On July 10, 2014, the San Francisco Business Times sat down to talk about the future of food and beverage manufacturing in the Bay Area with a group of CEO’s of locally based food and beverage companies. The conversation was hosted by accounting firm Sensiba San Filippo LLP, and moderated by San Francisco Business Times publisher Mary Huss.

PDF of the Food and Beverage Innovators Booklet from the San Francisco Business Times August 13th Issue

Screen Shot 2014-08-13 at 10.02.54 AM

Panelists (in order above)
Tim Fallon – President and CEO, Columbus Foods, Inc.
Shaun O’Sullivan – Co-founder and Brew Master, 21st Amendment Brewery
Gary Guittard – President and CEO, Guittard Chocolate Company
Reem Rahim Hassani – Co-founder and Chief Branding Officer, Numi Organic Tea

Moderator
Mary Huss – Publisher, San Francisco Business Times

Keynote Introduction
Karen Burns – Partner, Sensiba San Filippo and President & Co-Founder of East Bay Manufacturing Group

FULL TRANSCRIPT

KAREN BURNS: Good morning, everybody.  I am so happy to see such a great crowd here.

Sensiba does have a strong focus in the area of manufacturing, particularly in food and beverage.  So, it really was our delight to be able to sponsor today’s event.

I would like to share a few words with you based on my experiences, talk about some of the key benefits that my clients see, and share what I have learned from my clients relative to manufacturing in the Bay Area.

I’ll discuss some of the challenges relative to manufacturing in this area as well as the outlook, trends, and a few resources.  Sometimes when we are so busy running our companies, one of the things that is so difficult to figure out is who to connect with.

This leads me to tell you a little bit about the East Bay Manufacturing Group.  For those of you who manufacture in the East Bay or just have an interest in being part of the East Bay, there’s clearly a significant amount of manufacturing that does go on in the East Bay.

I had set out to see if I could connect with manufacturers in a more meaningful way and to see if I could put them together in a more meaningful way.  About two and a half years ago, I co-founded the East Bay Manufacturing Group (EBMG). We are a forum for C-level executives of manufacturing companies to get together to network, to share and learn best practices.

We put on seminars on a quarterly basis that are not necessarily altogether different from what you are going to see today.  The difference is it is not in a hotel and downtown with 200 people. It oftentimes is 40 to 50 people at a manufacturing facility, and we conclude with a tour.  Manufacturers get to see what each other does.  One of our guests here today has hosted our event in the past and it was fantastic.

Being a good listener at EBMG events and with my clients, I’ve learned a bit about why manufacturers like the Bay Area, their challenges here and the benefits for why they stay.

Well, clearly it is about innovation, and I am not going to steal the thunder of our panelists later today, but being in the heart of Silicon Valley clearly just means innovation.  It is sort of defined by innovation.  Being able to have your R&D really close to where you do your manufacturing is critically important.

Additionally, I think San Francisco is known as a food mecca around the world.  When you put manufacturing together with food, it just speaks of the San Francisco Bay Area. Those are some of the key benefits and the reason why people do manufacture here in this area, but it can be a real challenge as well.

Some of the key things that my manufacturing clients and the constituents that I work with are facing is how to find talent.  Yes, there are lots of engineers in Silicon Valley, and we do need to have key managers running our businesses, but how do we supplement that middle management?  How do people afford to live in the Bay Area and work those middle manager-type jobs?

I’ll get into that in a moment.  There are a significant number of resources that are working on that issue right now.

Another one of the key struggles has to do with image.  It perhaps is not as significant in the food and beverage sector as some of the other areas of manufacturing, but oftentimes when people think of manufacturing, even within food and beverage, they think it’s dirty, it’s not clean or sexy like some of the high tech, but, in fact, that really is, as most of you know, a misnomer. There are some amazing food and beverage facilities out there that are doing great work, and it is high tech.  It is high class.

It’s something else we need to overcome if we are going to draw the right kind of talent.

We hear a lot about automation and robotics.  We hear if we are in a recession, we need to hire people. Fortunately we have come through the recession, and we are all here on the other side, which is fantastic.  But when do I implement automation? How much automation do I implement?  Gosh, it’s expensive to do, and isn’t that going to mean that I am going to lose jobs?  Will I have to let people go as a result?

What we’re finding, in fact, is that the more you automate, the more efficient you become. The more efficient you become, the more revenue you generate.  The more revenue you generate, the more people you have to hire.  It’s become actually a fantastic circle of growth.  So the key is, again, when do I automate and how much?

I’d like to also share a tidbit, because as Mary mentioned, I am a CPA.  On the accounting side, hopefully most of you know that effective July 1, there’s a new statewide incentive that allows you to not have to pay the State portion of sales tax up to $200 million of equipment that you put into place.  It’s a great time, actually, to invest in capital equipment because you’ll see a little over 4 percent right now when you put that into service.

What about outlooks and trends?  In terms of the future of manufacturing in general and the future of food and beverage, we are now in a digital age.  IT is a necessity.  It is not a luxury.  How do we incorporate that digital technology into what we do and how we run our production?

Most of you have heard of 3D printing, additive manufacturing.  I am sure many of you have said, well, that couldn’t possibly apply to the food industry, that must be something you make with metals.  In fact, additive manufacturing that is used for 3D printing says that, in fact, it is not over the horizon.  Additive manufacturing is on the horizon.  It is here already with a number of metals and materials, but it will very soon be here with multiple materials, including the food and beverage industry.

What that does is it really levels the playing field.  Right now when you get into food and beverage, when you start a company, there’s a lot of capital intensive, buying your equipment, doing different things to try to get your production up and running.

And per the term for years, decades, economies of scale, how do we get things to scale up?  That is gradually becoming an economy of one. It’s now cost-effective to produce one, and you can do that with additive manufacturing.

What that allows you to do is produce one thing and go out there and secure some funding before you put the investments in to scale.  That has coined the term that I recently heard at a statewide conference on manufacturing, the rise of any man.  Anyone can get funding now. There’s a lot of social platforms, KickStarter, things like that.  There’s a lot of sharing.  We have come into a generation that does a significant amount of sharing, sharing on the Internet.  Everyone grew up with the Internet in this new generation, so they are very used to sharing.

Now that technology can be pulled off of a shelf, there’s a lot of sharing relative to technology.  People can get funding.  Any man can sort of get into the business.

Some of these are challenges, but some of these are really exciting.  Because what that’s going to force us to do and come full circle is to innovate.  The more people that are kind of chomping at the bit, the more we have to innovate to stay on top of things.

I’ll close with a few resources I mentioned earlier.  I mentioned the East Bay Manufacturing Group.  That is, you can feel free to stop by the Sensiba sample table at the back.  We do have a sign-up sheet if you’d like to get on our distribution list.  You can pick up some information about who the East Bay Manufacturing Group is.

Some other great resources that are available are manufacturing extension partnerships, or MEPs.  There’s one here in Northern California called Manex.  They will help you with lean manufacturing concepts, different operational things to help you get better.

There is a multi-year, multi-million dollar grant called “design it, build it, ship it.”  If you’re not involved in that initiative as well, that group is specifically working on solving the issues that I mentioned earlier around talent and image and collaboration, really with government officials.

The last one that I would mention would be the community colleges and the labs that are out there are great resources for talent and for training talent.  I am happy to discuss any of this with any of you afterward.

Without further adieu, I am going to pass this back over to Mary because you guys are here to listen to the panel, not me, but I appreciate your time and thank you so much for being here.

MARY HUSS:  Karen, thank you so much.  As I said, there are things that you need to know, and she knows them.

Now I’d like to welcome our distinguished panel to the stage.  Rather than read their bios, which are in the programs at your tables, I am going to actually let them introduce themselves.

Please welcome Tim Fallon, president and CEO of Columbus Foods, Incorporated; and Shaun O’Sullivan, co-founder and brew master at 21st Amendment Brewery; and Gary Guittard, president and CEO of Guittard Chocolate Company; and Reem Rahim Hassani, chief branding officer and co-founder of Numi Organic Tea.

Rather than wait until the end to ask audience questions, I am going to turn to the audience and let you stand up and ask your questions, and then I will get back to mine.  We would like to make this as interactive as we can.

I am going to let each of you introduce yourself to this audience by each answering this opening question so just to give us some context about who you are in your company.  You can take three or four minutes a piece to answer this question.

So, here is the question.  It is kind of a big question.  Give us a sense of your company and your role, tell us about your company’s history, your products, sort of the age, size and scope, if you would be willing to share revenues, employees, that sort of thing, and maybe where and how you manufacture.

That’s kind of us getting to know you and your company.  Then what is your current greatest challenge or what keeps you up at night? So that’s kind of a big question to answer in three or four minutes, but Tim Fallon, why don’t you get started on that one.

TIM FALLON:  Morning, everybody.  Glad to be here.  I am the chief executive officer of Columbus Foods.  We are a 97-year-old company that was founded here in North Beach by two Italian immigrants in 1917, and our primary business is the manufacturing of salami or cured Italian deli meats.  That’s about a third of our business.  And two-thirds of our business is we make deli meats for turkey, ham, pork and beef.

We have three manufacturing facilities. One in South City here right by the airport, and then two in the City of Hayward across the San Mateo Bridge.  We have around 355 employees, and the company size is $250 million.  The biggest challenge for me is input prices.  The eggs you had this morning were up about 30 percent in price. The bacon’s up about 65 percent.

So we put beef, pork, turkeys in our products, and they have gone through an unprecedented rise in cost.  And as a protein producer, that’s probably the biggest challenge that we are trying to navigate at this period of time for probably the next six months.

MARY HUSS:  Does the drought have anything to do with that?  What impacts that?

TIM FALLON:  Each species, is what we call it, have a different reason why there’s a different cost.  The drought affects the beef more than any of them.  They have reduced the size of the herds down to the lowest levels since 1950.  Now they are starting to rebuild them.  So that’s created a supply-and-demand issue.

On the pork side, the buyer’s going through the pork complex that’s eliminated the piglets, reduced the herd by about 4 or 5 percent.

And then poultry, we primarily process turkey, and turkey prices were traditionally lower a couple years ago, then the growers overcorrected right now and reduced the flocks.  So that’s a supply-and-demand issue.

MARY HUSS:  All right.  Thank you.  So now let’s move to the provider of beer this morning, Shaun O’Sullivan, co-founder of 21st Amendment.

SHAUN O’SULLIVAN:  Thank you for having me here, and also for the goal that I always have of getting people to try craft beer before 9:00 o’clock in the morning.  So cheers to you all.

I am Shaun O’Sullivan from 21st Amendment creating craft beers, the beers you see out there. Nico Freccia, my business partner, started the 21st Amendment Brewery 14 years ago in a little pub in San Francisco on 2nd Street two blocks from where the Giants play baseball.

He was running the front of the house, and I was the brewer, and we were trying to think of a way to expand our business.  We thought about opening up other breweries or other restaurants, but it was pretty capital intensive. So we looked at the idea of putting our beer in cans.  At the time we got into it, not a lot of players were doing it, and we saw it as a way to kind of separate us from the herd in craft beer.

We produced our first cans out of our 500-square-foot brewery in San Francisco on a two-head filler.  It was like milking a cow, 20 cases an hour.  It was hugely popular.  People loved it.  First two beers were IPA and watermelon. So the whole idea had legs to it, but we didn’t have the money to build a big manufacturing facility.

We took a page from Pete Slosberg and also Sam Adams and went out and utilized the excess capacity available to brewers from other breweries. It worked great.  In other industries it is called co-packing.  So we went out to the Midwest, and that’s where we are right now.

We went from 1,000 barrels of beer in 2008, to it will be 75,000 barrels of beer this year.  But we have always had the idea of moving the beer back to the Bay Area.  Nico and I are currently building a large brewing facility in the City of San Leandro at the old Kellogg’s factory, which we are very excited about.  Thank you.  Glad to be home.

We are set to open that up, cross fingers, in February — excuse me, December, January of this year.  So very exciting.

The question of what keeps me up at night? Probably getting up early for this meeting, but more top of mind with what we are doing, it’s the creation of this new facility.  It’s the planning, the construction, the development, and everything that goes with that.  It is an exciting way to be up late at night.  So thank you.

MARY HUSS:  I think you were saying that just to be able to manage the cost of constructing something that big is challenging, right?

SHAUN O’SULLIVAN:  It absolutely is.  Any time you open the ground up, there are surprises there, and those surprises cost money, and managing those is very critical.

MARY HUSS:  Very interesting. All right.  Gary Guittard, president and CEO of Guittard Chocolate.

GARY GUITTARD:  Thanks.  I should have been a little bit more prepared for this question.  I have been traveling, but anyway.

I am a fourth-generation chocolate maker. When I was a kid, our plant was south of Market on Main Street.  In 1954 we moved down to Burlingame when they put the Embarcadero Freeway in and have remained and grown.

We have another facility that we are slowly but surely building.  In our business, it is not build it and they will come.  It is wait for them to come, and then you build it.  I think that’s the safe way to proceed.

We really rely — our business is not just a branded side.  On the branded side, people still have a difficult time deciding if it’s Guittard or Ghirardelli.  Or I have so many times people ask me, “Do you make the chocolate for Ghirardelli or does Ghirardelli make the chocolate for you?”  Just about kills me, but people in the industry know who we are.

We are suppliers to people like See’s Candy and basically sell a lot of — most of our business, 80 percent of it is really sold to people that use it as an ingredient.

R&D is a very important part of our business.  Supply and source is a huge part of our business, having relationships with particular farmers and particular cocoas around the world.

Others of us know what that’s like and that process.  Sustainability is very important.

When I think of what keeps me up at night, everything.  I am never really comfortable.  But anyway, seriously, I really think that you have to be on your toes and aware, not just for me if I’m building a plant, which we have been doing for ten years — and in a very progressive, I am sort of an engineer basically.  Not a real engineer.  I was not ever that smart in school.  But really the way I think and the way I build the business, I love the equipment.

In our business the equipment is half of the flavor, and the types of ingredients and beans you use is probably the other part of the flavor. That’s a very important part of our business.

R&D, the types of equipment, how we buy is very important to me.  I love the process.  I am very involved in the process, very involved in R&D.

I’ll end with the fact that the important thing for us is for us to get a new customer from a large company.  We compete with ADM, Cargill, Barry Callebaut, which are some of the largest companies in the world.  We have to have a value added.  We have to be able to respond to our customers.

Our customers come to us.  If they are using a product from ADM or Cargill, we have to copy it besides doing our own things and our own products.  With the value added, we have to then go and try to make another person’s product.  So that’s a big part of our business.

I have a great time with it.  I have a fifth generation; my daughter just started.  I did stuff first.  My daughter has worked at Clif Bar for six years.  She brings a lot of marketing knowledge to us.

We are hoping to build the brand inside slowly and surely, apart from Ghirardelli.  It is great fun.

I love the people I work with.  They are key to my business, and keeping them flexible and open with an open-door policy.  Might try my own flexibility to deal with all of them in their own individual ways.  To help them grow, helps the company grow.  I am talking too much.

MARY HUSS:  It’s all the chocolate. Now, I have a question.  You may have said this.  I don’t think I heard.  How many people are in the company?

GARY GUITTARD:  I didn’t say?  200.

MARY HUSS:  200. Next we are in the world of tea, and we have Reem Rahim Hassani, who is chief branding officer and co-founder of Numi Organic Tea.

REEM RAHIM HASSANI:  Good morning, everybody.  My brother and I started Numi out of a small plant in Oakland, California.  I was an engineer turned artist, and my artwork was on the original packaging of the Numi tea boxes.

He had a background running tea houses in Prague in the Czech Republic.  So we merged our passions together 15 years ago, sort of a classic story, out of a small apartment.  We didn’t have any business background, and we have grown in the past 15 years.  We have distributed nationwide across the country and in grocery stores, natural food stores, coffee spas, universities, you name it, and distribute in about 15 countries worldwide, and we are at about 35 employees.

We just moved to a new facility in downtown Oakland, which was also another groundbreaking adventure which had a lot of issues in itself.

My role is marketing and branding.  I do all of the packaging and new product development and branding, marketing, all the things that are involved with that.  We are over $20 million.  So, going strong.

I guess what keeps me up at night, cash flow is always an issue for a small company, and lately it’s personnel.  We are all human, and we bring ourselves to work eight hours a day.  We bring all sorts of issues as we go.  So there are personnel issues that we have.

MARY HUSS:  I am sure none of the other panelists have concerns that relate to personnel.

TIM FALLON:  Or cash.

MARY HUSS:  I think on the phone what keeps you up at night is sales.

REEM RAHIM HASSANI:  Yes.

MARY HUSS:  Very common. Tim, you actually — the company is 97, right, years old, and can you explain a little bit about the history of how private equity came into the company, maybe any impact that that has had?

TIM FALLON:  The company is 97 years old founded by Italian immigrants who ran the company for 50 years and then sold it to their workers, five Italian families.  Each had 20 percent, and then the fathers ran the business and then the kids took over up until 2006.

Five Italian families at some point in time aren’t going to agree on a lot of things. They decided to sell the business because really none of the kids at that time had any interest in downstream being involved in the business.

They brought in private equity in 2006 to do a transition, and they sold 79 percent of the business to private equity.  Then I came in 2010, and we sold it again to private equity in 2012.

The difference is generally, I am up here with founders.  I am a little bit of an outlier.  I have a high threshold for pain, so I work private equity.  This is my fifth venture.

The difference is as a family business, you’re satisfied, always looking to move forward, as does private equity, but we have leverage.  They use leverage in their deals.  That’s probably one of the bigger differences.

And the very focus on the numbers. It boils down to make your numbers, they leave you alone.  And if you don’t, they torture you.  It is that simple.

MARY HUSS:  I think you have felt like in this case, though, as we discussed, that you have been able to pretty much have some of that freedom to innovate?

TIM FALLON:  Yeah, they are looking for growth.  They provide a lot of resources to help you innovate.  They help you champion it, and they are not a slash-and-burn group that I have been involved with.  It is more we build one facility here in Hayward, which was a $31 million plant from the ground up, and we are building another expansion right now, which is a $28 million expansion in another facility in Hayward.

Those are major investments that have been signed off on by both private equity partners. They understand the investment.  You have to invest the money to grow.

MARY HUSS:  Okay.  Great.  Thank you.  I’ll throw this out to all of you or any of you who really want, talk about the areas of future growth for your business.  Is it going to come from new product development or expanding markets, international, possibly acquisition of companies, or do you — may you one day go the route of private equity?  Big question, but you can all answer it in your own way.

SHAUN O’SULLIVAN:  All at the same time?

MARY HUSS:  Yes, please.

SHAUN O’SULLIVAN:  For us there’s a saying in the beer business:  If you’re not growing, you’re dying.  I think everybody up here can say that.

Craft beer is huge right now.  It is larger than big beer, Anheuser-Busch, Coors, Miller breweries.  It is on the rise.  It is a hot thing right now.

So expansion for us is critical.  It is really to take advantage of those markets that we are not in yet.  That’s one of things this new plant is going to do for us.

I think there’s a great untapped market that we aren’t tapping into, and that’s the international market.  America sells.  I’ll see like these — there’s this iPad or iPhone app called untapped, and you can see where your beer’s being consumed.  And it is in markets that we aren’t even in.

So to go to Japan and Europe is really going to be an awesome opportunity for us as we flush out the rest of this country.

MARY HUSS:  Reem.

REEM RAHIM HASSANI:  It is difficult — one of the things they say is we developed all kinds of innovative products along the way.  We launched a line of flower tea, which is tea soaked with flowers.  We have a fermented tea from China which has a lot of health properties to help reduce cholesterol.

We just launched a line of savory tea, which is vegetables made into not a soup, not a tea, somewhere in between.  Right now we are launching a line of chocolate teas and a line of turmeric teas.

We tend to innovate all the time, too fast for my pace sometimes, but that definitely gets us more shelf space.  That definitely gets us more brand recognition, more PR.  New product is one of our pipelines for growth.

I think the other is we have a really good distribution, and we are working on larger brand exposure, larger brand awareness to increase velocity.  It is all about turns on the shelf, as I am sure everyone knows.  It is a mixture of different things.  Acquisition’s not out of the picture.  That definitely helps.

MARY HUSS:  Okay.  Great.

GARY GUITTARD:  For us, we kind of in some ways can cheat on what’s happening because we see being an industrial supplier and supplier to larger companies, we can see what people are successful with, and then we can begin to innovate in that area as far as our brands are concerned.

Most of our brands, we have these chocolate bars which are really the first chocolate bars we have had, oh, gosh, probably in 80 or 90 years.  Most of our things that we have been focused on have been in the baking aisle in the stores.  Most of you probably know us for our chocolate chips.

We have recently added some baking bars that we sell.  But as far as our concerns, I think there’s a lot that’s coming out in regards to the health aspects of chocolate.  We have put in a sterilizer which kind of allows us to really do roasting, fermenting.  When we buy cocoa means, part of the flavor, not only do you ferment spirits, but you also ferment cocoa beans.  So cocoa beans are fermented and dried.

If we can control the fermentation of the beans and keep the fermentation very low, and we have a lot of relationships with farmers that we work with, we can save a lot of the flavonoids in chocolate.  As long as you don’t roast it really high, and then you have a lot of pathogens in chocolate.  We recently put in a sterilizer, very capital-intensive business, chocolate is.  All of our equipment comes from Germany, Switzerland and Europe.  They just don’t make the pieces of equipment here.  They are very precise.  But this allows us to sterilize the beans with a very low roast.  You can’t get a five-log kiln which you need to have it be a clean product.  So that’s basically that area.

Sustainability, fair trade, we are doing a lot of growth in the fair trade area with us and our retail products, which is a huge thing, and organic is also growing.  Our whole organic side is growing quite a bit.

We have a lot of stuff that’s happening and a lot of growth in a lot of these areas, which require us to be flexible.

As far as we are concerned as a company, that’s kind of been our area of expertise, being able to make a lot of different products and types, which a lot of the larger guys can’t do.  They don’t have the flexibility.  They have big lines built for running big things.

I think the more flexibility you have to kind of follow the markets as they come.  Again, don’t build it, and they will come.  You wait for them to come, and then you build it.

MARY HUSS:  Tim, what about — what are things that — how do you grow and meet business? What’s — and are there trends that impact your future prospects?

TIM FALLON:  For us we are a West Coast business, and we are expanding from the west to the east.  Our primary focus is distribution.  We are taking the Columbus brand from California’s routes, and we are spreading it across retailers across the United States, retailers like Target, national distribution with Target, Costco, Trader Joe’s.  Those are great retailers for us.

That’s our primary focus, is distribution, and it’s one of our growths.  Because we have great products, and they seem to be accepted nationally.

Second is innovation, and it is tougher in the meat business, but we are refocused on the noes.  We are taking out nitrates, antibiotics, binders, things of that nature that have been in meats for centuries and reformulating.

It is a difficult process.  Reintroducing brands under no nitrate-type products, antibiotic-free products and no binders… that’s where we innovate.  We can talk about pathogens all day long in the meat business.

SHAUN O’SULLIVAN:  Same in beer.

MARY HUSS:  It does seem like there’s a trend out there towards bacon and meat and meat products.

SHAUN O’SULLIVAN:  I love that we have the great vices of life up here.

MARY HUSS:  They are all great together, right?

So what about, just with all the costs that are in the Bay Area, how difficult is it to manufacture here?  If you’ve chosen to manufacture here why, and if not why?

Talk about what it takes, and then do you think we are going to continue to see this growth of local manufacturing that we are seeing here?  Tell us about those choices when it comes to manufacturing your products in the Bay Area.

GARY GUITTARD:  Well, we don’t have a choice.  We need to be close to our customers.  And in our business, the Sierras are a big barrier to us servicing our customers.

San Francisco, when I was a kid, you had Hills Brothers, MJB, Folgers, ourselves all south of Market all within probably five or six blocks of where we are today, and they are no longer here. But they were originally here because of San Francisco, and the fact we were a bay and we could receive goods in our ports.

But we in the same way have to be able to serve somebody like See’s Candy or many of our customers on a daily basis, on an inventory-turn basis.  Many of our customers buy chocolate in a liquid tanker.  So we have to be able to service them really at a moment’s notice.

To us we don’t — we can’t be too far away.  That’s the important aspect for ourselves, I think, is being able to service our customers.

SHAUN O’SULLIVAN:  I think to make beer in San Francisco in kind of the epicenter of craft beer in our country from Fritz Maytag, it is Anchor Brewing Company, it is vital that we are in this area.  I think beer tours are huge right now.

You have all probably been to breweries in your areas, but when people come to San Francisco, you’re able to touch craft in so many different ways.

And for us to — sure it would be cheaper for us to build a facility somewhere in the central valley, nothing against the central valley, but I don’t think we would see the kind of people coming to us as they do down in San Leandro and certainly our pub down in San Francisco.

MARY HUSS:  Tim, I know you have some opinions on this subject.

TIM FALLON:  Yeah, we are a little bit different.  Similar to Gary, this was the hand we were dealt.  The company was founded in North Beach and grew up in the Bay Area.  We trade on the foodie nature of San Francisco.  We think that’s part of our branding.

The type of business we are in, which is the salami business, is a very capital-intensive business, and the assets have been here for a long time.  Not necessarily if you were going to do it again you would not necessarily do it here, you’d do it someplace closer to the supply, which would be the Midwest.

Saying that, this is where we are. There are a lot of challenges running a food business in the Bay Area, and we try to do the best we can.

Part of it’s personnel, which you talk on. We were committed to a living wage.  Our average factory worker makes around $22 an hour, and we have no turnover.  So we try to keep the workforce because we have a great deal of technology.  We have been making salami for a long time, but we have a tremendous amount of technology when you build $28 million and a $31 million plant.  It is all robotics, and it is all state-of-the-art equipment.  You really need to invest in the people.  We are committed to that.

So we are here because we started here, and we work around the challenges.

REEM RAHIM HASSANI:  I think having — being in Northern California is, of course, the hub of innovation.  I think to be — to innovate — tea, of course, is much more popular on the West Coast than the East Coast.  The Midwest is probably our — we have distribution and good sales there, but it is our growing sort of demographic.

I think the port is beneficial.  We co-pack, but everything goes through the Oakland Port.

But in general, I feel like having started here versus the Midwest, the receptivity to our products and the receptivity to our values, organic and fair trade, as well has been way more than we could have ever expected, and I think it is an affirmation to businesses like us to keep going and make it.

MARY HUSS:  Shaun, this is a question that probably any of you can answer. I am amazed by how many beers there are.  There’s the whole thing of branding.  How do you stand out from the crowd?  There’s the fight for shelf space and all of that.

So how — you know, how is it that you’re able to grow market share amidst all these brands? And I wanted to get a little under the concept of branding as well.  There are many things involved in this.

SHAUN O’SULLIVAN:  When we first started packaging our beer in cans, nobody was really doing it.  The conversation was more about the can than the liquid inside.  We were able to – that was a marketing trait in itself.

The big beer wall that you see out there in grocery stores and liquor stores is really daunting.  What it is working with your distributor partners.  All our beer goes through distributors before it is out in the retail market. We have salespeople out there working directly with retailers and our distributor partners.  It is really kind of about jockeying your position in those places, getting the tap handles which are vital in bars and restaurants because that’s where the sampling opportunities occur for the consumer to go then buy your beer in the package.

The other thing that we did in marketing is that we stepped away from the hi-cone.  Our beer comes in a box.  You can see it back there before you leave, and you’re able to tell our story 360 degrees around that box.  And it really stands out when you’re on the shelf competing with your — with the other craft breweries.

MARY HUSS:  And you’re the branding expert here, Reem.  Talk about what it takes to grow a brand and how far you think you can — you were talking about some of the things that become challenges as you try to grow that brand and some of the things that you’re dealing with right now.

REEM RAHIM HASSANI:  I don’t think I’d call myself an expert; just my knowledge base is, I think, a brand is a personality and a character. The brand is like the person.  It exudes personality traits.  If you think of Apple, you would think of creative, out of the box, young, good customer service friendly.

These are all traits that people want to associate with and people want to purchase it to feel associated to that product.

I think our brand has had an aura about it.  People always come up to me and say, “Oh, my God, you have such a great company and great brand.”  And I think to myself, it is so interesting, I don’t know them.  I have never met them.  And it’s, I think, the attributes that the brand exudes, whether it is in the taste even of the product.

I think as Shaun is mentioning and as the panel mentions, it is that care that you put into every cup that people feel, and they resonate with it.

It is the way your package looks.  It’s the values that you bring to your employees and to your supply chain that they either read about or just comes across.

I think we started — we grew very strongly through word of mouth.  That was, I think, our initial way of growing the brand, and then I think PR has been our greatest strength to grow the brand and grow brand awareness.  And, you know, the more — I mean, now we are really into social media, of course.  Social media and engaging with our consumer on that level in constant conversations and constant questions and feedback.

Actually tomorrow I am meeting a woman who did a social media contest for a blend.  So she created her own blend.  We had a product called an artisan blending kit with samples of different ingredients, and you can make your own tea basically.

We invited folks online to make their own blend.  They did.  Now she’s the new signature blend.  It is called — well, right now the name is Justine’s blend, but it is a ginger-hibiscus blend that I am tasting and naming and creating the designs for.  She’s coming tomorrow and collaborating with us to create the package.

That’s definitely a way of engaging your consumer, to have them be sort of collaborators.  I think that is the new age where it’s not about you; it’s about us.

The other thing that we are embarking on is we have realized that tea without water is nothing.  We are creating a water campaign where we are giving back to over 800 people who do not have access to clean and safe drinking water.

We are partnering with Charity Water out of New York, who is an amazing non-profit in this sphere and hopefully giving back at least $50,000 and greater in the following years to recognize how fortunate we are that we have water.

I think that grows your brand awareness. The more you can focus on your brand; I think the brand is stronger than the product at that point.  We have been so focused on our products, and now we really want to focus on our brand.

I think as you grow the character and the values of the brand, you deepen that, the greater resonance you’ll have with people out there.

GARY GUITTARD:  I think that sounds like a marketing expert. [Laughter]

MARY HUSS:  You know, I think there are gigantic brands.  I am assuming you compete against some very big ones.  What would be a brand?

TIM FALLON:  Hormel, Hillshire, Boar’s Head, Dietz & Watson.

MARY HUSS:  You have a list.

TIM FALLON:  That’s what keeps me up at night.

MARY HUSS:  You can have a huge marketing cloud and have anybody come up from a ground level and create some sort of buyer system.  You’re trying to take the company across country.  What kind of experts are you working with?

TIM FALLON:  Well, really for us the branding, obviously we are an Italian foods company, so that gives us — from San Francisco, which is known for great food. That gives us a great overlay from a branding standpoint.

But from where we focus is the quality of the product.  What will separate us from those companies I just named is our products are distinctly better products because we basically are an artisan producer.  Our salamis are artisan and our delis meats.

I can go through all the different reasons why we are better that Boar’s Head or Dietz & Watson or Hormel or Hillshire, but it really comes down to the way we craft the products.  We are a batch process relative to a mass produced process. That’s what we are committed to, and that’s really why we do as well as we do.

Our biggest thing is getting people to taste the products.  Once they taste it, they can see the difference between us and the other products.  Faux deli meat is what I call it.

MARY HUSS:  Faux deli, that little plastic sheen?

GARY GUITTARD:  I would like to say something with regards to branding as well.  I think the main thing with branding, first of all, that’s a great example of having your passion and the spirit of your product carry through in the things that you do as a company, and I think that’s really important, especially in our particular industry in regards to sustainability and stuff.

I think that means that all the stuff you do has to fit that personality that you want to be, especially where we live here today.  Because that’s such a focus of the area, this area.  People want to know about food.  They want to know where it came from.  They want to know how it was produced.  They are very interested in the people that produce it in the ground.

The other side on the branding is doing something different.  Doing something unique and not a me-too product, something like everybody else, whether you do it with quality or packaging, whether you do it with all these different things you do as a company, but doing something different to me is what makes you stand out from the crowd of everybody else.

SHAUN O’SULLIVAN:  There are so many breweries out there.  Everyone has an Indian Pale Ale.  A pale ale, you have to do something different.  It has got to be about the package and quality.  I think everybody on this panel right now is committed to that.

I think the way a lot of craft breweries aren’t going to make it — and there’s a big, big bubble happening, and you can feel it in this room. Not many people are going to make it, and it is going to come down to great business practices, quality beer, and how you sell it and packaging.  I think that’s important because we are all — in the craft beer business, we are all watching it very closely.

MARY HUSS:  The “bubble” meaning there’s so many?

SHAUN O’SULLIVAN:  Yeah, just many more breweries come online, and those opportunities to get shelf space or a tap handle are getting harder. That’s why you have to stay on point and sell, sell, sell.

MARY HUSS:  All right.  I would like to open it up now for some audience questions.  If you’ll stand up and identify yourself and then ask your question.

[AUDIENCE QUESTION]   Samantha Foster. With regard to the increase in corporate service and foods service that happens here in San Francisco and Silicon Valley, how has that impacted your brand in terms of marketing?  And with the thousands of people that are served food every day, Google being the leading example, are your products being used in Google and Apple and Drop Box?  And if so, how is that impacting you getting your brand out there?

MARY HUSS:  Corporate food services.

REEM RAHIM HASSANI:  I think we are in Google, in many of the Google campuses, Levi’s, Pixar across the bay.  That’s a focus of ours for sure. Because it is a young audience, an early adopter and free cafeterias.  So a lot of our tea goes home with them.

Definitely a focus of our food service side of our business is to get in a lot of these fast-growing tech companies and also doing seminars and tastings with them.

We have a tea trainer on staff who is amazing.  He’s in the Encyclopedia of Tea and goes to the various corporate offices and does trainings and teaches them about the basics of tea.  It is hugely kind of part of our business plan.

[AUDIENCE QUESTION]   Ray Moore. Mr. Guittard, I was listening to radio the other day, and they were talking about chocolate consumption in China with the new middle class is exploding.  Are you starting to see the effects in your business?

GARY GUITTARD:  I think the jury is kind of out on that.  In a way it is — sometimes I think people are talking their book in regards to the cocoa market.  People have been kind of talking about that for a while.

There are some questions, first of all, distribution there.  Chocolate melts.  How many places and how do you distribute in those areas? India might be a — I think that there’s a lot of questions.  There is compound chocolate.  If you’re aware, chocolate that’s made with cocoa powder and other types of fats that have different melting capabilities.  It might work better in warmer areas which then makes — this gets very complicated. Cocoa powder becomes more expensive, and that actually happened maybe happened two or three years ago and everybody was talking about China and usage about cocoa powder going to China because of the distribution issues and problems, and it was more heat resistant.

I am not really sure that that’s the case.  A lot of the big companies want – are putting a lot of effort into having more production.  I think that will be a natural evolution.

I think China has grown slowly but surely, as all countries.  Brazil is actually a grower of cocoa, imports cocoa.  Same with Indonesia, they grow and they are importing cocoa.  It will sort itself out, but it is not going to go whacky right overnight.

[AUDIENCE QUESTION]   Alex Greenwood with the City of Brentwood. Can you say more about your workforce needs both on the innovation side and the production side?  What skills are you finding readily available at the region, and what skills are you looking for?

GARY GUITTARD:  People skills.  They are hard to find, really, on the supervisor level, I think, for us.  We have people that have been with us — I think our average worker has been with us for over 20 years.  We have a really great workforce.

But on the higher, on the managerial side of the plant, is an area that — also the other area that’s not as easy and I am not sure whether you have the same issues on the mechanical.

TIM FALLON:  Yeah, maintenance.

GARY GUITTARD:  Maintenance, because our equipment is major equipment.  We need a lot of good, smart maintenance, which is a constant.  It is like painting the Golden Gate Bridge.  That’s hard to get.  That’s really hard.

SHAUN O’SULLIVAN:  We are in that same thing right now.  We go through this expansion of hiring great engineers or even brewers.  Beer’s a living product, and you just can’t have a guy go in there and push a button and making it happen on the other end.  There’s science involved.  There’s mechanics involved and automation involved.  There’s definitely a skill set with that.

TIM FALLON:  I agree with that.  Mid-level supervision and our equipment in our plant, we have Maserati equipment in our plant.  Your workforce has to be able to get under the hood and not wreck it.  It is a challenge.

MARY HUSS:  Really you’re hiring engineers among others?

TIM FALLON:  Yeah, you need people that can program.  You need people that — we do have engineers in a couple different locations that run the equipment.

GARY GUITTARD:  Electrical stuff, important.

MARY HUSS:  Is there a plentiful supply of these folks here?

GARY GUITTARD:  No.

TIM FALLON:  No.  We end up stealing them from each other, basically. [Laughter]

GARY GUITTARD:  Exactly.  It is really tough.

TIM FALLON:  All the same companies are gone.

GARY GUITTARD:  It is a desert.

TIM FALLON:  Right now, yes.

MARY HUSS:  So if you don’t have a class of the same types of companies.

TIM FALLON:  There’s really no upward mobility out of those types of people here on the food manufacturing side.

[AUDIENCE QUESTION]   Margot Prado from City of Oakland. I wanted to mention, I work a lot with Laney College, and Laney is doing an introduction to food manufacturing course.

I think if a group of you participated, they could actually be sending apprentices directly to you or being skilled in industrial repair, which really is building equipment and machines.

I had the question earlier about export also.  I was curious about the markets, not just China.  We have a growing middle class, and I understand there are issues with perishability in chocolate, but perhaps that’s exporting cold storage technology.

Just wondering for the others on the panel about your thoughts about export, and I would say the non-China export because I am really interested in — Obama’s very interested in diversifying export to as far as Africa and other regions.  Any thoughts from the meat or beer or tea side?

TIM FALLON:  From our standpoint, we export to Mexico.  We have a fairly developed business there, but right now we have just been approved to export to Japan.

We have a processing capability in our Hayward facility called high-pressure processing. So it is a process that removes through water pressure any potential additives in the product, and that gives us the ability to extend the shelf life and ship the product on seaport containers to Japan.  And we are going to be opening up, working with Costco on Japan right now.  Any day we should get our approval and our first order for there.

Each country’s different.  It is a nightmare to kind of manage through all the export paperwork.

Every time I go to a trade show, I get a million guys saying, “I want to export my product,” and they say, “The export guy will be back in an hour.” [Laughter]

Generally we work with our customers, mostly Costco, Walmart or Target, we will work with them to export products.  It is a lot easier.  They have got the networks, and we just feed it into their network.

[AUDIENCE QUESTION]   Rob Carrol from Nixon Peabody along with my colleagues, and thanks to all you guys for your insight.

I wondered if you could share with us how you’re using social media and regulating or making sure the message that goes out there is true to your brand and that sort of thing, how you go about doing that in each of your businesses?

REEM RAHIM HASSANI:  Well, we have on staff, we have a social media PR coordinator, and that’s all she does.  And we also, our PR agency also works with — has someone in their staff who works with bloggers.  So blogging is a big thing.

I think it is that constant engagement. There have been very minimal times where we have taken a post off of our Facebook site.  It is always monitoring what’s going on and the dialogue that’s going on.  She has a calendar of all the different activities every month and every week and every day, actually.

Monday through Friday there’s one day that’s tea education day.  There’s one day that’s about the brand.  There’s one day that’s about the product and innovation.  There’s one day about cooking recipes with tea.

So she has a calendar that she populates constantly with new information and things that are going on around the office, events that we have. And she’s taking pictures, and of course, there’s Instagram and Pinterest.  I don’t even know all the stuff that’s out there.  It is not my forte, but I know about it and how it works.  So I think it pays off.

We also do a lot of sampling.  So we, I think, increased our Facebook friends 5,000 overnight because we sent a bunch of samples out, and everybody started commenting on it.

So there’s different sort of mini-tactics you can do.  Videos, of course, YouTube videos are great to get viral.  So ways you can see how other people — it is good to study how other people use different — and of course you have to be very clever about your posts.  So quotes, people like quotes that they pass on.  People like clever videos.

We are working on a video.  We are looking at how interesting it is, not just informational, but being clever and funny and quirky, the things that you would repost.

So for me it is not a matter of when I judge — of course you have to have measurables, how you judge the success of this person’s job.  It is not about how many liked you, but it is about how many people have reposted.  So it is not being friended, but it is shared.  So the more you share, the more others share, the more friends you get. It is a word of mouth.  It is online word of mouth, is what it is.

SHAUN O’SULLIVAN:  Yeah, I think it is vital.  We wear many hats in our company, and we are a young company.  This is brand-new for us, and I was the guy that Tweeted all the time.  It is exhausting, absolutely exhausting.

We recently hired a PR firm, Bread & Butter here in San Francisco, and now there’s somebody who is doing that.  I will look at the feed and say, “Thank God this person is doing it.” [Laughter]

To echo what Reem said, we do social media campaigns.  We are in the ballpark and very excited about that.  We will have a contest about people doing selfies, that kind of thing.  You got to maintain the conversation.

MARY HUSS:  Anyone else about social media?

[AUDIENCE QUESTION]   David Grossman.  I am with Slow Food for Fast Lives.
A couple of referenced issues in sourcing, challenges in sourcing, I’d love to hear more about that, especially as it relates to sustainability, however you define “sustainability.”

GARY GUITTARD:  I will start on that one. I think the majority of the cocoa in the world is grown in West Africa, and the people that grow it are probably the poorest people in the world.

There has to be a way to be able to actually get a better price for cocoa and to have them get a better price.  You have the governments that take their cut, and we are talking about a lot of infrastructure, political infrastructure within countries that keep that from happening.

There are certain things that are happening.  We are a partner with the Gates Foundation and the CLP program that they have, which is an educational program that basically empowers the farmers and the communities.

The whole issue now is to start getting the communities together and empowering the communities.  We are doing that.  It is really an industry-wide thing.  Hershey is doing a thing with phones.  There’s the World Cocoa Foundation, which you all might want to check out, and maybe even give money to because of all of the things that are going on there and the things that we do.  I am on the board of that organization, but there’s a real focus on the labor issues with regards to cocoa, but it is changing.  It is happening.

You have to realize that it is social infrastructure and an actual environmental infrastructure as well.

If you go to Africa during harvest, you can see somebody walking with a bag of cocoa beans out in the middle of nowhere.  I mean in the middle of nowhere.  They may have walked five miles with this thing on their back, 100 pounds of beans. It is extraordinary, but there’s a huge amount of effort that’s going into it.

Hopefully some of the South Americas – a lot of our cocoa comes from South America, which is a lot — we pay huge premiums for the cocoa we buy. So the farmers are pretty well off, but we also buy West African cocoa as well.  We have a lot of — our small company can’t do a lot of the projects that a lot of the larger companies are doing with the traders that we work with.  That’s why most of our West African cocoa we are sourcing through Fair Trade and working with Fair Trade.  We do a lot of work with Fair Trade with regards to helping their farmers make a better quality as well.

We are going to the Ivory Coast here in the next few months with the Fair Trade group.  It is a constant battle.  It is slowly, slowly turning the ship around, but it is going to be a long time.

Education, if you teach a woman in West Africa to read, it raises the whole family, the kids then are taught to read.  If you teach the father, it is a little different, but it also makes them better businesspeople as well, just learning to read.  So education is a really hugely important aspect as a foundation.

TIM FALLON:  Being in the protein business, we focus on the supply.  Yesterday I was out in South Dakota visiting where we get most of our turkeys from, and we are looking for and partnering with growers that basically share the same values.

So we are looking at the amount of space the turkeys have got as they grow, water, feed access, ventilation, how they are handling their birds, how they are processing.  We do that on the turkey side.

We get all our beef down from Harris Ranch down in the central valley, same thing, great family.  We know the guy handling it, and everything is state of the art.

Same thing with pork, people are not using gestation crates.  We buy a lot of pork from Coleman and Niman as well.

For us it is really out looking at the raw material that’s going into the product, making sure that the suppliers are reputable suppliers and kind of follow the same guidelines.

SHAUN O’SULLIVAN:  Just to add to what Tim said, there’s water, there’s hops, there’s yeast and there’s malt.  And probably the one thing in there aside from water these days, which we have been talking about internally, is hops.  Hops have different characteristics, different flavors.  The bitterness in the hop alone that you get, there’s so many different types of hops out there.  And the market fluctuates up and down in terms of supply and demand and cost.

We would not — we have been keeping our eye on that for a long time.  Now that we are in this production business, our contracts are out two, three, four, five years now so we have that. It is vital.  We can’t make it without them.

MARY HUSS: I have a question for all of you guys.  As you mentioned, San Francisco has a huge foodie culture.  I was wondering what your strategy is for standing out amongst all these other food businesses.  Do you see this as a fierce competition being in the food business, or do you see it as an advantage?

REEM RAHIM HASSANI:  I see it as an advantage.  I don’t see the competition.  There are other tea companies based in the Bay Area that distribute nationally.  Whether they were here or anywhere else, it wouldn’t really matter because you are really competing on the shelf.  You are not competing in your backyard type of thing.

You have to do what you can as a company and a brand to stand out, be different, be innovative, offer product benefits that they don’t. So all of that you have to do.

I think in terms of having other foodie companies here is wonderful because you share resources.  We have coalition — we have a packaging coalition going on within our company to try and create an overwrap.  We have our tea bags and our overwrap.

All of our packaging is really made out of recyclable material or recyclable, it’s very sustainable in that sense.  But our overwrap is not, paper poly, foil poly.  It can’t be put in the garbage or the recycling bin.

We have been working with other manufacturers, Clif Bar, Nutiva, sorry, these names are escaping me, but many manufacturers from the Bay Area that are looking for a source of overwrap. Everything has to be sealed in some sort of plastic seal that is not a GMO-based corn, which all the plastics, bio-plastics are.  There’s a Eucalyptus-based material.  It is under testing right now.

But because of the collaboration among like-minded companies, we can make it happen hopefully, and it is compostable.

MARY HUSS:  All right.  I have a question about money, cash, financing growth, access to capital.  You’re all different ages and sizes and that sort of thing, but when you have to finance the huge equipment purchases, the expansion of the facilities, new product development.  So talk about some of the experiences that maybe others can learn from.  How difficult, I guess, is it to access the capital?

SHAUN O’SULLIVAN:  You can never have enough.  You always have to have more.

MARY HUSS:  There are bankers in the room. [Laughter]

GARY GUITTARD:  You have to really be smart where you put your money, and everybody in the company has to buy into it and your direction.

At least in manufacturing on my side, everything is connected to everything else.  So if I don’t have capacity in one area and I build something in another area that I don’t have the capacity upstream from it, I am just shooting myself in the foot.

So you have to really think about how you’re spending your money and what the payback is. As long as you look at payback, I think, and/or potential payback, you’re good.  Again, don’t build it and they will come.

REEM RAHIM HASSANI:  I think finding the capital isn’t so difficult.  I think it is the variations of how you can get capital.  Our preference is loans so that you don’t give up equity share in your company.  And of course, to get a bank loan, you have to show profit and show success over a period of time, which thank goodness we are at this point.  So it is easier for us to get that kind of capital.

Prior to that, it was investment capital, and that’s not that difficult in these types of companies that are the growth sector of food economy.  It is just a matter of finding the right partner, making sure that they are aligned with your company values and how you want to grow and your business strategies, et cetera.  And of course, the valuation of the company and making sure you are comfortable with that.

There’s definitely negotiation and having the same people in the room that are aligned and, of course, the prior sort of vulture capitalists is not a comfortable place for founders and entrepreneurs, so you look for people who have more patient capital, that kind of thing.  Those are the ones you have to deal with.

MARY HUSS:  Thinking about you building that facility.

SHAUN O’SULLIVAN:  I signed a big loan.  You kind of get into this thing and everything is asset-collateralized loans.  But really you just can’t put it there.  You have to build things around it, and you have to run the thing. Loans beyond that become necessary.

Exactly what you said, I don’t want to give away equity.  Loan’s preferable.  That’s the route we got in.  There are bankers out here, and they probably hear that all the time.  I think that’s an important conversation to have with them.

MARY HUSS:  I am going to wrap up here and ask for a couple more questions and then leave some more networking time. Back to that culture of innovation.  If you’re 97, if you’re 150.

TIM FALLON:  146.

MARY HUSS:  If you’re 15 or 16, how do you recapture what that founding spark and spirit and innovation that caused the company to come into being? In these highly competitive times, how do you foster and nurture and continue that culture of innovation?  Start with the 97-year-old company.

TIM FALLON:  Not the oldest guy.  We make it part of our accountability for everybody in the organization, particularly on the marketing side of it, new product development, where one of their goals is to continually improve and astound and amaze our customers, consumers and our retailers. To continually look for ways to make our products better, make them more accessible.

We have our incentive system set up to work that way.  That’s one of the ways that we look at that.

SHAUN O’SULLIVAN:  You know, we don’t have like focus groups or anything like that. Everything that we have ever innovated or put a new beer style in a can or a keg has all come from the pub on 2nd Street.  Literally I’ll come up with an idea, if it sells in our pub, and we like where it is going and the marketplace can absorb that idea, we’ll create it and go through the process and expense of creating a beer label and putting it out there.

I still home brew, if you can believe it. It is something that gets me back into it, and it is what it’s all about.  So that’s where our innovation comes from.

MARY HUSS:  Very close to the customer, it sounds like.

GARY GUITTARD:  I think innovation comes from the people that work together.  If you have creativity, to me it is a really important aspect of life in general.  The more we can expand and get out of our particular mode of kind of how we were raised, the more we can expand that, the more we are able to meet others that might be different than us and a spark of something happens innovatively.

I think Martin Buber said, and I don’t want to get hokey here, but “God is in relationship.”  I think God is in a way creativity. So I think relationships between people is what helps create things that are greater than today or that are greater than right now.

I think that that is why you have Silicon Valley.  I think it is built on relationships between people and ideas.  We can’t do it alone in a cave.

So for us, the people aspect is an asset of our company, that’s the important part.  As long as we all get in our ruts — it is not easy to get out of it sometimes.  We all know if you’re married.  But that happens in work as well.  I’m sorry, but it happens in work as well.  It happens in a lot of relationships.  You get comfortable in doing one thing, and you think it’s okay and you’re going along fine thinking it’s comfortable, and you find out it is not.  You have to move and try something different.

So for me, that’s the creativity, the more flexible we can be as people and not too hung up in ourselves or one way of doing it.  And I think the creativity, innovation happens within the company, and it happens all over the place.

REEM RAHIM HASSANI:  Yeah, I would add to what’s been said is we travel a lot.  So you see various things around the world and food and habits and rituals that always spark new ideas.  So we are always kind of looking at trends and new ideas.

Something that I think is interesting, I just had a conversation with our marketing director last night about new product development, and we have a brainstorm next week on new products.

As you grow, as a company you tend to hire folks that have more experience and have more marketing background, and that comes with research and stats and looking at what’s been happening and all kind of things that are almost to validate your idea.

But the problem is a new idea has never been done, so where are you going to find the research from?  He wanted to extend the new product build-out so that we can do that research, and we can study and vet and we can do all this stuff.

I thought wow, we used to come up with a new product in a month.  And because you did have an idea and you go and that’s what makes you an entrepreneur, and now it has become boring.  Who wants boring?  Creativity is not boring. Creativity is exciting.

It’s interesting as one grows to be able to get those people on board with your crazy idea and balance it with some research.  A lot of crazy ideas don’t sell.

Then to echo creativity, I am an artist. I have a studio in my garage, and my brother’s a photograph.  He photographs from airplanes and takes these amazing photos.  That’s our number one passion before being businesspeople.  Not that one has to do that, but I think doing something outside your business is important, whatever that passion and love is.

SHAUN O’SULLIVAN:  Just to echo that, brewing is a very collaborative task.  We as brewers get together.  We’ll come up with different recipes and put them out together.  You’ll see two different breweries get together.

We have also stepped out of that idea and collaborated with other companies.  We did an oyster stout with Hog Island Oyster Company.  Went up to visit John and Terry up at the farm and came up with crazy ideas and put it in a can and had a great story called “Marooned on Hog Island,” very innovative and creative and collaborative.  Gets you out of your rut you spoke of.

We are doing other collaborations with breweries.  We are doing a collaboration with an independent rock band called “The Shins.”  I don’t know what that’s going to be about because there’s not an ingredient that can go in there, maybe some music.

Every time you do these things, you learn something different.  I would say today we should do a meat, chocolate and tea collaboration brew somehow.

REEM RAHIM HASSANI:  I was going to add that being in the Bay Area, we have done a tea beer, a tea stout with Linden Brewery and tea chocolates with TCHO Chocolate.  Obviously they are all good companies, but we’d love to do that.

SHAUN O’SULLIVAN:  Absolutely.

MARY HUSS:  Salami chocolates could be good. [Laughter]

SHAUN O’SULLIVAN:  The new thing.

TIM FALLON:  Just need to cure it. [Laughter]

MARY HUSS:  Okay.  Real quick, is there a mistake, a really juicy mistake that you learned a lesson from?

GARY GUITTARD:  One, only one? [Laughter]

MARY HUSS:  The one big one that you might share.

TIM FALLON:  I would say there’s a lot for me, but I’d say most of them have been on the personnel side, making a bad hire has been a costly mistake.  Those are sometimes you hire a warm body instead of wait for the right person.  Those generally don’t — that usually costs a lot of money.

REEM RAHIM HASSANI:  We put a lot of money behind a product that failed.  Put a lot of money behind one product rollout, and it didn’t succeed.  Lesson learned.

GARY GUITTARD:  Yeah, the same thing.  I think sometimes my whole life was a mistake when people ask sometimes, but I get in those moods. [Laughter] But yeah, we have all done that.  We have all had this great packaging idea, and you get the package made.

I remember that we had a can that – this is going to sound so stupid.  We had a can that was a beautiful can.  In the old days in San Francisco, you couldn’t make one product.  In the old days we made — because the population was only, you know, maybe 100,000 people.  You had to – we had coffee.  We had baking soda.  We had mustard and a number of different spices, teas as well, anything we could kind of import.  We were close to the bay and port.

We had this little can that was a pyramid can and a screw top, and I wanted to put these little molded pieces of chocolate in it.  We made all of these cans and had them all ready to go.  Then the pieces that fit in it didn’t fit in the top of the can.  You could put them in maybe one by one, but that didn’t work.  It happens every day, folks.

SHAUN O’SULLIVAN:  I feel like that’s the therapy question. [Laughter]

MARY HUSS:  Get it off your chest. [Laughter]

SHAUN O’SULLIVAN:  I think for us we really haven’t — I think personnel, absolutely.  You think you got the right person and it doesn’t work out, which is unfortunate because we are such a small company.  I think honestly when we opened up our pub on 2nd Street, we were very naive in a lot of ways, which I think is important as an entrepreneur, not knowing what’s ahead.  If you knew that, you wouldn’t do that.

I tell people all the time, it was probably not opening up with enough money.  We opened up in August of 2000, and that is hard. When we opened, it was the end of the dot com bomb, next year 9/11, economic downturn.  It was three or four years of:  Are we making it?  Money, definitely money.

MARY HUSS:  I have actually a final question, and then I know there are other questions out there, but maybe you could come up and ask them in person so we can leave a little networking time. You can answer this quick if you haven’t already.  What’s the most exciting product or innovation or development, just something you’re really excited about in the next two to five years?

GARY GUITTARD:  There’s not a — you know, ever since I was a kid, I really wanted to make the best milk chocolate in the world.  I never really liked our milk chocolate.  I tasted the stuff from Europe, and all of these things have changed.  What I tasted back 40 years ago, it doesn’t taste that way today.  I call it incremental degradation, and it’s what happens in these little tiny steps that are taken over time.

It’s happened a lot in the food industry. That’s why you’re seeing this big resurgence of people trying to get back to the craft and things that really taste like they should be tasting.

But I always wanted to make this milk chocolate.  I am still on that quest.  So I would love to — that would be one of the things I have, but I have 100 things on the shelf that I am working on.  They are all pretty exciting.  But that one, make this milk chocolate.

It is really important with the type of milk that we get what the cattle are eating. There are all of these crazy things involved, how the milk is processed, that are important in that process, the types of beans we use.

Right now I am on this hunt to get different types of beans from around the world to try and get something — and a blend that’s very unique, but we’ll get there.

SHAUN O’SULLIVAN:  I think for me, and this sounds like really marketing blah, blah, blah, but new packaging.  The variety packs for our beers, those are important to me.  It excites the public and me.

But beyond that, before I got into craft beer, I lived in Los Angeles and I was a photographer.  I shot for a local weekly down there, went to punk rock clubs and a lot of political stuff.  To me it is about the pursuit of the art.  As corny as that sounds, that’s what it’s about to me.

I have a million recipes and collaborations I want to get up and do.  That’s what gets me out of bed in the morning.  I think you will see more collaborative efforts from the 21st Amendment as time rolls on.

TIM FALLON:  For me what we are really focused on now is the continual improvement in our
current line, but we are starting to expand the Columbus trademark into other food markets, but meat being the main component.

So we are looking at a lot of different ways to expand our brand.

MARY HUSS:  What would be an example?

TIM FALLON:  We are going to launch an all natural take-and-bake pizza, and we have done a turkey bacon that’s been pretty successful.

MARY HUSS:  Very interesting.  Reem?

REEM RAHIM HASSANI:  I don’t know, but we toy with ideas outside the category, but still with tea… tea beer, tea chocolate, tea ice cream.  I want to do tea chips, but nobody wants to do that, like kale chips.

SHAUN O’SULLIVAN:  One thing I was going to say before we close.  I hate the word “product.” We have the saying at 21st Amendment:  Beer is a living thing.  We don’t make ball bearings or cocaine.  We make beer.  You make tea.  You make chocolate.  I wanted to say that and pass that along.

MARY HUSS:  Any other parting words that you wanted to get out there?  Thank you.  You all have been absolutely wonderful.  Thank you so much.