Welcome to Season 15 of the Troubleshooting Innovation podcast. Molly Blakeley, founder and CEO of Molly Bz, talks about how she built a nationwide cookie brand from $150 and an InstaPot experiment. Sponsored by CoPack Connect.
In Episode 3, we’re uncovering how contract manufacturing has been the key to Molly Bz’ national growth.
Learn more about this season here, and tune into Troubleshooting Innovation on Apple or Spotify.
Joanie Spencer: In this episode, Molly and I uncover how contract manufacturing has been a key to Molly Bz’ national growth. Molly, welcome back.
Molly Blakeley: Thank you. This has been so fun.
Spencer: Oh my gosh, I’m loving it. I’m loving it. So we have had an incredible conversation, learning about your wild journey, the entrepreneurial spirit like nothing I’ve ever heard, and learning how you developed these very unique flavors. And then we ended last week kind of getting into the co-manufacturing space. And so that’s where we’re going to go a little bit more in depth this week. So let’s start off by talking about just walk me through how you went from making cookies in this small town in Alaska to getting distribution around the country. I mean, it’s hard to do when you’re on the mainland. It’s got to be a huge undertaking from where you’re standing. So how did that work?
Blakeley: Google. You just have to Google everything! I mean, when you’re in Alaska, if you’re gonna fly somewhere, you might as well just make it a monthlong trip, because getting out of Alaska takes three and a half hours, just to get to Seattle. When I’m going to plan on visiting a co-packer, or wherever it’ll be, I’ll try to do as many things during that time as I can so that I can divide and conquer. I’ve been gone for six weeks at a time before because I just fly, fly, fly, fly, fly. You know, Google really was the co-packer help-all for all of it, and then a lot of it is word of mouth. I’m part of some CPG groups that I’ve joined now, who I just learned about a new co-packer yesterday. So that wasn’t on these platforms I’ve been to like, I think there’s one called Keystone and Partner Slade, and all these different ones.
I have co-packers that you can go through, then you have to do your due diligence. And, okay, they’re a bakery. But what do they bake? Do they bake cookies? Okay, but do they top cookies and do they flowwrap? Do they have a vertical flowwrapper or a horizontal flowwrapper? And they do pouches? Will they do a pouch? How many pouches can I do? How many? There’s so many questions. And so when someone says, you know, go find yourself a new co-packer or whatever, that’s gonna take months to find one that’s actually good for the project that you need. So there’s a lot of prayer involved, and lots and lots and lots of conversations.
Spencer: I’ve heard so many times the emerging brands lament that ‘I can’t find a manufacturing solution.’ And when you’re new to the game, it’s, it’s hard enough to get your brand into a store, but it’s exponentially harder to find somebody who can help you make the products. And sometimes that’s a double-edged sword. You land your first huge piece of business and you have no capacity in the shared kitchen where you’re working, so you’ve got to figure out something really fast, and you don’t start out with huge amounts of capital, obviously. And you can’t really do that from Alaska if you’re going to have national distribution. I mean, if it takes three hours just to get to Seattle…
Blakeley: Three and a half hours to get to Seattle, yeah, from Anchorage.
Spencer: How do you even…
Blakeley: How do you even! Yeah. And there’s so much to it too, because once you have a conversation with a co-packer, okay, so they can do it. And you go through, you have to do the NDA, and then you send them the formulas. Sometimes they don’t get back to you for a month after you send the formulas. And so what I started doing is saying, ‘Just give me a price on just this cookie, just one. You don’t need to figure out all the formulas for everything. I just want the price on this one cookie,’ and then I’ll say to this one, ‘Can you do this? If you can, then give me the price on this cookie.’ But there’s so much due diligence you have to do: Can they flowwrap? Can they case pack? Will they put it in a tray? And then, if they do, are they going to charge a kitting fee? Because there’s a kitting fee on top of tolling. So there’s so many attributes that you don’t think about when you’re doing this.
But then the whole other part is capital. For instance, when we went ahead and launched in a major retailer, and so the launch itself was my first launch ever, and it was a nine-pallet, $50,000 deal. So I borrowed money from one of my investors, not knowing that after we did that huge launch, that they were going to reorder the next week before we were paid by them. A lot of people don’t know that you have to pay everything upfront: all the ingredients, all the packaging, all the boxes, and then for them to make it, they want paid upfront. And then some stores, don’t pay you for 120 days, and that they’ll reorder all 120 days. And so you’re just like someone just, please bring me a money fairy today?
And this is something I’ve seen with so many CPG companies that it’s not that they’re not getting the purchase order. It’s that the purchase orders are getting harder and harder to cover because they have the demand but not the funds to do it. And so then you see people like me, the CEO, going and now my new job is no longer trying to make a deal. My new job is finding capital. That is really a thing that happens. And so you really have to have a co-packer that believes in you, that knows that you’re not going to screw them over and then give you a net 30. That’s what you need. That’s my dream relationship, right there.
So then they can make and make and make everything for every reorder that you have. And then when you get paid, then you can start to pay them. And just you’re repurposing the money, because even if you get paid from the first purchase order, that’s just for the first week, that’s not the third, fourth and fifth week that they were doing things. And so you’re not getting to pay any social media marketing. You’re not paying your team, you’re not paying any you’re just paying the co-packer to keep this the wheel attorney, right? It costs a lot of money, and I didn’t know that. Someone told me that to start a brand takes five years, and $8 million is the average. And I’m like, yeah, that’s probably about right. And I didn’t know that when I started. I had no idea. I know this is going to be so fun.
Spencer: Do you think if you had known that, would you have done it?
Blakeley: Yeah, I would have, just because I have the best time. But that’s the flex, is getting someone to back you, and then they let me see your numbers. Okay, well, here’s all my numbers. This is what we’re doing. This is where we’re going. Well, you know, why are you still in the red? Some, you know, when we were back in the red and stuff, and well, because we’re repurposing our money non stop. And to explain that to the investor that was helping us at the time, he said, You’re spending so much money, but you know, you’re not getting paid. And I’m like, well, because when we get paid, we’re putting it back to the co-packer, you know? And so it’s a thing.
Spencer: That’s why landing the really big order could be what puts you out of business, yeah.
Blakeley: Mm, hmm. And it does with some people. It could be murder for some people, and then, But wait, there’s more. So then sometimes there’s, I’m not going to say who, but there’s a specific distributor that we worked with twice now, the first time and the second time. Both times, they feed us so many fees that on $30,000 worth of invoices, I got $25 and then we just did another $8,000 with the invoices the next year, trying to begin with another store that said they worked with them, and they sent me a check for $18 because they’re like, Well, here’s the fee for a new setup fee. This is a fee for the new flavor fee. This is the fee for you being two hours late with your truck, which I don’t drive the truck, you know. And so they fee you all these fees that you don’t even know are going to happen, and then you’re waiting for this check to come in, and it’s 18 bucks, or it’s $25 and they say, Well, when you sign the contract, the fees were on there.
Spencer: How do you navigate that? How do you manage that? You’re in Alaska, and you’ve got these customers that have this huge geographic map, this huge spectrum across the country, and you’re working with how many six, yeah, co-packers. I’m kind of a control freak, and so that gives me a little bit of panic to think, how are you managing all that? And you’re not in the plants. I guess it goes back to the relationship and having a co-packer that you trust.
Blakeley: Oh, I go to the plants before I hire them, I look at the employee morale. That’s important to me, that these people are happy. You will know then kind of what you’re working with. I saw someone that’s like a scout for football players, and they said one time, when I go, I don’t watch the kid play. I watch how they are with their parents and with their coach and with their team. And that’s kind of how I am too. You know, I think it’s really important, because you’re hiring the core of this company to make big things, but if the morale is down, they’re not going to last, and then you’re going to be stuck with this weird situation that you’re gonna have to get out of. So the people seem to be dancing and having a great time on the ones that I go to, but that’s one of the things I look for, obviously, quality control, making sure everyone has a little hair nets on and a little outfit. Some of them make it look like you’re putting on a whole hazmat outfit, but you have to do it in order to have the certain certifications the bunny suit. Yeah, absolutely. And, of course, I always get the hairnet pictures, you know? And, yeah, so that’s something I look for, but I do. I taste the first cookie off the line. Make sure it’s right. Right? Because when I started, I was doing like, 20 pounds of dough. Now, like, minimums are like 35,000 pounds of dough, you know. And so if they’re in the middle of doing, like, say, like a tunnel oven now, where it’s dropping and then going through this big tunnel oven, or whatever, by the time it comes out, you get the first cookie to taste, they’ve already done probably several 100 pounds, right? And so you’re gonna have to throw it all out if it’s not right. And so it’s important to be there.
Spencer: So you do travel a lot.
Blakeley: Listen, I’m always looking for a good time anyway. And so like in Alaska, it’s cold in the winter, so give me a reason to go anywhere.
Spencer: That’s true. That’s so true, I jotted down a note that this feels like internet dating. It’s like dating on steroids.
Blakeley: It is! Trying to find a co-packer.
Spencer: Yeah, you’re putting yourself out there. You’re kind of taking a risk and entering into this relationship that it could go great, but if it’s not good, you want to get out as quickly as possible and say, let’s not; let’s just stop right there.
Blakeley: Do you want to hear two nightmare stories with co-packers? I got some good ones.
Spencer: Yes. Only if we balance it with a good one too!
Blakeley: Oh, I’ve got lots of good ones. These are the two nightmare ones, though. So the first one, we needed a new three PL, which is a warehousing place that’ll drop ship you. And we also wanted to have a place that would do our indulgent cookies at the same time. So we found this company who also had a brand, and they said they would absolutely do all of the stuff that we had to do. And I said the number one thing we need to do, because my shelf life on the indulgent cookies is only four months, but if we freeze them, then we can do up to a year, and so then we can date them when they come out of the freezer, and they do good. And so I said that that’s a requirement. And I said, and right now, in the warehouse, we have stuff is not frozen. They’re like a box warehouse. They don’t have air conditioning, and it was in Texas, and so the cookies were cooking on the shelf. And so our shelf life was just plummeting, and we had to hit minimums with our co-packer for each flavor. So we’d get, like, a whole pallet of one flavor just for our stock, for our e-commerce. And sometimes we wouldn’t sell that whole pallet of just one flavor in time, and then we’d have to throw stuff out and donate it to somewhere. So we found out real quick we needed a freezer. So this guy said, yes, we’ll do it. We’ll stick them in your freezer. Don’t worry about it. And I said, Okay, we’re going to send you 19 pallets of goods. Please get the cookies immediately in your freezers, and then we’ll start working. But we’re going to be getting orders immediately, like off of our e-commerce and stuff. So please, you know, let us know as soon as you get this stuff. Absolutely no problem. They got all 19 pallets and kept them all outside and our cookies cooked in the sun, and we lost about $20,000 worth of stuff.
Spencer: Oh, my God.
Blakeley: We kept contacting them, and they ghosted us. They had all 19 of our pallets of goods, including boxes and deployed and everything. And we had to randomly call a nonprofit to go and pick up the cookies before they were completely done, and they got there, and they wouldn’t release them to the nonprofit. And so then we had to call a trucking company to just go pick up all of the cookies and all of the boxes and everything. And they had to travel. We had to pay an extra, I don’t know, like $5,000 or more, to get them all trucked to another facility all the way across America, those people said, Well, I hope that you can find someone that will lead up to your standards. Wow. What just saying? What doing? What you say you’re gonna do? That was about a $10,000 hit that we were not expecting. We thought they were gonna be this great partner, and they were actually the one that ended up doing some of my flavors on their website that week that they had all of our stuff they like, mirrored my flavors. And, oh, the whole thing was weird. So, you know, that was, that was one weird co-packer situation.
And then the other one was just recently. It was in August 24 we had 180 pallets that we had to do for Costco. Is my first Costco run, and I was super excited about it, and we were there for when they started and everything, and then left. And then they took a picture of all 180 pallets, and said, We’re getting ready to ship these off. And before we do, you have to send us a purchase order for $1 more per bag, or we’re going to hold them. And I said, No, that’s not how this works. Like you already gave us the price. You can’t do that. And they said, Well, these cost us more than we thought that it was going to cost, and therefore we’re raising the price. And I said, Well, you can’t do that like we have an in writing. This is the cost. We quoted Costco on that cost, so the markup is there, so we have a decent margin or whatever, so we’re not doing that. And they said, well, then you’re going to miss your drops with Costco, and we’re not going to deliver. And here I’m in Alaska, and they’re in Atlanta, and so I flew there surprised them. Made them very upset, because I came in unannounced, and I said, we’re going to figure this out, like you can’t hold my 180 pallets. I make me miss this drop. And so after I. They’re like, an hour of them screaming at me, saying they weren’t making any money on my deal or whatever, and me saying, That’s not my problem. Maybe I’ll come halfway with you. I tried to negotiate with them. Finally they said, Fine, we’ll do it, but we’re never doing anything for you again. And I’m like, that’s fine. I get to the airport and they call and they say, We will not release these until you get you agree to this amount. And so I had to, I was forced to do it. It cost me $130,000.
Spencer: Oh, my god.
Blakeley: Yeah, it was completely not expected. So there are things you have to be careful with, and even if you’re on contract and stuff like now, it’s going to cost lawyers, then the stress of that, I mean, so there’s things that people don’t talk about, but then I have amazing partners, like the people that said they would finally try it after I harassed them 1000 times. And my favorite one, probably my favorite, co-packer that we work with. They are in a little tiny town in Washington. They’re the ones that’s 2000 square feet, and they will just do anything. They will absolutely do anything. We’ve gotten to be really good friends, and we have the best time. I love them to pieces. So they’re a great, great partner, and they’ll do anything we can do, up to six pallets, but then they max
out.
Spencer: So hopefully they will grow, and you can grow with them. That would be cool. I know, I told them, ‘You guys need to expand!’
So how does R&D come into play when you’re working with all contract manufacturing in terms of like, ideation and and then testing that scale. How does that all work when you’re working with several different contract manufacturers?
Blakeley: So again, you have to be on site after we figure out the exact recipe. So I start in my I call it a test kitchen at my house. I’m at my house, mixing, mixing all the things. And then I write down, okay, this was this, and this, and this, and now it’s a formula. And the formulas go like 18% chocolate and like 50% flour or whatever it is, those are the formulas. Then I will send those formulas to them, and if I’m not planning on being there, they will make a sample batch and then overnight it to me, and we’ll go back and forth like that, but a lot of times I’ll go there because it’s just easier, and then I’ll say, No, this has got too much of this. This has got too much of this. No, because every single oven, like if it’s a rack oven or a tunnel oven, that changes the chemistry of the baking. For sure. Think about if you’re at home, and when everyone upgraded to a convection oven from their just home oven that change, you know. So it’s that way, just in a grand scale. So there were cookies that would take like nine minutes at my house that cook in like four minutes in the rack of it. So you really have to be there.
There’s food scientists involved, checking the moisture on it, making sure that you’re … like my bacon cookie, I didn’t know at first I was putting too much bacon, and that was like, a USDA thing. You learn, and the way you learn is these co-packers are smart, and they know the rules, and they’ll say, ‘You can’t do that, you need to do this.’ But see, when I get told no, then I’m like, ‘Well, what is legal? What can we do?’ And then I just change the recipe. I’m not going to be like, Oh, that’s a bummer. That would have been great. You know, that’s not how I do things. Like, I just pivot.
Spencer: So do you have, do you have co-packers that you work with to sort of do that trial and error with them? Like, do you have some that you have that relationship where they can say, Okay, if you tweak your formula like this, it’s gonna come out the way you want it to. Or, yeah, you’re not USDA compliant here you need to back off on the bacon.
Blakeley: Yeah, travesty. I know, who does that anyway? But yeah, we absolutely have both. The one that we were at that now is doing their own brand, and so we’re exiting out of them. They were great about letting us come in and fiddle around. Fiddle around. And then also the the one in in Washington. But every time you scale, it’s different. So once we went from the Bobadoodles being done in the Washington co-packer to going to the huge factory in LA they use different things. So like, instead of baking soda, they use this other thing that they use, it works better, and it changed everything about the Bobadoodles, they’re so much better now. And I would have never known about that, but these bigger bakeries, they help you with things like that. So it’s great.
Spencer: That’s awesome. That’s awesome. Okay, so how does packaging come into play? You’ve talked about it a little bit over the past. Few weeks. But how does that factor into your co-man relationship?
Blakeley: Packaging is important. Well, first of all, not all of them have flowwrappers. Some of them only do pouches, and then some of them only do flowwrappers, and they don’t have pouches, and they won’t touch pouches, and some of them don’t have a bag filler, and they will only do it the back filler. Some of them don’t want bag fillers. And the people are the filler, bag fillers, right? So, you know, anyway, it’s, it’s, it’s always surprising to me, because the people, the smaller one, wanted the bag filler, and then the bigger one, so they won’t use a back filler. They use people. So that really shocked me. So if they’re doing 90 pallets with people filling them, and then the other one is doing four pallets with the bag filler. So you just don’t ever know wherever you go. There you are.
Everyone has to kind of their own little niche of what works for them and what doesn’t. But packaging. I take my bag, whatever bag it is, and I usually get a prototype, for those of you that are new into CPG, Sticker Mule now has couches that you can get 10 at a time. And that is so great, because before to get a prototype, it would be like $500 for 10 bags. Now it’s like 40. That’s really handy. So you get one, you take it, and then what I want everyone to do is go to your local store that they’re going to be at and stick it on that shelf, right where you think it’s going to sell, where they’re going to put it and then step back and just look at it doesn’t stand out, not just because it’s your brand and you know it’s there, but like, compared to everybody else, are like, a bunch of white bags there, and yours is also a white bag. Is it going to stand out? What’s going to be different? Is there too much going on on the bag? Anyway?
So that’s what I do. I stick it on the shelf, and I walk backwards, and then I just sit there and look. And sometimes, if I’m already on the shelf, there have been CPG brands, and I’ve done this to go in and just be a pain in the butt and watch what people are buying and then say, why did you pick that brand? Why did you pick that up? What? What about it looks good to you? What made you buy it originally, if you’re buying it again, like, what, why? And talk to the consumer. They know everything. They’re your customer.
Spencer: It’s like guerrilla research! Okay, I’ve got one last question for you on this. When you envision your future, do you think there is a future where you will self manufacture some brands it’s a goal, like they want to get to a point where they can just open up a plant of their own. Cliff bar went that way that they used to rely on CO mans, and eight or 10 years ago, they designed and built their first manufacturing facility. So some brands want that. Others say, hey, if it’s not broke, I’m not fixing it this. We’ve got a great relationship. It works. This is how we’re going to do it. Like, what do you envision for Molly Bz?
Blakeley: Well, two things here come into play. First thing is, I plan to exit in 2027 and that has been the plan from the very beginning. So I want to be either acquired or sold in 2027 so if I started a facility now, it would be a lot of overhead and a lot of margins and a lot of pain in the butt, and then finding the location and all those things and possibly moving, because shipping anything from Alaska to anywhere is ridiculous, right? But the other thing is, is when I had the bar and lodge and restaurant, I at one point, I had over 50 employees, and during that time, the amount of stress was unsurpassable, like it takes a special person to have that many employees, so I really appreciate not getting the call that they can’t come in for one reason or the other. That side of it is really, really hard. The overhead is a lot. Then, you know, if a machine breaks down, there’s all those things that I don’t ever get a call if someone’s babysitter didn’t show up for their kids, so they can’t come to work like I never get that phone call.
Spencer: Right, or get a phone call at five in the morning that the machine’s not working.
Blakeley: I don’t ever have to worry about those things. And so to me, it’s worth it to pay a dime more, a cookie to not have to worry about all of that.
Spencer: That’s fair. That is fair. And like I said, some have one goal and others have another goal.
Blakeley: Yeah, to each of their own. And none of them are wrong, and none of them are bad. It’s just … which way do we want to go?
Spencer: Right, right. Okay, well, that’s gonna do it for this week Molly. Next week, we’re gonna talk about, I call it modern maturity. It’s mentoring and leadership.
Blakeley: Oh, good. I love that.
Spencer: So yeah. So we’ll get into that next week, a little bit of a shift from the manufacturing side, but also, I think it’s something that’s really important to you and the success of this brand, so that’s what we’re going to get into next week. So for this week, I stay. Thank you, Molly.
Blakeley: Thanks so much! It’s been awesome, as usual.
