Oregonians are proud of the state’s array of small, locally produced food. But small- and medium-batch food manufacturers struggle to find spaces to make and package their products, especially when it’s time to scale up.
When Nikki Guerrero moved to Portland in the 2000s, she struggled to find food with the flavors that she grew up eating in Arizona. And in 2008, she decided to start making them herself.
At first she made Hot Mama Salsa in the kitchen of a North Portland bar, Albina Green, while it was closed during the day. In exchange for use of the bar’s kitchen, she prepped food for the staff to cook on shift. She sold fresh salsa at Cherry Sprout Market, which was adjacent to the bar, and a couple of farmers markets. Once her daughter was in preschool, she was able to scale up, making wholesale deals with grocers like New Seasons. She’s also expanded her product line to include hot sauces, Mexican chili oils and tortilla chips.
Scaling up meant moving out of the kitchen of the bar — which by then had changed hands and been renamed the Red Fox — and into a commissary kitchen in North Portland, then into a shared kitchen space in Portland’s Hollywood neighborhood.
And when she spoke to Oregon Business in October, Guerrero was in another phase of expanding. Starting in November, she’s due to take over half of the New Seasons Central Kitchen in Southeast Portland, which the grocery chain opened in 2015 but closed in 2019, and which has sat unused ever since.
The other half of the facility will be occupied by Community Co-Pack NW, which has also been helping produce Guerrero’s tortilla chips for the past year and a half.
“It’s much more space than I need, and it’s beautiful, state-of-the-art equipment. So I’m thinking, ‘How can we best utilize that space?’” Guerrero says.
“There’s a big need for co-packing in the industry all around,” Guerrero says. “But one of the things that is almost nonexistent is small-scale co-packing, where the owners can be involved in the process, where they can do their own sourcing so that they can be able to use more local produce and ingredients.”
Community Co-Pack is a co-packer and business incubator that works with small, BIPOC-owned food-manufacturing businesses to help them scale. According to Hannah Kullberg, business development director of Community Co-Pack, “co-packing” is a term that can mean a couple of different things. It can refer to simply putting a food product in a package, or repackaging, after it’s manufactured — or it can refer to contract manufacturing, where a company will contract with a manufacturing facility rather than own its own site full-time. While co-packing happens at all levels in manufacturing — and is particularly prevalent in food manufacturing due to the seasonal nature of the product — it’s particularly important for smaller companies that may only need manufacturing space for small batches of products. This summer the Oregon Department of Agriculture launched a survey project to talk to food producers and manufacturers about what they need.
The results aren’t final yet, but multiple people who spoke with OB for this story said there is a crying need for more co-packing spaces in the state.
“There are these big gaps in the co-packing ecosystem,” says Aidan Currie, founder and CEO of Portland’s Swift Cider, which produces cider in Portland but also offers co-packing space for other companies to produce small batches of beverages. Some of them are just starting out, but Currie has also worked with farmers who aren’t normally in the beverage business, who want to make a limited run of a special-edition beverage.
“[Co-packing] allows people to scale that otherwise would have no opportunity to scale,” Currie says. “It also allows people that are already at scale to grow their business before they build the new facility. If you know that eventually you’re going to have the revenue to support a 2-million-unit-per-year facility, then you can go borrow your neighbor’s [facility] until you get there and really hedge your risk a lot on that bench.”
For example, Currie says, if a business has just inked a deal to get its product on grocery store shelves, the demand is uncertain.
“Everybody hopes for the best, but the reality of it is that demand is its own thing. And so you have to kind of sit there and wait. So a lot of people need this extra capacity in order to make these commitments to these large retailers just in case something starts selling a lot faster,” Currie says.
While Guerrero has been able to scale up her business at a pace that worked for her, the lack of co-packing infrastructure has sometimes led small businesses to leave the state as their companies grew — or to close up shop altogether.
In 2013 Michael Kanter — a former restaurant cook — started making Eliot’s Nut Butters, a line of flavored nut butters like honey-
chipotle peanut butter, spicy Thai peanut butter and pistachio-date almond butter — as well as a classic salted peanut butter.
“I stumbled on this idea while eating a bag of spicy cashews,” Kanter tells OB. “I was like, ‘These are great by the handful. Why not make them into some nut butter? I threw them into the food processor, tasted them and thought, ‘This is pretty good.’”
By the end of last year, the product was available in 600 stores in 40 states, including Williams Sonoma and Whole Foods, and was one of the most popular nut-butter brands on Amazon.
“[The year 2022] was our best sales year to date. We felt like we were trending in the right direction,” Kanter says.
But then the company hit what he describes as a run of incredible bad luck. In early 2019, a Wisconsin-based co-packer the company had used on a one-time basis issued a recall for all products made during that production run, leaving Eliot’s with a loss of 15% of that year’s revenue, putting the company in “a precarious position for several years.” In December the Portland-based co-packer the company primarily used was late fulfilling an order.
“It was weeks late, and there were no answers,” he says. The order finally arrived in January; the co-packer, according to Kanter, demanded immediate payment for a separate production run they were also running late with.
“This was on, like, a Thursday. Then the following Monday, they let me know, ‘Oh, by the way, we’re closing up shop and moving to Colorado,” Kanter says. He declined to name the co-packer but says the facility again demanded payment for a production run, which ran counter to the terms of their previous agreement.
And, he says, there was nowhere else he could go to contract for the production of nut butters locally.
“We needed to make a quick decision. There just weren’t any good options,” Kanter says. “It just sort of forced me to make the decision that that was a good run for nine-plus years. It wasn’t the way we wanted it to go, but it was time to move on from there.” Kanter announced the closure of Eliot’s Nut Butters this March.
Not every story ends as grimly as Kanter’s, but that doesn’t mean they’re great news for Oregon manufacturing, either. Raj Vable founded Young Mountain Tea in his Eugene kitchen in 2013. His company works with farmers in India to get them a better price for tea leaves; leaves are dried and fermented there before being shipped to the United States to be blended, flavored and packaged in tea bags.
At first he had his home kitchen certified as a commercial kitchen; then he worked at a shared kitchen space in Springfield.
When he sought to scale up, he couldn’t find a co-packing facility in Oregon that worked at the scale he needed and had the right equipment. He ended up moving production to a facility outside Los Angeles and laying off three people; he and his wife have moved to Michigan, where they run the company remotely.
“What it comes down to is — I’ll just say what it is — co-packing is not sexy,” says Anna-Rose Adams, director of business development for Carman Ranch. “It is not what people are graduating school for and saying, ‘Yeah, I want to start a food-manufacturing business.’ The cool technology is in lab-grown meat and efficiency. But in terms of meat-and-potatoes co-packing, there’s no incentive for it to exist, really, in a medium scale.”
And sometimes food producers will need to drop or change a product line for reasons far less dramatic than the ones described by Vable and Kanter: According to Adams, one co-packer Carman Ranch has worked with has had to suspend production for a while because of staffing issues.
So where do the solutions lie?
Adams says often food producers find co-packers simply through word of mouth; there isn’t a centralized repository or database for them. A simple website could make it easier to figure out what facilities are able to manufacture or package what types of food, and how to make contact.
That’s part of what ODA is trying to accomplish with the survey, says Erick Garman, the agency’s trade-evelopment manager.
“What I’m trying to do is pull all those stories together so that we can have a better conversation, so that some of the industry folks can come together with a proposal or an idea to be presented, so that everybody is kind of on the same page of understanding where can we go from here, and what that looks like,” Garman says.
Guerrero says Community Co-Pack NW will lease the other half of her new facility, and will offer manufacturing space to other, smaller manufacturers looking to start out, experiment or scale up. She also believes that — in part due to the rising cost of real estate — policymakers should take a more serious look at supporting co-packing in a sustainable way.
“I do think that one of the reasons that it’s almost nonexistent is because it’s pretty hard to make that model work as a viable for-profit business,” Guerrero says of small- and medium-scale co-packers. “We’re really hoping that we can form this partnership and leverage it as a community resource and really look into how can we create a resource in the areas of shared ingredient buying, shared packaging, shared distribution, so that it can be a benefit to many small businesses in the community. And in doing that, we’re hoping that we can leverage some buy-in by the state or the city or something to offset the cost of getting that up and running.”
“We’re pretty lucky to be in this state that has so much support for food entrepreneurs,” Garman says. “We’re just here to make it better.”
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