. 

Nicosia: Thank you. I look forward to our time again next week.  

Spencer: Next week will be our last episode. I’m so excited because we are going to unpack your unique leadership perspective as a CEO with a very interesting background, so I can’t wait for next week to wrap up the season. 

Nicosia: Awesome. Thanks, Joanie.  

Welcome to Season 9 of the Troubleshooting Innovation podcast. Joanie Spencer, editor-in-chief for Commercial Baking, is spending this season with Darlene Nicosia, CEO of Hearthside Food Solutions. They’re talking about operations, culture and innovation … behind the curtain of co-manufacturing. Sponsored by Reading Bakery Systems.

In the third episode, Spencer and Nicosia explore how product innovation is playing a new role in contract manufacturing.

Learn more about this season here, and listen to Troubleshooting Innovation on Apple, Spotify and Google.

Joanie Spencer: Hi, Darlene. Thanks for joining me again this week.

Darlene Nicosia: Great to see you, Joanie. How are you?

Spencer: I am great. I’m super excited about the topic this week because I feel like it’s something that has changed in the world of contract manufacturing over the past five to 10 years, thanks to Hearthside.

Nicosia: Well, thank you for that endorsement. I think there are a ton of changes going on in our industry. If you look at the changes that have taken place over the last five to 10 years, I think the most important thing is that our customers have changed. An important part of our strategy is to meet our customers where they are. The majority of our customers come to Hearthside for long-term strategic partnerships. In fact, of our top 10 customers, we average 23 years of experience with them. So, these are long-term, long-standing partnerships, but how we interact with them has really evolved. The biggest thing that I would call on is the fact that, now more than ever, our strategic partnerships are truly that, they are partnerships.

If I look back 10 years ago, business was much more transactional. The role of a contract manufacturer was much more for overflow. It was when there was a surge in demand, or there was a unique need. Maybe there was some innovation where a branded company may not have the infrastructure to produce in-house, and they were waiting to make that investment to see if that innovation took off. But I think the role today really is much broader than that. There’s certainly the opportunity for us and our competitors to be overflow, but there are other situations where there’s a promotion so there’s an episodic demand. Maybe somebody’s going into a new club store or something like that, and they need a surge in production capacity, and they’ll call on contract manufacturing. Or say they need flexible packaging capabilities for displays or something like that; they’ll come to contract manufacturing. But more importantly, I think there has been this big change in partnership in this ongoing, long-term relationship, where contract manufacturing really is an extension of our customer’s supply chain.

Spencer: I have really seen that evolve. But you’re right, like overflow is always going to exist. I was just talking to someone at PMMI about changes in packaging with overflow. It’s easy to just send that over to the co-man. But R&D is really coming into play, and I think Hearthside is leading that charge. How have the increased R&D capabilities of Hearthside? And I should backtrack to build some context, Hearthside had some strategic acquisitions that enabled a really strong R&D capability, right?

Nicosia: I think we’ve probably had a number of bolt-on acquisitions that have brought some of this R&D capability to us. I think we talked in an earlier podcast, we’ve had 10 acquisitions over the last 13 years. With each of those, we’ve been able to take the best of what was offered in those businesses and build upon them.

We certainly do R&D work across a pretty broad breadth of our business. I think what is important is that we offer this incredible optionality for customers because we have pilot lines, so we can do testing at small scale for trials in target markets for customers. But if those are successful, and they immediately want to expand that success, we have the massive capability to then go in and produce at scale across all of North America without a blink.

We have the ability to learn with them to understand what’s working well, both in getting the consumer feedback, making tweaks to recipes, looking at packaging options, and how to make some tweaks as you go into bigger and broader distribution across the landscape. I think that is something that sets Hearthside apart from a lot of our competitors, but we don’t necessarily have to run big lines. We can run small quantities on small lines and big quantities on big lines.

It allows our ops teams the opportunity to think through different stages of a product lifecycle, which is really important. The last thing you want to do is grow out of your contract manufacturer and then have to go to a new one and start all over and re-commercialize those products, and then — boom — you’re out of capacity again. Being able to start with a contract manufacturer that can help you throughout different levels of a product lifecycle, I think is really important.

Spencer: I was sitting here thinking, I guess the easy answer is, of course, you have those capabilities. You have 39 facilities, so bandwidth isn’t an issue. But it’s more than that, operationally. And I’m asking you as the puzzle solver, how do you do that strategically? Because there has to be a lot to that puzzle. And I’m thinking the quintessential operations and R&D don’t always play nicely together, so do you have to be the referee?

Nicosia: There are natural tensions in our business, small to medium-sized production runs or customers may have four to six flavors of an SKU of a particular brand. It requires a lot of changeovers. There is lost production time in that, there’s certainly more scheduling and there’s more complexity in it. But we try to focus our speed and efficiency on all these aspects to be the best in the industry at doing that work.

You talk about these different capabilities, and many of our lines are completely sold out. So, scheduling often is a challenge, and you want to satisfy all your customers all the time. I can only think of one occasion in my career where I had to essentially make a call on running a startup launch for a customer and had to really collaborate with another customer to make the time work for everyone.

But there are times when you have to do those things. It’s not common and again, we have a tremendous amount of focus on trying to satisfy all our customers at once. But there are times when something may not go right as you’re starting up or commercializing a new product and you have to be able to be flexible in those moments.

Spencer: This is an insight that really anybody can use if you apply it in the right way. For our publication, I’m thinking, when we have a bandwidth issue, we can’t just add more lines or acquire a new facility. We have to really get strategic. It’s the classic, “work smarter, not harder” for you on a much grander scale, but I’m hearing what you’re saying and thinking I can see where we could apply that and make different shifts to have some give and take with customers in order to get to the same end result in a more efficient way.

Nicosia: It’s interesting. Bringing a new product to life is truly both art and science. It takes a tremendous amount of collaboration because different machines, processes and atmospheric conditions can all have an impact on a product. You have to have a lot of collaboration in the process.

Lucky for us, we have incredible R&D, commercialization and engineering teams. They are constantly finding ways to use a combination of ingredients, processes and equipment to bring new flavors, tastes, textures or whatever it is, to products. So, the best relationships are the relationships where I think our customers are open to exchanging ideas, hearing our thoughts and bringing us in early. Even if we don’t develop the product and they develop it, we get the opportunity to co-create. Executing is different from ideation. Right?

Spencer: Absolutely. That was going to be my next question — what’s trending for you right now? Are you innovating with your customers or innovating for them? In other words, do you typically troubleshoot on a customer spec, or do you find yourselves bringing product development ideas to the table and helping them come up with new ideas?

Nicosia: I hate to say this, it’s both. Our biggest customers have huge R&D organizations. It’s amazing in my mind because earlier this year we went to one of our largest customers, and we brought them 10 concepts. We said, “This is just for ideation and creative thinking. Maybe you can think about some flavors.” We all like to eat around the table, so we brought in some samples. The feedback was incredible. They were like, “Wow. We love the ideas that you brought to us. Our R&D team is backed up for 18 months, and it would take us so long to get this product to market.” They came back to us two weeks later and said, “We want to run with three of your recipes and ideas.” We were out in the marketplace in six months. So even when somebody has a really established world-class R&D organization, sometimes there are competing priorities.

Many of our customers are in multiple categories. They’re trialing things with new ingredients or things that may have new sweeteners coming into the market, whatever the case might be. R&D is so broad for them, that to actually get to commercialization takes a long time. What we can do is sometimes accelerate that process, especially if it’s something small, such as flavor changes. In these examples, we just took some on-trend flavors and ingredients and added them to an existing product line, and it’s been a huge success for us.

Spencer: This gives me two thoughts. One, this puts an entirely different view on what overflow means. So, 10, 15, 20 years ago, you went to a co-manufacturer for the operational overflow. But now, brands can come to a co-manufacturer for their R&D overflow and product ideation overflow and say, “We don’t have time to come up with something new, because we’re cranking out snacks for Super Bowl season. Can you come up with something so that we can focus on this?” And that is a little mind-blowing.

Nicosia: It is. When I talk about the duration of our customer relationships, I think our biggest customers have tried to harness the best of what we can offer and what they offer, and found a way to really create this true engagement, where we’re like an extension of their business.

I often talk about wanting our manufacturing plants to be an extension of our customers’ supply chains, to make it feel like it’s such a clear handshake in the process that knowledge and product and ingredients flow so seamlessly between us so that you would never know that it was made in a contract manufacturing environment. But there are some customers still who predominantly interact with us transactionally, maybe the relationship is just for a single product, and they’re not ready to engage the full portfolio of what we could offer.

Spencer: So, the second thing that came to my mind was when you said that you had a customer meeting that was typically transactional and you said, “Hey, we just thought that we’d bring some products for you to snack on while we meet and see what you think?” How do you prioritize making time and space to just get creative and come up with new things  that maybe you can throw out there as “food for thought.” How do you work that into such an intricate operation?

Nicosia: I think it starts with being customer centric at the start and thinking that every one of our customers is focused on growth. They want to have growth in the categories they operate in today, they’re trying to find new adjacencies or whatever the case may be. Everybody’s focused maniacally on how they can continue growth in the marketplace. I think our role is to continue to stimulate ideas, to be a thought partner, to have the capability behind us to go and make it happen and execute it. A lot of people can come up with ideas. There are very few that can be strategic, bring ideas and then be able to execute them, and I think that’s what Hearthside offers.

Spencer: You came from a world that was intrinsically connected to consumer trends and consumer demands. Now that you’ve been in the co-manufacturing world for a year, I’m going to assume that even without a brand, co-manufacturers are not immune to these really rapidly evolving consumer demands.

Nicosia: You have to know what’s happening with the consumer to run a successful strategic contract manufacturing company. First, we have to be able to talk with our customers about the trends and growth rates for us to align on what infrastructure will be needed in the future. We need to know better than they do in some circumstances because some of our lead times on equipment and infrastructure could be 18 months or longer.

But if you look at things like better-for-you snacking, you have to understand how would that trend of better-for-you snacking impacts ingredients? How do those ingredients behave differently in processes? Do they introduce moisture? Do they impact shelf life? You have to look at the trends right now with consumer behavior and really understand a lot of that.

Right now, you can look at inflation. Everybody’s looking at inflation prices have gone up, many consumers are having to make different choices about their spending. How can we help? I think we have a huge role to play. We can provide insights about revenue growth management. We can talk about pack sizes and pack size changes, and what it takes for us to do that again to get to the market faster.

Again, we enable speed to market. We have insights on how to maintain magic price points; we can offer club packs. We can do all kinds of things at a discounted price-per-unit in a club pack so that maybe we help bring solutions forward to the customers that we manufacture for and provide solutions that they’re trying to solve without necessarily having to have it impact their margins. So, whether it’s ingredient optimization or thinking of substitutions, there are all kinds of ways for us to also think about it on the cost side and the product side without impacting quality.

Maybe from my long time at a branded company, I’m always thinking about how to grow the top line. But I think there’s also a lot that we do to try and control costs, maybe take costs down and find product substitutions. All those things also add up to take pressure off of our customers, and those are kind of critical elements of a strategic relationship.

Spencer: It’s funny because I’m sitting here thinking about your experience with a big brand. I’ll tell you that I grew up in the era of New Coke and the New Coke experiment. I remember Coca-Cola consumers are fiercely loyal. Do you feel like having that insight of coming from a brand with such fierce loyalty that you have this frame of reference and know what loyal customers are and are not willing to put up with in terms of how far outside of the scope of change they want to go?

Nicosia: It certainly helps. It’s an experience like no other. I think some of the spaces that it helps me in is really understanding when people are looking to drive innovation within an existing portfolio. Billion-dollar brands are supported by innovation, and I think maybe one of the examples I draw upon is my time at Coca-Cola with Coca-Cola Creations.

Coca-Cola Creations created a ton of buzz and a lot of excitement but it also buoyed and reignited passion around the brand Coca-Cola. I think just being able to talk about that, whether it’s customers making their own LTO’s or holiday packs, there’s a huge need for innovation on the fringe, to bring consumers back to that core that they know and they love within that portfolio. So, we do a ton of brand extensions. It’s a really important element of an overall strategic plan for any one of our customers.

Spencer: That’s interesting. On that note, the next question is just about food and beverage manufacturing. When you look back on your history and professional experience, and you think about the change that manufacturing has been through over the course of your career, how far ahead is the industry from where you imagined it would be by now?

Nicosia: I love the optimism in your question. I actually think we’re probably more at the other end of the spectrum today, but I see endless opportunities. So perhaps I’m always looking out that way in an optimistic point of view.

But I’d probably say the starting point is on the low end of the spectrum. I think there are places where, for the tremendous amount of flexibility contract manufacturing offers to its customers, you have to be agile and offer some level of uniqueness that each one of our customers wants, yet do it with somewhat common infrastructure.

Because of that, I feel like we have less automation. There’s probably a lot more hand-touching of packaging and processing then you may find a more advanced manufacturing environment with a ton of automation. Now, I have to say, where we have long-term strategic partnerships, say a seven-year contract or something like that, where we have high demand for a product, we’ll put in tremendous automation — digital sensors, monitoring, quality technology and things like that. I’d say that in  that particular circumstance and situation, we are more on the far end of manufacturing in terms of manufacturing innovation. It is a bit of a mixed bag, but I think there’s a bigger opportunity for our industry.

It’s about this ability to have longer-term partnerships with our customers so that we can make the necessary investments to be world-class extensions of their supply chains. It’s not just in the manufacturing process; it’s in how we forecast, plan and share inventory levels. Just the ability to give transparency across the supply chain would be a huge step in the right direction. I see very limited circumstances of this being used.

When you think about the ability to have a consumer buy a product that scans across your register, and it sends back fulfillment signals, not just to the customer, but all the way through the supply chain to a contract manufacturer. That’d be incredible.

And if you could think about going back into the ingredient suppliers, it would be even more incredible. We could probably take a lot of cost out because of the reliability we could offer. In my opinion, co-mans are still treated somewhat as dispensable relationship partners. Some of that is in the short contract durations.

I could have a crystal ball and get a wish, I would really encourage our customer side to do less spot buying and really think about engaging in longer-term relationships. I think it could be much healthier for both of us and give us the ability to use technology information and other things.

Spencer: When you talk about the idea of tracking that purchasing data, like sending that information all the way back through the supply chain, I think it would really help with forecasting and your equipment needs as well, if you could gauge here’s where the purchasing growth is in this area and these are areas where we could automate more. We need to really put the focus on how we’re investing in automated equipment in this area, versus the growth that is happening in areas where we need more flexibility because there are a lot of line extensions and different varieties that are becoming more popular. I think it would just really streamline a lot throughout the supply chain.

I’m going to circle back. We kind of got far ahead, so I’m going to take it back in to talk about product innovation. We’ve touched on a lot of things. How do you think this evolution has impacted your own personal philosophies for co-manufacturing?

Nicosia: I would say I learned a lot in my time at Frito-Lay and Coca-Cola. I learned a lot about product innovation, and so, whether it was about recipe formulation or the opportunities to bring new ingredient blends forward, to improve a taste profile, reduce calories, or take out cost or create redundancy of supply, when you think about the innovation at shelf, how to win displays and how to take on more space in a retail location, we talked about the whole idea of this halo effect of innovating around a core brand and the excitement that it brings.

Behind every innovation, you have to have end-to-end visibility, collaboration and execution capabilities by all partners. And so, when I think about customer relationships at Hearthside, I would love to have these customer relationships where they would bring us in, give us visibility into whatever they’re innovating, welcome our collaboration, d let us advance the possible success through the ability to partner with them because at the end of the day, they’re going to turn to us and ask us to execute.

Oftentimes when we get brought in, everything is already decided and the recipe is solidified. They know what they want to do; the packaging is decided. And far too often, I think, we’re brought into the process late. Then we tactically end up executing on very accelerated timelines. So we give our best but leave, I think, an opportunity on the table where we probably could collectively do better. It certainly has changed how I think about manufacturing, and I’m constantly trying to escalate conversations with our customer base to bring our teams in earlier.

Spencer: Do you think we’re heading into a new world where marketing, R&D, operations, and co-manufacturers can peacefully coexist?

Nicosia: I’m a former chief procurement officer. I think in so many ways, we have a right to say we would love to be engaged with all the winners in the innovation process. But I would also say, it’s tough because oftentimes, my teams are engaged with procurement when we really need to be engaged with R&D. We need to be engaged with others that are involved in the supply chain, sometimes even engaging with brand managers.

It’s this constant push to have us be a more integral partner than to be a transactional partner. I think that happens over time. It happens as trust is built. I love my procurement partners out there, but sometimes they’re a barrier, because they don’t necessarily want to give us access to what we need to really give our best and be the best collaborative partner that we can be.

But again, I think our story is only in the middle chapters, and I think there’s so much more for us to do in terms of building a profile and elevating the role that contract manufacturing can play with our customers. I’ll leave it at that.

Spencer: Okay, there’s a runway.

Nicosia: I love it. There is an absolute runway.

Spencer: All right, Darlene. Those are all my questions for this episode. What a great conversation this was. I enjoyed talking about the new world of R&D and contract manufacturing. So, thank you so much.

Nicosia: Thank you, Joanie. Great talking to you again. I’ll see you next week.

Spencer: Next week, we’re going to look through your eyes at where we are in general and the evolution of contract manufacturing, so I can’t wait.

Nicosia: Awesome, take care.

Welcome to Season 9 of the Troubleshooting Innovation podcast. Joanie Spencer, editor-in-chief for Commercial Baking, is spending this season with Darlene Nicosia, CEO of Hearthside Food Solutions. They’re talking about operations, culture and innovation … behind the curtain of co-manufacturing. Sponsored by Reading Bakery Systems.

In the second episode, Spencer and Nicosia uncover the most critical factors in creating a cohesive operating culture.

Learn more about this season here, and listen to Troubleshooting Innovation on Apple, Spotify and Google.

Joanie Spencer: Hi, Darlene. Thanks for joining me again this week.

Darlene Nicosia: It’s great to be back with you.

Spencer: We had an amazing conversation last week. We talked about Hearthside’s timeline and your timeline and what led you to Hearthside, and really got an overview of some of your key operational philosophies.

As an engineer and your experience in manufacturing and procurement, I’m ready to take those big thoughts and drill down, and this week it’s on operating culture, which is a super important topic in our industry. So, I’m excited to dive into this with you.

My first question starts with a statement: There is one specific aspect of a contract manufacturer that really sets it apart from branded food manufacturers, and that’s this notion that the process is the product. What does that mean exactly?

Nicosia: I will first tell you, we love and care for our customers’ brands as if they were our own. We do feel like we are an extension of our customers’ brands. So, if you go into any one of our plants, our teams take huge pride in what they do every single day. Our role is to make food that people love, and to do it with quality, passion and efficiency is where we do our best work.

We work incredibly hard to ensure that we deliver the same quality and consistency every day that our customers expect, and their consumers expect. Many of the things that we produce are well-known brands out in the marketplace. Our teams go through extensive onboarding and training, so they do really focus on the quality and consistency of process. We have a program that has a buddy who helps to coach new associates until they’re ready to operate on their own.

We have systems and processes in place to guide and support our teams in delivering these high standards and expectations so that the finished product, every single time, meets or exceeds our customers’, and ultimately their consumers’, expectations. So, I think that there is a bit of magic to the process in contract manufacturing. But I would tell you, we still love all those brands.

Spencer: My observation in just unpacking your answer, I feel like consistency in the product is even more critical for the contract manufacturer, in some respect, than it is for the brand because you are responsible for someone else’s product, and you cannot get that wrong. It has to be consistent. The quality has to be consistent, the look, the taste … everything has to be just exactly spot on every single time. I feel like there’s a little bit more pressure on a co-manufacturer in that regard.

Nicosia: Oh, there’s no doubt. Here’s the biggest thing: We’re producing over 800 different SKUs every single year. So not only do we have to be excellent at producing some of these products repeatedly, but with the amount of flexibility that we have to drive the variety of the portfolio to produce so many different and unique things consistently, is even a bigger challenge for a contract manufacturer than it is for any of our customers who have a much narrower set of products that they’re producing.

Spencer: So, the Hearthside process, it is long established, and really what you’re known for. I would go so far as to say it’s a big part of what has led to Hearthside’s growth of where you are now with 39 facilities worldwide, right?

Nicosia: Our network today is quite extensive. I mentioned on our first podcast that we really have five different platforms we operate from. We have everything from baked snacks to bars to frozen to refrigerated and fresh foods and a huge packaging operation as well. We really do operate across these verticals in these 39 facilities that we have.

Spencer: So, then what was it like for you, as a leader, to come into such a well-established process? And then, how did your engineering background help you assimilate into that?

Nicosia: It’s interesting. I’ve always been extremely analytical. I call myself a problem solver, and that side of my background has probably been one of the key attributes I have relied on, not only throughout my career, but really as I come into Hearthside and lead the organization.

 As an organization, if I look at Hearthside, we have had this foundational strength in continuous improvement. Every day, our teams are focusing on getting better together. They’re focused on really understanding how our operational performance was yesterday and finding ways to beat it and best it from the prior day. We have a mantra; it’s about being the best at getting better. And so, a part of our approach to using data, analytics and discipline processes is really to drive this operational efficiency. We’re focused on reducing waste, reducing energy consumption, driving our overall performance and OEE to drive that productivity for us and for our customers. It really helped me to assimilate into what is a very strong, continuous improvement culture here at Hearthside.

Spencer: This really resonates with me because I have a teenage son who is a competitive swimmer. And so, I live in the world of no matter how great you are, that becomes your baseline for how you need to improve.

Nicosia: I love the parallel of sports. I think you and I’ve talked about this before, but I was an athlete in college. I think about all the things that I learned from being an athlete, I’m sure much like your son, but you don’t become better every day just because you’re an athlete. You must practice, you have to analyze both the things that you’re doing well, and the things you’re not doing so well. You got to take coaching and have somebody else maybe give you some suggestions on how to change your swimming stroke or ways to improve your overall speed in the pool.

I’m sure those same things resonate in the business environment, for me, I know it does. We talk as a team about what are the things that we’re doing well, but let’s also talk about the things that aren’t going so well and find out why they aren’t working and do after action reviews. Like how you would as an athlete, practicing and thinking through how to get better, our teams are doing that in the continuous improvement culture that we have.

Spencer: I’ve had that conversation with my kid, and he doesn’t listen to his mother. He’s a teenager. So, I can tell him it doesn’t matter how much innate talent you have, you are only successful when you work at it every single day. And he didn’t listen to me until he started swimming in meets, and then after every race, he comes to me and says, “What was my seat time? What was my finish time?” Every single race, he wants to see continuous improvement. Sports, manufacturing and business, I think all have that at their heart.

Nicosia: That is awesome. Well, someday when he’s looking to enter the working world, hopefully there’s a job out there for him that gives him the same reward as he has today.

Spencer: So, we talked about this, Hearthside manufactures in so many different categories. Of course, baking is one of them. With your engineering lens, have you been able to identify operational efficiencies across categories?

As you know this podcast is for the baking industry, so when you look at the other categories where you’re producing, do you see efficiencies that easily translate into baking production? Is there anything that stands out that can be applied to baking? And then vice versa, are there baking efficiencies that you’re able to apply in other categories?

Nicosia: Absolutely. If I look across so many of the things that we’re doing from an operational efficiency standpoint, there isn’t any aspect of our business that somehow isn’t an area of focus where we’re using some sort of engineering or operational expertise in it to make it better. These operational efficiencies have been implemented across all aspects of our business, but if I picked one, I think about so much is happening today with data and technology and how you apply it on the shop floor to really collect real-time processing data. It is about how you understand it and how you’re operating. Not only giving the operators immediate feedback on how a piece of equipment is operating, or where you have defects and what may be causing the defect. It gives you precise information to go and adjust a specific piece of machinery where before this data was available, you wouldn’t know exactly where on the line, part of the process was breaking down. It would take you a very long time to troubleshoot, you’d have a lot of waste because of it, and it would take you a while to get back in alignment.

I think our ability to use real-time information to try and understand why something may not be performing where we need it and then very quickly, make the changes necessary is hugely important for our business. It’s immediately transferable to pretty much any part of our manufacturing operation. I think back to some of the things that I learned back in my days at Coca-Cola, but a lot of it there is very similar when you think about ingredient blending and batching, and how products are made versus how we make them today in a baking operation. I think our ability to really use technology to confirm ingredients, to make sure that we have the right amount of ingredients for a very particular recipe so that we ensure that the product comes off the line has the same consistency is so critically important.

I think there are still more ways that we could use data information, technology and process to really drive efficiency. I think about all the different customers that we serve, and many of them have common ingredients, common commodity ingredients, a lot of them have their own specialized ingredients. But there are things that we could probably do to drive even more efficiency by taking those common ingredients and being able to utilize them in a different way in the batching process. That’s just maybe one example to draw a parallel between my prior life and this life where I see some of the similar principles.

Spencer: Do you think that these efficiencies could eventually lead Hearthside to break into other categories? Or are you more focused on just really being the best at getting better in the categories that you serve right now and just dialing that in and continuously improving that?

Nicosia: I think that is more of a strategic question than it is an operational one. We do have broad capabilities today, but we’re always looking for adjacencies. I think a lot of that comes through the conversations that we have with our customers. We will often talk to them about new things that we see coming into the marketplace. We might see emerging technologies that we’re using in the manufacturing process, and we try to engage in conversations about do we want to scale this? Is this something that we should be making an investment in? Should we build a production line that fully supports this new capability? The biggest base that I have seen innovation just coming out of COVID, is the proliferation of packaging.

If you think about where we were during the pandemic, certainly larger size packs were necessary. Obviously, you saw this change in packaging dynamics to more club size. As people are getting out and about, returning to work to some degree, certainly moving more freely, as well as the compounding impact of inflation, you now are seeing a lot of revenue growth management strategies coming forward. How do you create more offerings for consumers that have affordability packs and things like that? So, we do see a lot of transformational work going on, as it relates to new packaging trends, new packaging sizes and really trying to offer consumers some solutions, while our customers continue to look for ways to grow their businesses.

Spencer: That is interesting. So, you sparked a question for me, when you talk about the things that changed, specifically in terms of packaging, during COVID and then once we got on the kind of on the other side of the pandemic, then things change drastically again. I remember we did the executive profile for the magazine last year. And in that interview, you said something that was interesting, and I loved it. You said, “One of my biggest beliefs is that speed wins.” Speed to market for brands is critical right now. How does operational efficiency ensure speed to market for brands, especially when we’re talking about a company with 39 different plants?

Nicosia: I think one of our biggest strengths is in both our R&D and our commercialization capabilities. They work with our customers daily to utilize all kinds of capabilities. Whether it’s in creating new recipes with better-for-you ingredients, or you think about some new on-trend flavors, or the ability to help customers address inflation with new pack sizes, I think speed to market is important.

One of the great things about our network is that we have R&D capabilities, we have pilot lines, and then we have skilled manufacturing capabilities. And to have the ability to do ideation into piloting something and offering test market opportunities to then being able to very quickly scale and have common partner do that across those opportunities, is something that I think Hearthside does really better than anybody in the industry. It is definitely something that is a competitive advantage for us and allows the customers to partner with us the ability to really not only get speed to market but have the opportunity to scale quickly.

Spencer: This all ties to the overarching topic of operating culture. And culture is something that is getting a lot of attention in our industry lately, a lot more than ever before. As a leader, I’m interested in your perspective, because you’re new to the company and new to the industry after only being here for a year. Where do you see the intersection between culture and operations? Do you think that you can achieve excellence in one without excellence in the other?

Nicosia: I love that question. They’re inextricably linked; there’s no way you can separate them. First, if you don’t own things like safety and quality, and have an operational mindset for driving performance in everything that you do, if you don’t collaborate and drive teamwork, you’re not going to have a successful operation. All those things are the foundations of having a great culture. There is no way to separate them.

I think you’ll find that they feed each other. If you own safety together, you protect your people, but it breeds into quality. Then people understand that you must use those same behaviors to drive quality of product. If you’re driving quality of product, you have less waste. If you are focused on reducing waste, you’re going to have better performance, OEE and everything else. It is absolutely a linked chain.

When you’re doing those things successfully, it breeds this culture of winning, a culture of confidence in your team, a culture of engagement with people. I think that’s what everybody wants to ultimately tap into … the passion of their people and to really be a great place to work. Maybe there’s a pyramid there somewhere, I don’t know.

Spencer: If there’s not, we need to make one. We can trademark it. So, Darlene, from where you sit, how do you think a company can ensure a cohesive operating culture? Specifically for you, how do you keep so many facilities that make so many different products in so many different regions of the world operating on the same standards?

Nicosia: I do think first it is about mission and vision and values, making sure that people know what you stand for. For us, we want to create food people love. And it comes out of our focus on manufacturing excellence. I think when you talk about values, certainly it’s centered around our customers, but it’s focused on people who celebrate and really feel like they’re empowered to drive business performance. It’s about owning safety and things like that. It’s about driving continuous improvement in everything that we do.

I think as you talk to people about where we’re trying to go as a business and our overall ambition, we talk about the mission that we have and the values that we have. In fact, it brings to mind the fact that as we came together as a new leadership team, when I came into the business 14 months ago, we came together, and we also implemented something that is really our growth behaviors.

Our growth behaviors are really founded in things that are around inclusivity, collaboration, being iterative, and this whole idea of being agile and flexible in our work environment, but it is also about continuous improvement and really being the best at getting better, which is foundational to what we do.

When you talk to people about what it’s like to live those growth behaviors and to have a growth mindset and to act on your own, people understand it and it serves as the principles and the ways that they go about doing their work every single day. I think for many companies, people were coming out of the pandemic and were looking for a bit more direction. I think our growth behaviors have certainly served a purpose to help guide people so that they can take the actions that ladder up against our mission and our vision.

Spencer: I was going to ask you what personal investment this requires, but you answered it, with two key words: growth behavior.

Nicosia: That’s great. I would tell you, first of all, you must walk the talk, and the second thing you have to do is be open, be visible and be accessible. That’s certainly something that I try to do in my own leadership style. I spend a lot of time getting out into our facilities and meeting with our teams. I equally spend time out in the marketplace with our customers. I think that openness also is something that allows us to continually take feedback. And then again, go back to the growth behaviors, we reiterate what we’re hearing and what is necessary for the business.

Spencer: I love that. I need a piece of word art that has “Growth Behavior” on it and hang it on my wall because I really like the connotation that comes with those words. I think that’s great. And I think that’s a good note to end on. We’ve covered a lot, and I really enjoyed marrying the ideas of operating and culture. And looking at it from a very technical and operational perspective, but also how those feeds into the culture of Hearthside’s manufacturing. This was a great conversation.

Next week, we’re going to talk about product innovation. I think this is something that is a big differentiator for Hearthside. I’m excited to get your perspective on how product innovation is playing a new role in contract manufacturing.

Nicosia: I look forward to it. It’s been great to talk to you again this week, and I look forward to seeing you next week.

Welcome to Season 9 of the Troubleshooting Innovation podcast. Joanie Spencer, editor-in-chief for Commercial Baking, is spending this season with Darlene Nicosia, CEO of Hearthside Food Solutions. They’re talking about operations, culture and innovation … behind the curtain of co-manufacturing. Sponsored by Reading Bakery Systems.

In the first episode, Spencer and Nicosia walk through Hearthside’s history and explore the career timeline that led Nicosia to the food industry’s largest contract manufacturer.

Learn more about this season here, and listen to Troubleshooting Innovation on Apple, Spotify and Google.

Joanie Spencer: Hi, Darlene. Thanks so much for joining me.

Darlene Nicosia: Joanie, it’s great to be here with you.

Spencer: I am so excited to spend these next five weeks with you and take a deep dive into not only Hearthside, but, more importantly, your role. You play an interesting role in the industry — and with Hearthside —due to your history and philosophies on manufacturing, and contract manufacturing. I am excited to walk this journey and get your take on what innovation looks like through your eyes.

Can you share a brief timeline with me of Hearthside Food Solutions? How did Hearthside go from being the first Wind Point company to being a part of Goldman Sachs?

Nicosia: Well, Joanie, as I said, it’s great to be with you and I look forward to spending the next five weeks together.

As you think about Hearthside and our history, the business was really formed 13 to 14 years ago, in 2009. We started as four bakery plants that the company acquired from Roskam back then. If you think about the growth of the business, while its heart has always been in the baking side of the industry, the company has been through 10 acquisitions in the last 13 years. And it’s been amazing because over these different time periods, the business has bolted on adjacencies to that baking business.

So back in 2013, the company added a packaging capability that’s been significant, especially if you think about where we are today with consumer choice. Everything from single-serve to club packs are so important across many of our customers’ portfolios. But in 2015, we started getting into all types of bars, baked bars, high protein bars, cereal bars, etc. And so, we really bolted on some more acquisitions in 2015, to get into the bar side of the business.

In 2018, an important milestone came together, both Partners Group and Charles Bank came together to acquire Hearthside and create the businesses between Hearthside at the time and Greencore. That really gave us new capabilities in the fresh, refrigerated and frozen side of consumer packaged goods. If you think about that journey that we’ve been on to build the 39 plants in our infrastructure, it’s really been through thoughtful acquisitions and really looking at what categories our customers play in, and how we can best support them to be North America’s largest contract manufacturer of food.

Spencer: I liked that you said, “thoughtful acquisition” because I was thinking of a similar word as you were explaining this. It’s been really cool to watch how Hearthside has matured and entered all these different markets but has done so very intentionally. It wasn’t this Frankenstein operation; you have really splintered out into different markets very thoughtfully.

Nicosia: It is interesting because if you look across our customer spectrum, many of our customers operate in two or more of the categories that we manufacture out of those five key pillars, but you see some customers in three or four of those pillars. So, it’s nice to see that we can offer them both a platform across their businesses, but also as they’re thinking through their own growth and how they want to get into new adjacencies. They already have an existing relationship with us, and we can start to do R&D and innovation for them to get them into those new categories.

Spencer: Okay, so I’m starting my next question with “meanwhile” because as Hearthside was growing and maturing, you were on a path of your own, which is also very interesting. So, while all that was happening, what was happening in your own timeline? How did you get into manufacturing and what was your journey that led you to Hearthside?

Nicosia: I very distinctly remember, when I was in college — I went to Ohio State, Go Buckeyes — I went to hear a speaker from Kimberly Clark talk. She was talking about her career in operations, and the way that she described her work was, “I’m constantly solving problems, but it feels more like I’m really engaged in strategic puzzles.” She described this really interesting side of operations that I now would say is continuous improvement. But this opportunity to constantly look at things and to evolve them intrigued me. In a lot of roles early in your career, you’re solving problems, and I just loved the opportunity that I had from a supply chain standpoint.

I started my first job in the field in a manufacturing environment. I always felt like it was an opportunity to best the prior day and see how many more cases we could get out the door every single day. I love the competitive spirit of it and the opportunity to constantly get better. It was a place for me that I just felt really touched on things that were important to me — This idea of being able to use my mind in a way to be creative and problem-solving, but to also be analytical. The ability to engage with people, so much of what you do in operations is working together in a team-like environment. I have played sports all my life and really love that aspect of coming together with other people to give your best and get a great outcome. For me, it was easy to go through my career, because I was always enjoying what I did. It never really felt like I was working. It felt like I was doing things I was passionate about. I could see improvement and relationships building, and I was able to enjoy it the whole way through it.

Spencer: It is funny because you talk about solving puzzles and being strategic like that. I’m thinking as a journalist, I use a completely different side of my brain. It’s funny to hear you say solving those problems and continuous improvement was so enjoyable for you, because for me, that sounds like a lot of work.

Nicosia: Well, it can be work, but when you find this opportunity to make something better, you start to see things improving and then you have a new idea that can make it even better. There’s no better feeling. Obviously, the opportunity to use that in a business context …  you start delighting the people that you’re working with, the customers you’re serving and then you deliver business results. The opportunity to hit on all those things brings us a huge intrinsic reward. I certainly know that’s what’s fueled me in my past.

Spencer: I like that idea of when done correctly operations can delight your team and delight your customers. That’s a really great way to put it. So then, how did your journey lead you to Hearthside? How did Hearthside get on your radar, because you’ve got big experience with some big brands in food and beverage?

Nicosia: I think there’s this interesting part of my career journey. I spent most of my career in operations in some way, shape or form. I was on account teams for major customers, but when I would work on customer account teams and things like that, although I was interacting with customers, there was always an operational bend to it. Even in my times as a business unit president in really driving the business for Coca-Cola, there was always some element of operations, such as trying to get product to market, how you’re working with retailers, can you find ways to do direct-store delivery differently, or merchandising differently to really help and bring some value to your customers.

As I started going through my own career journey of understanding what I wanted to do next, Hearthside had been on this massive growth path, and they had an opportunity for me to come and lead this great business and really take it from coming right out of the pandemic and into its new phase of growth. I just felt like it was a great opportunity for me to take some of the deep operational experience that I have and help the company grow in new ways with a number of CPG customers. I felt like I had a lot of parallel stories within my past. I was the chief procurement officer for Coca-Cola at one point in time I ran our global supply chain, and there were just a huge number of parallels with how we operated. I just felt like Hearthside was a business that I could bring not only strategic leadership to, but a real operational understanding of the business.

Spencer: Let’s talk about some of those parallels for a second. What was it like going from operations in this huge brand like Coca-Cola to contract manufacturing? Because you essentially went from being the customer to being the vendor, right?

Nicosia: Well, first, maybe I will take a step back. There’s no doubt that after a 30-year career with a company and brand like Coca-Cola, it shaped my leadership style due to the values it stands for and what it was a part of culturally. For me, my career has only been about a number of things. It has been about personal connections, openness and transparency, and quality and trust.

Maybe the most important thing that I took away from my time at Coke, in really reflecting on the brand, was this idea of optimism. You can even think of Coke slogans, “Open happiness.” or “Have a Coke and a smile.” The brand breeds optimism, and I had the benefit of being in that environment for 30 years. Belief is such a powerful thing. I think you can always make a moment better.

As I made a transition to Hearthside, I think the parallels that I carry or the things that I feel lead over into my leadership now, I carry this optimism with me. It’s this continued sense of belief in our teams and our opportunities to continuously improve our business. The opportunity to build even stronger, open, honest and trusting relationships, not only with our employees internally with the company but also from a customer lens and a customer perspective.

To answer the second part of your question, about moving from the customer to the vendor side, I probably sat on both sides of relationships. I was a chief procurement officer, and obviously, I dealt a lot with global suppliers. I was the customer in those circumstances, a lot like I am now with many of our large CPG customers. I worked with the largest suppliers in the world, as well as the smallest ones. I think the most important thing for me that I always tried to impart is those relationships. Coca-Cola had a lot of buying power. You could certainly say that there was an opportunity to squeeze suppliers to a point where maybe they weren’t even profitable. But that will only get you a short period of time of supply or services that you need.

You really need your partners and suppliers to be successful with you. If they’re successful with you, and you’re both able to grow, it frees up money and things to invest in R&D, to invest in the best people to really bring innovation and creative ideas. I carry that with me all the time. I even talk about it in some of the tough conversations with customers and with my own team. I say “Look, we must find ways to build the relationship to build the success together. If this is you take all and we take none, there are other relationships that we can go and invest our time in.” I spend a lot of time thinking about how we win together, and how do I make sure my customers get the absolute best for my team. It allows them to win, and hopefully, we’ll win at the same time.

Spencer: I feel so inspired right now, Darlene. It is one thing to leverage your buying power — and in business that is important — but that was deep to say that only gets you a better price on something. It doesn’t leverage the relationship in the long term. I think that is a key lesson that some learned the hard way, not only during the pandemic but also during supply chain disruption.

Nicosia: That is a good point. I think the relationship between any customer and supplier has evolved since the pandemic. Part of it is because there was scarcity, right? Everybody needed incremental capacity and only a few places had it available at that time. So certainly, the strongest of relationships probably won, big and small. I think people relied on and went back to their best of customers and serviced them well. I think companies did it in their own small ways. They looked at their SKU portfolio, and they said, “These are my most reliable brands or items, and I’m going to keep them on the shelf every single day.”

The things that only a small consumer base really trials or buys infrequently probably got pushed to the end of the queue and didn’t get any shelf space or production time. There are a lot of ways to think about relationships and partnerships. But in the contract manufacturing world, we absolutely value the relationships that we have today. When we’re innovating and looking at the capital we must deploy, we want to do it with our partners.

Spencer: You talked about the optimism that comes with working with the Coca-Cola brand. I’m going to date myself, but hearing you talk about that and then these relationships, all I can see is a bunch of people on top of a mountain, singing I’d like to buy the world a Coke. I think that sentiment from that old ’80s ad really sums up what you’re talking about and the importance of relationships, applying it to your vendor relationships, your team, your operation and how important that is.

Nicosia: You know, Joanie, it’s a great point. It goes a long way to talk about the culture inside of an organization. When you’re winning and feeling like you have great relationships, both internally and externally, it feeds upon itself. There’s a bit of opportunity for it to flow over into everything that you do. I do think that optimism is an important part of leadership, culture and how you deal with your stakeholders. It does allow you to get the best out of all those environments.

Spencer: I agree. I want to go back a little bit and talk about your transition from Coca-Cola to Hearthside. What was it about this opportunity that made you want to engage in it? That is a big jump, to go from one of the world’s biggest brands to North America’s biggest contract manufacturer. At the heart, the operational part is very similar and there are parallels. But when you look at the big picture, it was a leap. What attracted you to come into the world of co-manufacturing?

Nicosia: I think I saw parallels in my own business. As I mentioned, I saw not only Coca-Cola but a lot of other consumer products companies at this point of growth in their own companies, where they were looking to invest more and more in up-and-coming innovative new brands, or they were looking to get closer to consumers with the whole digital movement. A lot of investment was required for CPGs to continue to grow. They had to make choices where they were investing their dollars. I think most CPGs would say that they would prefer to invest their money in either acquiring new brands, building out adjacencies, or creating stronger relationships with their consumers, rather than investing in physical infrastructure. And that’s exactly what Hearthside does. We build physical infrastructure. Infrastructure is a service, if you want to say that, just in the food industry and not the technology industry.

I saw more and more companies making this decision to have strong and reliable outsourced manufacturing partners. It gave us this opportunity to have a strong viable business, where we were able to provide high quality and reliability with innovative flexibility to those opportunities so that our CPGs could go in and invest in their consumer base.

I just saw a significant amount of growth opportunity in this industry. This industry is already very well penetrated in contract manufacturing. If you look across the categories that we operate in, they have been utilizing contract manufacturing for a very long time, the trends just pointed in the right direction for the industry. Then I had the opportunity to look at Hearthside specifically and again, most companies are very narrowly focused on a single category, the fact that we are into pretty much anything snacking made me feel like because of my understanding of CPG, it is a great place for me to lead.

Spencer: We’re going to dive deeper into this as we go along over these five weeks, but I just want to get a flavor for your entry into co-manufacturing and where you are, really, after this first year. What would you say are your biggest learnings over the past year from your transition from Coca-Cola into Hearthside?

Nicosia: I think as a contract manufacturer, you have significantly less control over what you produce and when you produce it. I think the difference in how we plan our production volumes and execute against them is very different. At Coca-Cola, when volumes were soft, we could work with our customers to offer consumer promotions, invest in marketing, etc. There were all kinds of mechanisms that we could control or use to drive consumer demand. We could work with retailers in a different way. And obviously, we could build inventory to smooth out our demand.

I think as a contract manufacturer, some of those levers that you could pull are not necessarily available to you. Your customers more deeply control that, so therefore they’re carrying that flexibility in those decision rights. They can cut back orders or cancel orders with limited notice, but we may have employees and a production line lined up and ready to go.

Once you lose that window of opportunity, you lose it forever. You pay the employees for their time and for showing up. You have that equipment and all the costs associated with it. There’s this very huge dynamic of thinking about how you continually balance the needs of your various customers across all the capital and infrastructure that you have.

When I talked earlier about this idea of problem-solving, putting puzzles together, and the complexity of what we do with so many plants and production lines, that comes even more into play. The ability to understand how to drive in an efficient manner becomes so much more important than in a contract manufacturing environment.

I will tell you that we’re spending a lot of time right now talking with our customers about demand and demand smoothing, and how can we work and be better partners to each other so that we can anticipate what demand is looking like in the future. This way, it helps when scheduling line time and labor and makes sure that it’s efficient for both us and our customers. Because we do want to give them great service, but also take care of our people with consistent work.

Spencer: Yes, and that’s like the ultimate puzzle.

Nicosia: I would tell you data and information also has been helpful. So much more technology is coming forward, that allows you to do S&OP processes in a much more technical way with all kinds of scenario planning and allows us to optimize what we do. But there still is this human element of it, where there’s a lot of scheduling that still happens in a manual way to try and get the most out of our teams.

Spencer: All right, Darlene, that was my last question for this episode. I think we had a really good conversation that lays an awesome foundation for diving into a lot of topics on innovation behind the curtain of co-manufacturing. Thanks so much for this first visit. This was wonderful.

Nicosia: This has been awesome. Thank you. I look forward to being with you next week.

Spencer: Next week, we are going to uncover some of the most critical factors in creating a cohesive operating culture and why that is so important for contract manufacturing. So, I am looking forward to that conversation next week.

Nicosia: Great. Can’t wait to see you then, Joanie.