Area hub of healthy snack, food makers

BOULDER — What do a crunchy bean snack, a fruit and granola bowl and a gluten-free, chocolate-chip cookie all have in common?

They’re all snacks made at food-manufacturing companies in the region and sold at grocery stores across the country.

The crunchy bean snack created by Snack Out Loud Foods is manufactured at Fresca Foods in Louisville and sold in Whole Foods grocery stores, among others, said Liz Myslik, Fresca’s executive vice president of marketing.

Rush Bowls’ fruit and granola bowls are made at Claremont Foods in Niwot. Rush Bowls are sold in select grocery stores and at a retail store on The Hill in Boulder.

The chocolate-chip cookie is made by Boulder Cookie LLC founder Anna Fletcher at The Kitchen Coop in Broomfield.

Fresca and Claremont are two food-manufacturing companies – called contract-packaging or “co-packer” companies – that are helping the industry grow in the region.

Such food-manufacturing companies commonly handle all aspects of food production for food companies, from cooking and packaging to distribution.

The Kitchen Coop offers food-manufacturing space to contract clients, but is not considered a co-packer, said Jeanne Eisenhaure, a spokeswoman for the company.

Representatives from Fresca, Claremont and The Kitchen Coop all declined to give revenue information or financial details about specific contracts with clients.

But all three are busy growing and signing contracts with local and national food companies. For example, Fresca Foods has a licensee contract with General Mills Inc. (NYSE: GIS) in Minneapolis, Minnesota, to make frozen sauces and pastas under the Progresso brand label. At one point, Fresca also made Justin’s LLC nut butters and candy bars. Boulder-based Justin’s merged with a California-based private equity firm in a $47 million transaction in October.

“34 Degrees (crackers) and … others I can’t talk about, create a whole portfolio of brands that we’re very proud to support and grow,” Myslik said. “They’re all creating jobs in Colorado.”

Virtually all products made at area food manufacturers post revenues in the natural and organic foods category. Boulder County is the unofficial hub of the natural and organic food industry, according to many in the industry.

As one financial measure of the natural and organic food industry’s economic impact in the region, companies that belong to the Naturally Boulder trade group have a $303.1 million direct impact on the state economy annually, according to research done by the Leeds School of Business at the University of Colorado-Boulder.

Across the country, the food, beverage and tobacco manufacturing industry grew by a small percentage in the fourth quarter of 2013 compared with previous quarters, according to Food Merchandiser, a trade industry publication. Organic food sales were estimated at $28 billion in 2012, by the U.S. Department of Agriculture.

Claremont’s client companies make gluten-free products, said Alex Cioth, a founder of the company. Gluten, which is found in wheat and some other grains, causes problems for people who have celiac disease, including digestive problems. The gluten-free food category has taken off in recent years as more people report gluten intolerance, or problems digesting foods with gluten in them.

At Claremont, Cioth also has invested in the “bar” business – buying special equipment needed to make extruded energy bars. Extruded energy bars are made when ingredients are pressed through a mold to create a bar of food, usually something that tastes sweet and is made with ingredients considered healthier than a candy bar.

Claremont representatives are negotiating with two energy-bar companies to make bars for them, Cioth said, declining to name the companies or the size of the contracts.

“There’s such a good demand for (energy bars),” Cioth said.
A larger-than-average number of investors looking for new food trends also has helped the regional food manufacturing industry grow in recent years, said John Maggio, a founder of Boulder Canyon Natural Foods, the potato-chip company, and an investor in Snacklemouth, a granola-based snack food.

Founders of the original Wild Oats grocery store — Barney Feinblum and Mark Retzloff — often invest in startup food companies, Maggio said, as do founders of WhiteWave Foods Co. (NYSE: WWAV) in Broomfield, and representatives of Boulder Brands (Nasdaq: BDBD) among others.

“The capital markets are tough. Early stage (capital) has really dried up,” Maggio said. “So in this town, we end up kind of piecing it together.”

Justin’s nut butters and candy bars and Boulder Canyon potato chips have given Boulder a good reputation with food investors around the country, as have Phil’s Fresh Foods LLC burritos (bought by Boulder Brands for $48 million in January) and Izze carbonated fruit drinks (bought by PepsiCo. Inc. in Purchase, New York (NYSE: PEP) in September 2006 for an undisclosed sum), Maggio said.

Fresca has gotten so busy, that the company now focuses on bringing one or two new products to market per year, Myslik said.

“What’s exciting in the industry is the clustering builds upon itself,” Myslik said. “And we have consumers and retailers here who really yearn for these products.”

Fresca’s customers include White Girl Salsa, a Denver-based salsa company that got its start at farmers’ markets in the region, and Open Road Snacks, makers of Rocky Mountain Popcorn, Myslik said.
With so many new food companies opening, The Kitchen Coop in Broomfield wants to fill a niche for clients who might be too small to be able to afford a full-blown food manufacturing company such as Fresca or Claremont, Eisenhaure said. The Kitchen Coop sells itself as a company that can help small but growing food companies streamline their costs and grow bigger quickly, Eisenhaure said.

Boulder Cookie LLC was making about 500 companies per shift, for example, and can now make up to 4,000 cookies per shift, Fletcher said. Fletcher declined to give sales numbers for her Boulder company or discuss how much she pays to The Kitchen Coop to make her cookies.

The Kitchen Coop looks for client companies with annual revenue between $100,000 and $3 million, Eisenhaure said. Companies who sign on with The Kitchen Coop often can produce eight times more quantity in the same time they could using a commercial kitchen, and get more help from company representatives to get federal certifications they may want for products, including gluten-free or kosher certifications, she said.

Costs might be initially higher for companies that sign contracts with The Kitchen Coop, but as companies grow, costs per unit usually go down quickly, Eisenhaure said.

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