Articles
Unpacking Houston food and beverage manufacturing with Consolidated Mills
Co-manufacturers are the unheralded catalysts for America’s food and beverage ecosystem, led by entrepreneurs like Scott and Keith Vrana
By Bart Taylor, GHMA
Scott and Keith Vrana acquired Consolidated Mills in the early 2000’s, the fourth owners of the venerable food manufacturer – and an entrepreneurial leap for the brothers, both of whom had ties to the industry.
“My brother was working for a rigid-container packaging distributor, and was a vendor for the company, selling the owner a few things here and there. Not much, but enough to develop a good relationship to where he let Scott know that he really didn’t have a succession plan,” Keith Vrana told me recently in a GHMA interview. “I was working for a different food manufacturer at the time as a regional sales manager for the Sugar Foods Corporation. We were known for selling the SweetN’Low brand in the food service world. I had a 13-state territory managing a broker network and calling on the major food service distributors such as Sysco, US Foodservice, and Ben E. Keith,” Vrana says. “When my brother told me about the opportunity to acquire the business, I said, ‘well, let's take a look.’ So as a family, we decided to take a leap and get into the entrepreneurial space.”
The Vrana’s jumped into a national industry that at the time, was still in the early stages of a profound transformation to more decentralized, locally-influenced food ecosystems fueled by new ideas and people and processes where co-manufacturing, or co-packing, was poised to play a key role. But in the middle of it, that was not quite evident.
“The business was not devoid of problems, I can tell you that,” Vrana laughs. “But at the time, the company was doing about $4.5 million in sales. And half of that – really more than half – was distributing canned jalapeno peppers. We were the first company, I believe, in Texas to bring in canned jalapeno peppers out of Mexico. We were the first company and one of our biggest clients back then was Whataburger. We supplied Whataburger with all their canned jalapeno peppers,” Vrana recalls.
“And at the time, it was a good piece of business. But as time rolls on, it turns into more of a commodity business. And you're really expending a lot of capital to buy truckloads of this product. And it became something, you know, that just wasn't a fit for what we wanted, so we started to exit out of that business and turn everything we did toward manufacturing,” Vrana says.
“At that point, we were only doing some repacking of spices, some blending, not much. We were doing a little bit of syrups – snow cone syrups – all by hand, nothing was automated. So we made a point to start looking at different capabilities. We brought in a (similar) process food line for salsa-sauce filling, with steam-jacketed kettles and so forth, and learned how to get into that space,” Vrana recounts. “But here we are. After all that, we are out of the jalapeno pepper business and we're now concentrating on total manufacturing with our sales doubling over the last several years since that decision”.
I hear industry voices so often sing the virtues of “advanced manufacturing” without once referencing food manufacturing, as if the only companies that aspire to be more automated operators are high-profile aerospace, or bioscience, or electronics manufacturers. The fact is that some of the most automated operators are in F&B – outcomes that as consumers we see every day.
Moreover, food and beverage manufacturing is a juggernaut, enjoying sustained employment growth where other sectors are struggling. Food manufacturing is a model: employment is growing even as technology-adoption overtakes the sector. Win-win.
For Houston, and other outposts, the challenge now is how to capture a larger share of a growing market. Neighboring Austin and San Antonio are home to dynamic craft food-and-beverage ecosystems – so important today in developing a local F&B “brand” that attracts innovative companies and people. I asked Vrana about the “demand” side of Houston’s food community – and its food brand – aside from its reputation for being a good restaurant town.
Vrana was tracking. “I believe at one point, more people went out to eat in Houston, per capita, than anywhere in the United States, so yes, the reputation is well-earned,” he says.
“Demand for our services is high,” he continued. “We do get phone calls all the time; our challenge is sorting through the inquiries to find the right fit. We of course have them complete a contract packaging form as an initial filter and I’ll take it to the next level with a phone call. Often it’s a situation where they’re in another co-packing situation that’s not working out. Or, and this happens a lot, it’s a situation where their idea or product is not quite ready, for us,” he says.
In fact, co-manufacturers like Consolidated Mills are today the front lines in the food-innovation game – and play an invaluable service in helping idea-people assess whether their product or business model is ready for “prime time.” So much so that it can be hard for start-up brands to find right-sized co-manufacturing: too many ideas, too few co-mans willing to take on the expense and risk associated with “breakthrough” ideas.
And today, regions also specialize in particular product types. Colorado is home to a vibrant sector of co-mans that specialize in natural and organic foods; energy bars, gluten-free products, cereals and granolas, etc. I asked Vrana about Houston’s product tilt.
“Barbecue is still king, right? You still have a lot of people building their own brands, whether they're pit-makers or pit-masters and all that goes with that, like cooking shows. I still see a lot of capacity there, companies coming to us to say, ‘hey, look, I've got my own this and that, I've got a marketing team that I'm doing XYZ with, and I need somebody to co-pack this.’ Okay. Not a problem. And we certainly have the line to do it. We have a high-speed line, and we can handle that.”
South Texas is also a spirits mecca – and more. The Texas craft beverage ecosystem exploded onto the national scene the past decade, notably in Greater Austin, where brands like Real Ale Brewing, Celis Brewing, Deep Eddy, and of course Tito’s Handmade Vodka gained regional and national prominence – alongside Houston stalwarts like Saint Arnold Brewing and Karbach Brewing Company.
But a national beer and spirits recession has rocked the industry, forcing beverage brands to remodel operations to include, interesting enough, co-manufacturing. Vrana’s Consolidated Mills is unique in that production lines include both dry and wet-fill capabilities, which puts beverage co-manufacturing in play. I asked Vrana about the opportunity.
“When you're talking about beer and alcohol sales, yes, we know it's declining. That said, we won’t ever do alcohol here – the regulatory hurdle is high – but on the other side, the alcohol guys can't necessarily do a food-based product, either. They have to be specialized, as we are, and it's a whole other issue with the FDA and the Texas Department of Health and so forth.”
Yet the trend is for alcohol brands to diversify into non-alcoholic products. I see it all across the west – beer and spirits brands developing seltzers, hop-waters, and other NA beverages that tap changing demand but more, fill empty tanks and keep production lines running – often for new co-manufacturing clients. It’s certainly not lost on Vrana.
“I do see the opportunity of doing more non-alcoholic products, not mixers per se, but maybe a non-alcoholic bourbon or something that’s appealing to this new generation of drinkers, something that looks good and drinks more like an adult beverage,” Vrana says.
I wrapped up the interview by mentioning how important it is to shine a light on all facets of Houston’s manufacturing ecosystem – not just the nation-leading fabricated metal products or machinery manufacturers that call the Gulf home – but co-manufacturers like Consolidated Mills. Vrana made sure to add an important point.
“The benefits of being a food manufacturer here in Houston is exactly the fabrication part of it,” he says. “Something breaks down, we just go up the street. We can find somebody up the street, a welder, whatever – something we need to have done. All the internal mechanisms and these machines need support, and basically, we can source it here. That's a big, big benefit compared to others that are forced to do it somewhere else.”
And it sums up perfectly why connecting the entire ecosystem, across manufacturing industries, is so important.
Bart Taylor is executive director of the Greater Houston Manufacturing Association. Reach him at [email protected].
