Private label spice company doesn’t skimp on quality

LAFAYETTE – Variety is the spice of life, but it can also be a key business strategy if it involves diversifying your product offerings.

Kerry Ostholthoff, president and founder of Tundalaya Inc., has realized this from the beginning of her spice business, and is expanding past her signature spice grinders to offer a line of all-natural meat rubs, mulling spices, teas, cocktail mixes and flavored sugars and salts.

The Lafayette-based company is going in two directions – toward expanding its base of private label spice buyers and marketing its own brand of cocktail mixes and flavored sugars.

Private label products are manufactured or provided by one company under another company’s brand. They are the items you see in the grocery store as the store’s own brand – Safeway’s “O” Organics and Wild Oats’ brand are examples. Private label is the crux of Tundalaya’s business.

“The reason why private label is so attractive to a retailer is because their cost is typically lower … there are no marketing costs included in the cost of the item,” Ostholthoff said. “Typically, retailers also make a higher margin on the private label items while at the same time building brand equity.”

Ostholthoff realized the potential of producing high-end, all-natural foods, but instead of joining the natural foods bandwagon and selling under her own brand, she decided to do private label.

She began producing spices for her clients in 2003, and is currently signing up new buyers. She wouldn’t reveal the new names, but said Wegman’s grocery and Harry & David are two of her clients. Most of her sales come from contract manufacturing spices for these companies. She didn’t disclose numbers, but said sales have doubled each year for the past three years.

Her spices are unlike the value-sized containers of powdered garlic one would expect to find under a store’s generic brand. Ostholthoff’s signature product is whole Southeast Asian spices with built-in grinders – like sea salt or tricolor peppercorns.

“There is so much opportunity out there, especially in private label. All the retailers are realizing the potential of private label,” she said.

Tundalaya faces competition from other private label spice manufacturers, such as McCormick’s Gel Spice Co., ACH Food and Magic Seasonings Blends.

Julie Berghoff, national sales manager, thinks Tundalaya is differentiated from the competition because of its ability to customize products for clients.

“There is a difference in working with a small company that works hands-on to create a new product, rather than with a larger company that says ‘Well, here’s what we have – take it or leave it,'” she said.

Though most of Ostholthoff’s sales are from private label manufacturing, she launched a line of cocktail products under the Tundalaya brand in November. The cocktail mixes come in flavors like orange pomegranate, black raspberry and blueberry mojito. The rimming sugars come in lemon, mint and other flavors, and there’s also lime and Bloody Mary salt. All contain no preservatives, additives or colors.

“I think natural and organics is the way the future is going,´ said Kerry Matheren, who does the product development for Tundalaya. “The Tundalaya brand has been really well received.”

The cocktail accoutrements are being sold at What’s Cooking in Lafayette and Capers and Co. in Longmont. Ostholthoff is trying to get them into Peppercorn in Boulder.

She hosts martini parties and home sales.

Having paid off all startup costs, the company is now happily balancing expansion of its contract manufacturing base with development of its own brand.

“There’s a lot of energy and momentum right now,” Berghoff said. “In part because of the new products and our business is catching on. People are now coming to us.”

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