R&D as a core competency

The key to contract manufacturing is in understanding the role of the baker and that of the customer — in that one produces and one markets.

Most companies who turn to co-manufacturers are those that focus on marketing, according to Byron. “A lot of our customers are marketing companies. They’ve got manufacturing capabilities as well, but their mission and core competency is marketing,” he explained. “That allows us to focus on the manufacturing. Global CPG sales and marketing are a totally different, huge, infrastructure. It’s a different bailiwick.”

Considering R&D as one of its core competencies, Oak State prides itself on its ability to not only produce new items from customer specs but also develop products and bring them to the customer. Two R&D specialists, Dave Busken, R&D manager, and Chris Bruch, R&D project lead, invest time and resources in identifying and tracking consumer trends, and then take that knowledge a step further by applying it in new product development.

For example, Mr. Busken has done extensive research on protein, concentrating on various levels and sources of protein — and the same for fiber — in product formulations.

Product innovation is a two-way street for this contract bakery that produces bars, cookies, sandwich cookies and chocolate-enrobed cookies. While Oak State can take on any new product request with exceptional speed to market, it doesn’t sit around waiting for the directive. “When I first started, we were developing our own products. Now, it seems like customers rely on co-­manufacturers for quick innovation,” Mr. Bruch said.

Look at it this way. From Oak State’s perspective, the life cycle of a new product is roughly four to five years with the initial support of line extensions, new flavors, updated packaging, and advertising and promotions. Then the product will generally decline, and the company will need to come up with something new. Depending on the volume of a product, it would typically need to be a large business for a branded company to take it in-house. “It would need to be a pretty successful product in order for them to turn on an oven and never stop it,” Byron observed.

“We’ll bake an innovative product that customers aren’t yet developing and bring it to them. We’ve got traction on innovation, where they’ll springboard their marketing department on those new products,” Byron said. “And when a customer has to reformulate, we know our equipment so well that they’ll bring us something new, and Dave and Chris will get to work on making it manufacturable.”