Welcome to the third season of the Troubleshooting Innovation podcast. Josh Allen, award-winning artisan baker and founder of Companion Baking in St. Louis, is redefining ways to think about artisan bread production. In this episode, he tells the story of his team’s trash journey — which led him to be named as a Sustainability Hero by the Tiptree World Bread Awards last year — and how other companies can make sustainability work for their bottom line.

Listen to Troubleshooting Innovation on Apple, Spotify or Google. Hosted by Joanie Spencer, Commercial Baking editor-in-chief. Sponsored by AB Mauri North America.

Joanie Spencer: I’m really excited about this particular episode, because it is such a cool story and I think it looks at sustainability in a very different way than bakers may be used to looking at it. So not long after we met, I got a press release that you were named the Tiptree World Bread Awards’ Sustainability Hero. Now, some heroes are born, and others are made. Would you say you set out to become a beacon for sustainability practices? Or did it look a little different?

Josh Allen: It definitely looked a little different for us. I absolutely did not set out to be a beacon for sustainability. I mean, we were thrilled about the award— my team was incredibly proud of it, and I’m incredibly proud of it — but I still don’t think that we’re beacons for sustainability. But I think where we’ve gotten to has been super interesting and has been very beneficial for our organization in a lot of different ways.

Spencer: So I’ve talked to a lot of bakers who hesitate to create sustainability programs because it’s really hard to make a business case for it. Sometimes it requires a financial investment, and they’re looking at ROI through a very specific lens. But for you, the path was a little different. So I really want to learn how the business need came first. Can you start at the very beginning with how the business came before the sustainability and the benefit that you reaped from that?

Allen: Absolutely. That’s the basis of the whole thing. So [the company was] about 22 years old, I guess, we’d been baking in South St. Louis for 20 years, had dabbled a little bit in some frozen manufacturing. But for the most part, we were a fresh daily local bakery. And as a business owner, and as somebody who cares deeply about the professional and personal development opportunities for my team, in this particular market (St. Louis) — which isn’t growing and doesn’t do a great job of attracting business travel and convention business — the opportunity for us to grow the business and keep expanding was to do some things regionally and potentially nationally. Obviously, freezing plays a role in our ability to distribute our products outside of St. Louis. So in 2014, we found a building. We spent about a year retrofitting it and moved into a new facility in the end of 2015, in order to expand the business and grow into frozen manufacturing. That was sort of the direction that we were headed. What we absolutely failed to do was anticipate or appreciate the challenges of scaling up in the business. And as much as I probably wouldn’t have admitted it then, we completely dropped the ball on a million fronts. We went from about 15,000 square feet to 42,000 square feet we now were responsible for. We were leasing space actually from my family and a larger operation. They had since sold that business, but we still had a great relationship with the folks that had bought it and they were doing our shipping and receiving, or they were managing the dock, they were loading trucks. They were doing things for us that we didn’t really appreciate how much was getting done or taking care of, and even the facility upkeep, they were responsible for the outside of the building because we were just leasing space within it. So it all overwhelmed us, candidly, and we pushed all of our chips into the center of the table as a relatively small business in order to make the investment for the new business. And we just got completely overwhelmed.

The bank was somewhat patient with us for a couple of years. But the bank called me in 2017 and said, “Okay, we better talk about this now because we’re not generating any cash and things aren’t looking in a particularly good direction. It’s time to have a sit down.” And we had never had to do that, you know, we had grown the business pretty consistently for 20+ years and with the generated cash, we were able to pay for investments if we needed them in our old facility. We hadn’t really made that big leap that we made in 2015. So in preparation for the meeting, I just tried to gather my senses about me and figure out kind of where we were and what was going wrong, or what I thought was going wrong. But we still just felt like we were constantly plugging holes in a dam.

As part of it, when we had made the transition — again, because they used to take care of everything and we used to just pay, I don’t know, $600 a month for trash — we never really paid any attention to waste. You know, we threw stuff away in the dumpster, they called when it got filled, and it went away and it came back empty. We never worried about it. And now we were responsible for trash.

So we contracted with the waste management company. They installed the compactor, they picked it up, and then they would send me a bill every month: Here’s the compactor fee, here’s the hauling fee and here’s how many pounds of trash you dumped. I never paid much attention to it for the first couple of years. Again, I didn’t have any context in which to look at the numbers, so I wasn’t paying attention. Well, I just thought that, ‘look, I love to chart things. I like to look at things sometimes unconventionally, so let me put a chart together of what our trash has been. Maybe I’ll learn something as I was gathering all this data.’ I charted these numbers, and I realized that we were generating like 1.6 million lbs. of trash per year.

Spencer: Oh, my God.

Allen: And it just kind of floored me. I mean, we were making about 10 million lbs. of bread then. So it was a number that was just astronomical to me, like it embarrassed me more than anything else.

I’ve always had a good relationship with the bank. So we sort of sat down at this meeting and went through a couple of slides about how poor our gross margin was, and how overwhelmed we were, and then I threw this trash number up. I said, “Look, I think this is the answer. Like I am incredibly embarrassed by this number. I’m not sure, but I think it impacts everything to a much greater degree than I realize. And I don’t think we have the bandwidth to do much more than like really go after one metric right now, because we’re still kind of overwhelmed.” We were still growing, but training new people and it was all this new equipment and just weren’t doing very well. I [asked the bank] to give me a little bit of time to just attack this number. And I think I can solve the financial metrics if we can fix the trash.

So it had zero to do with the idea of being sustainable. We never use the word sustainability. The idea was, let’s fix the trash, because this is embarrassing, and it’s got to be killing us. And we sort of started this three-year journey, where every decision that we made related to trash generation. I said, “Let’s throw everything out. We still gotta make bread for our customers, we still got to do what we’re doing, but let’s make decisions about what equipment to invest in, what process to change and not change, and everything else… just look at it from the standpoint of waste reduction.” Needless to say, this three-year journey led to over 1 million lbs. a year in trash reduction.

Spencer: Wow.

Allen: It’s sort of fixed all the metrics. In the end, that just makes sense. In going after it, we realized that it was fixing metrics that we didn’t really anticipate — yes, of course, your ingredient costs go down when you generate less trash, and yes, the labor costs go down — but we significantly increased our capacity, too. It’s because we were mixing so much more dough than we needed, because of the trim generated by machines or by mistakes or by rushing or whatever it was. So all of a sudden, if you only have to mix five mixes instead of six, you’re increasing your capacity by 18-20%. All of a sudden, all these different metrics started changing and working themselves out. And it was completely, only about the business case. You mentioned that normally it’s hard to make the business case, but that’s the only reason that we did it… and it dramatically improved everything: multiple points of gross margin, multiple points of operating income. This was all it really culminated, and things were going really well obviously heading into the pandemic. We’ve taken some steps back as it relates to profitability, certainly, but the trash journey has continued. And we’re doing better. We created a metric for ourselves that we refer to as trash efficiency. Between safety and trash efficiency, those are the two things that we’re really focused on here. Trash efficiency is sales divided by pounds of trash generated, and we’ve more than doubled that number. So that number was $5.70 in sales per pound of trash when we started the journey, and we just hit almost $13 in sales per pound of trash. That’s had this huge positive impact on the business, and in the end, it’s led to some other great conversations about sustainability, zero trash for landfill and new goals that we’re now generating.

But honestly, none of that stuff was on the table when we started. It was about how the bank breathing is down our neck — as they should be, candidly — and we’ve got to fix this problem quickly. So we just we went after the trash, and it had a huge positive impact and continues to have a huge positive impact on the organization.

Spencer: Josh, I have a journalism degree, so I’m not as good with charts as you are. And you talked about how much trash you are generating, and that you reduced it by more than 1 million lbs. What is the percentage in that three-year journey? What’s the percentage of the waste reduction?

Allen: Well, from an overall trash perspective, it’s somewhere in the neighborhood of 60%. I believe we’re at like 76% diversion from landfill, from where we were, which we’re excited about because what grew out of it was obviously a much more aggressive recycling program. Also a composting program that we were so overwhelmed with when we moved in, that we didn’t really get started with, so all of that 1.6 million lbs. in that first couple of years was going straight to landfill.

What we’ve done in the process of reducing is also figuring out a lot of different ways in which to divert. So our goal now is to get to zero trash for landfill by the end of 2024. I mean, we’re hoping to do it sooner, but you know, that would encompass composting almost everything that we can, recycling what we can, and we’ll still obviously have potentially a little bit of trash, but really looking at it from a much more sustainable standpoint. Obviously the best thing that we can do, and the most important thing, is to not produce the trash or the waste in the first place. So diversion is great, but the real savings comes from not even generating it in the first place.

Spencer: How do you get the companions on board to champion this? Because it can’t just come from you, you crunch the numbers, you see the problem, and you identify a way that you can fix this. But how do you get everyone in the bakery excited about this, to think about it first to not generate trash?

Allen: I’m gonna use the term “easy.” Maybe it’s not the right term. But it’s a little bit easier when you’re talking about trash, because we have folks that come to work every day and want to do a great job. I believe that’s the case with almost all bakers, all employees in every situation. I believe in my heart that people want to come and do good work. And there was nothing worse than coming and doing good work and then throwing it away that for some reason it was out of spec, underweight, overweight, underbaked, overbaked, whatever would happen… and that product would end up going into the trash. That doesn’t feel good, right? There’s an inherent lack of pride that comes with that. What I love about the business is that we take something from nothing every day, and we create a product that customers want. And what we were doing in our new factory was creating a whole bunch of stuff that nobody wanted, and that we had to throw away for any variety of reasons. So when we started talking about it in terms of, “let’s stop doing that, like that doesn’t feel good,” then all these different ideas started generating themselves. And I think everybody contributed.

What’s also been exciting is that we were able to go to manufacturers and have the same conversation: “Here’s what’s happening with your equipment. Here’s the challenge that we’re facing with your equipment. Help us figure out a way to solve this problem.” As we started to go through this journey, we recognize that what we were doing was sacrificing waste for speed. When we first moved in, we always thought speed was the most important thing: How fast can we process dough? When you run things three across, you have to trim the outside pieces so that all three have equal weights as they’re coming down. That created a lot of trim. What we were finding is that we would be running upwards of maybe 8-12% trim on some doughs, right? We weren’t big enough and we had allergen issues or different issues and the way our manufacturing worked in our process, we couldn’t just reincorporate that trim back into the dough. It wouldn’t produce the same quality that we were looking for. We didn’t necessarily mix those things enough that we could take them back to the mixer, we weren’t able to necessarily recapture the trim back into the same product again because we weren’t producing it regularly enough, or whatever happens. So a lot of our waste was trim. When we went back to them and had that conversation, they said, “Look, the larger line runs at a faster speed, but you would run two up instead of three up. And with two up, you have no trim.”

So when we started looking at the piece of equipment from a waste reduction standpoint and not a speed standpoint, we realized that it would cash flow itself right out of the gate. The trim has an expense, but so does the mixing, because if it takes us 25-30 minutes per mix all in, you’ve got the labor cost with the mix. And because with 12% trim, if every six mixes you have to do another mix to get the same yield, you know, you could get more yield and less mixes. So when we started doing the math, recognizing our volume, our size and kind of where we were, we recognize that the machine would pay for itself. That particular investment, which we made at the end of 2019, was a huge component of this whole thing. So we originally were running products with 8-15% trim, depending on what the product was, and when we went to zero, that had a huge impact on our trash. It also made better quality product. It did some other things that we knew it was going to do, but we couldn’t pull the trigger on it or we didn’t appreciate it until we started recognizing the real savings that would take place. If we hadn’t have gone through this kind of trash narrative internally, I don’t think we ever would have looked at the math that way.

So just increasing the speed, we weren’t really big enough to afford it if it didn’t include the savings. The way we were looking at it before, it was hard to pull the trigger. But when we started looking at it in the new sense, and what the trash was costing us to do the hauling and just everything involved with receiving more goods into the building and the handling of ingredients and all of that, when a percentage of those things were going out into the trash, when you reduce all of that, the savings became dramatic. That particular line essentially paid for itself on day one. And it completely changed the way we looked at a lot of different things. That’s been the biggest one from an equipment standpoint. At the same time, we’ve been able to do that with other things, whether it’s different ways in which we handle pre-ferments, recapturing some flour at the dusting stations, all kinds of different little decisions. It’s a series of incremental small decisions that have made most of the savings. But the big savings came from that change in that particular line.

Spencer: I think it’s one of the biggest lessons that is often learned in commercial bakery production: Speed isn’t always about going faster. There are so many drawbacks to just going faster. If you just take a moment and look at the efficiency and shift your thinking, you could find so many more benefits. I feel like that’s what happened with you in this journey of fixing the trash. You discovered a lot of efficiencies.

Allen: Oh, no question about it. Another thing that made a huge impact when you talk about speed is dough checks at various spots. So we never really had an official dough check coming out of the mixer, for instance. A mixer would do it. They would sort of check their own doughs and then they would push it through the fermentation process. And in doing this, we recognized there were inherent problems downstream because of that lack of checks. So we instituted a supervisor dough check at every mix. Is the temperature right? Is the development right? Everybody crossed out every ingredient, and it dramatically improved quality of the products and rework and all of these things by slowing down the process. Because it takes time, like if you have a dough check and the supervisor is not standing next to you, it could be five or six minutes before that can take place. But slowing that down has had a hugely positive impact. The quality improved to the mixes because you knew somebody was going to come check it. But at the same time, we also got a second pair of eyes on a dough to make sure that it was right or if it was at the high end. So let’s say a dough has a 74 to 78 degree tolerance level, like we’ll send the dough downstream if we’re in that rage, but 78 ferments differently than 74. And so at least by having the information, we can pass that on to folks in make-up and let them know, “Hey, this dough might run a little faster, or here’s what you should be anticipating, because here’s what we saw at the mixer.”

It opened up this level of conversation that we didn’t have before, especially in an industry where if you have a 2- or 3-hour primary fermentation, sometimes the mixer has gone home before the dough even makes it to make-up. So when you see something different, you don’t have anybody to ask, right? Because they’re gone for the day. And there’s somebody and they’re like, “I don’t know, I wasn’t here when that dough mixed.” So that communication level has had a huge impact, but it slowed the process down. But you’re absolutely right. Slowing down to speed up makes all the sense in the world. It just was so against what we thought we were supposed to do. And again, the trash thing has really changed our approach to that in a very, very beneficial way.

Spencer: I would say the assumption about speeding up to go faster is pretty typical. But the way that you got to the conclusion through waste reduction strategies, I think, is atypical. I think it’s really interesting. So let’s get back to all of this waste reduction journey. It led you to this Sustainability Hero Award, which you never set out to do. So what was your reaction when you were told you were going to be named a sustainability hero?

Allen: Look, I was thrilled. And I was thrilled mainly for our team, because they’ve worked so hard on this whole trash journey. I mentioned to you that I was invited to do a TED Talk recently in St. Louis about the trash journey, which kind of surprised me. But I think it’s a great story to tell. And in the end, looking back on it — and you know, 1 million lbs. of trash reduction is a really cool number — we’re thrilled that that’s sort of what has what has come out of it. And I think moving forward, now sustainability becomes a big part of the value that we set forth. We certainly don’t want to go back to this waste-creating organization that we were a handful of years ago. So how do we keep from doing that so it stays top of mind? It’s still a big part of our decision-making process, which is pretty cool, but it certainly wasn’t expected. And candidly, as we mentioned at the top, it certainly wasn’t the goal. And we never used the term “sustainability.” Anywhere in this whole thing, I really felt like folks could understand and appreciate that we just got to throw less stuff away. Like let’s stop creating all this trash. If you were doing this at your house, what would you do differently? Because it’s embarrassing, you know, and everybody has gotten on board because it just feels good. Creating sustainable businesses feels good for people. Maybe that in itself is enough of the business plan that it needs to be, because in the end, if we can get investment from our whole team into finding ways to improve, you can’t ask for any more than that.

Spencer: Yeah, I mean, it is just such a good case study and making sustainability an inherent part of the business plan.

Allen: Yeah, absolutely. And I don’t know necessarily how to articulate it any more than saying, “Look, part of your focus ought to be from a business case standpoint, reducing trash reducing waste, and making sure that you don’t create any more than you have to in your process.” I’m frustrated to think because of the 20-year history that we had in the other facility where we weren’t paying any attention to it, because we didn’t have to, that we could have done more than. Obviously I can’t fix that, but certainly moving forward and as I talk to other bakers, you got to make it a function of the whole thing. Trash costs a lot of money. I mean, we went from spending $8,000 to $9,000 a month in waste removal down to $2,000 a month. That’s an awful lot of money just in and of itself, just in spending less in trash. But then the impact that it’s had, and the ripple effect that it’s had through the organization, has been really phenomenal.

Spencer: Well, I think a hidden lesson here. I think you hit the nail on the head, you weren’t looking at it in the old facility. You didn’t look at it simply because you didn’t have to. I would say that’s an invitation for other bakers to lift up those rocks they didn’t think they needed to look underneath.

Allen: Whatever way you can measure it, right. Like we happen to be lucky here in the sense that our folks were weighing it and sending us a report every month. So now we get a report from our composting company: This is how many pounds we picked up from you and from our waste management company. So we know every month how many pounds we’re generating. But you can put a tick mark next to the dumpster every time you walk out with it with a trash can to see how many times are you going out to the dumpster, or take a picture of it and then take a picture of it every Monday to see how full it is, and come up with some kind of measurement. But you got to know where you are to figure out how to reduce it. There are definitely ways to measure even if you’re not getting those waste reports. Then you just figure out how to go after it. What could we do differently to generate less trash? And I will tell you, as someone who’s gone through the journey, that it will have a huge impact on way more than just how much stuff is in there. And then it becomes hugely valuable. It’s a great conversation to have and it’s easy to have with your folks. Because everybody wants that to be successful.

Spencer: Well, I think that is a perfect note to end on. I just love this journey. It’s such an interesting story, such an important lesson and a well-deserved award. I think you are a hero, and you may not have intended to be, but I think you are a beacon for sustainability practices.

Allen: Well, thank you for saying that. I don’t know that I feel that way, but thank you very much for saying it.

Spencer: So Josh, next week, we’re going to take the next step in this conversation and talk about some other unconventional metrics that you use in your production to identify and baseline efficiencies. So I’m really looking forward to next week’s conversation as well.

Allen: Terrific. I’m looking forward to it too. Thanks again for having me on.