2014 R&D Team of the Year: Hearthside Foods

June 10, 2014
'America's Bakery' is quite likely one of your partners.

"America's Bakery" sounds like a lofty claim. But at $1.1 billion in annual sales, almost none of it the company's own brands, Hearthside Food Solutions may have a legitimate claim to that title.

"The R&D/innovation process for a contract manufacturer, or at least for Hearthside, is different than that of a branded food company," says Bob Scalia, who oversees product development as well as many other functions as senior vice president of strategy for Hearthside (www.hearthsidefoods.com). "We're working with the R&D teams of many significant branded food processors in America."

With corporate headquarters is in Downers Grove, Ill., Hearthside Food Solutions has 20 production facilities in eight states across the country, making for more than 3 million sq. ft. of production space.

The company formerly dispersed its unique form of product development across several of those sites, but that function recently was consolidated in McComb, Ohio. A new R&D lab was added to the company's 36,000-sq.-ft. scale-up and pilot facility, which itself is adjacent to a 1 million-sq.-ft. plant, Hearthside's largest.

Packaging and equipment innovation is no small part of Hearthside's brand of R&D, with that center in Des Plaines, Ill. All in all, Hearthside has 64 people on its innovation team, including food scientists handling the formulation and prototyping plus specialists in processing, equipment design and packaging.

That all hints at Hearthside's philosophy for product development. A new product may start as a concept and a marketing plan – neither of which Hearthside gets involved in – but it quickly progresses to a formulation, a manufacturing process, a package and associated business processes; all of which can utilize Hearthside's expertise and resources. All of those are interdependent steps and all of them impact cost, quality and time to market.

"We want to free up our customers to do what they do best: consumer research, marketing and brand management," says Scalia. Perhaps Hearthside's biggest asset and value-add, he says, is shortening time to market.

Hearthside was formed from a collection of formerly independent, regional bakeries, which were bought in 2009-2011by Wind Point Partners. A 2013 acquisition brought it Ryt-way Industries, one of the nation’s largest contract packagers, with eight additional facilities. This acquisition broadened Hearthside’s manufacturing capabilities, and brought packaging and product innovation capabilities together under one corporate umbrella.

Hearthside's strengths are in bars, cookies and crackers, snacks and components, and granola and cereal. While known for operating the nation’s largest network of independent ovens, Hearthside’s processing capabilities include extruding, frying, grinding, popping, roasting, seasoning and slabbing. The company has produced skillet meals, rice products and pet treats.
More than 98 percent of the company's sales are contract manufacturing, with just a small fraction of legacy private label.

As a result of that level of custom work, "In the past three years we've commercialized well over 1,000 new products," Scalia says.

"The serial path from concept to shelf is a core competency that all branded food companies must solve for. All of the world’s premier food companies do this very well," he continues.

"These processes are outside the purview of the traditional contract manufacturer. Hearthside believes that by investing heavily in co-innovation with customers at multiple points in the development cycle, we can lower their cost of product development, speed time-to-market and help produce superior outcomes."

Hearthside likes to call its system "multidimensional innovation." Product development for this company means development of product, processes, business processes, commercialization, packaging, information and financial – and, as much as possible, doing those simultaneously.

The ideal scenario involves "a customer coming to us with deep consumer insight and various product concepts," says Mark Lindsley, who, as director of product development, leads Hearthside’s R&D efforts. "We'll develop a couple of 'protocepts' to bring back, and we'll go back and forth with their management, marketing and R&D people. Then we'll go back to the lab and refine them. But we'll also start working on what equipment and packaging would be needed and how fast we can get this product to the market."

Hearthside uses what it calls “spend-to-market” to highlight these costs. “Loosely translated, this is an early estimate of the product cost, capital cost and resources required to bring a concept to market," says Lindsley. "This approach helps our customers balance innovation with investment.

“By collaborating, our customer’s R&D teams can leverage Hearthside’s resources to increase the number of projects on their plate. We in turn leverage the R&D resources at our suppliers,” says Lindsley. “The net effect is an exponential increase in resources. This translates to speed.”

This is not a contract R&D company, though; implicit in this process is that Hearthside's factories will manufacture the ultimate product.

That's a typical scenario, although Hearthside has developed spinoff products for customers and even has pitched some products that its own R&D team has conceptualized.

"There's probably nothing we do that our customers cannot do for themselves," Scalia adds. "But we can do it faster, cheaper, rounding out their gaps or just let them better use their assets."

With the current debate leaning toward an eventual ban on partially hydrogenated oils, a key element of many baked products, Hearthside's R&D team has become expert at finding solutions and substitutions and can recommend them to customers.

But it's difficult to show pictures of their successes. "For example, our test kitchens just delivered 14 product concepts to a leading customer’s new product group," said Lindsley. "All were well received, and we expect several to be green lighted for further development. The problem, of course, is we can't talk about it."

Adds Scalia, “We don’t mind this anonymity. In fact, we revel in helping our customers be successful. Our true reward is customer loyalty and the growth of our manufacturing business.”

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