Many people in rural parts of western NC contact our staff at Blue Ridge Food Ventures to get information about making value-added foods, cosmetics, and natural products. A common issue for potential clients living in rural areas is concern that our facility and services are too far away to make use of efficiently.
Why would you choose to drive an hour and a half or two hours just to access a commercial kitchen? This is a reasonable question worthy of discussion. To come to a useful and accurate answer, several things need to be considered.
- What are you making? In over 15 years of operations, clients have come to Blue Ridge Food Ventures from both far and near. A pickle maker from Durham, a skin cream company from Charlotte, an herbalist from north Georgia, and a hot sauce maker from Boone all decided that a long drive to make product was worth the cost, both in terms of time spent and fees charged to access production space. In all of these cases, the clients were making consumer retail packaged goods that fall under FDA inspection. These types of businesses often learn that the inspection environment, access to specialized equipment, and technical assistance from professional staff all add value to their operations. On the other hand, remote businesses involved in catering have found that our facility is too far away from their customers to be viable. These include businesses preparing hot meals for events, food trucks, and food carts.
The kettle
- What equipment do you need? Some businesses in rural areas have trouble accessing specialized equipment that can help them make their products safely and efficiently. At Blue Ridge Food Ventures you can find a wide range of expensive and specialized food manufacturing equipment, including:
- Automated filling and labeling line
- 80-gallon steam jacketed kettles
- 40-gallon steam kettle for cosmetic production
- Commercial dehydrators
- High-speed combination oven with roll-in racks
- Pneumatic and volumetric hot fillers
- Hot-box for herbal infusions
- High shear mixer capable of blending 30 gallon barrels of products
- Horizontal band sealer for gusseted bags
- Tube filler and sealer (think toothpaste tubes)
While we think these pieces of equipment are great, many new clients are not aware of how using them can speed up production. For example, one of our early clients was making jams and jellies in his home kitchen, at a rate of eightjars every couple of hours. He did not think much of the idea of coming into our kitchens to make something he could do at home. However, once he learned how to use our steam kettles, a piston filler, and a semi-automated label applicator, this client was able to make about 600 jars of jam in a single production day. Once he understood how much time he was saving, he became a dedicated client.
It is not uncommon for clients to make a couple thousand units of hot sauce, mustard, fruit jams, and herbal tinctures in a single production day. One client makes about 2,000 units of his product every six weeks and earns a decent living from only about eight production days per year.
- What are your current costs of production and sales?
Tilt Skillet Range
Successful consumer packaged goods companies must have a good understanding of their per-unit costs of production and sales, also known as cost of goods sold, or COGS.
Important components of COGS are ingredients, packaging, labor needed to make the product, costs of accessing production space, and costs of storage and transportation of goods. Many new businesses overlook or discount the value of the owner’s time in making and selling products. No matter who you are or what you are making, you should place a reasonable value on your time. We recommend at least $15 per hour.Let’s take the real-life example of our client who makes jams and jellies. Before coming to Blue Ridge Food Ventures, he was making about 24 jars a day over a six-hour period. Just considering his time at $15/hour, labor costs of production were $90, or $3.75 per jar. Jars, lids, labels and ingredients were $1 per jar, bringing per-unit COGS to $4.75 per jar. Retailing all of these jars at $8 each, our client was making a “profit” of $3.25 per jar, or $78 for a full day of production. Note this does not include time spent actually selling the jars!After a few days of using Blue Ridge Food Ventures, he was making 600 jars per day. With himself and one employee, labor costs were $240, kitchen rental fees were $248, and miscellaneous hairnet glove fees were $6 for a total expense of $494. On a per-unit basis, the COGS were 82 cents per jar for labor and facility use. Adding another $1 for jars, lids, labels, and ingredients brings COGS up to $1.82 per jar. If our client is traveling from 70 miles away, we would also include his time driving to and from our facility. At a mileage rate of 55 cents per mile and a labor rate of $15/hour, a round trip expense would total $137, or 23 cents per jar made. This brings total COGS up to $2.05 per jar. Retailing all of his production at $8 per jar, our client is making a profit of $5.95 per jar, or $3,570 for the full day’s production. Note this does not include time spent selling the jars.
- What is the bottom-line difference? No matter where you are located or what you are selling, starting or growing a company making and selling consumer retail packaged goods takes a lot of effort. Costs of production determine profit margins, and profit margins determine whether a business succeeds or fails. Before making a decision about driving long distances to access a production facility, take time to analyze the benefits and costs on a per-unit basis. You may be surprised to learn that by traveling to produce your goods in a facility with advanced processing systems and professional technical support, you may actually save time and money and thereby make your business stronger and more profitable.
Bottling line