Hearthside Defines Contract Manufacturing: BakingBusiness.com

From BakingBusiness.com October 10-2013

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Hearthside Tightens Focus on Contract Manufacturing

Hearthside Food Solutions sold Golden Temple in May because the Eugene, OR-based granola and cereal business no longer fit into its co-manufacturing business model, according to Rich Scalise, Hearthside’s chairman and CEO.

Downers Grove, IL-based Hearthside purchased Golden Temple in 2010 thinking that the cereal company would enhance its co-manufacturing capabilities and reduce shipping costs to the Northwest and West Coast. All of Hearthside’s other snack plants are located in the central US.

Not a brand company: During the past three years, Golden Temple’s branded and private label business expanded, and it became apparent to Mr. Scalise that it might be a better fit for another company. “We’re not in the branding business,” he noted. The proceeds from the $158 million sale to Post Holdings is helping fund the merger between Hearthside and Ryt-way Industries, Lakeville, MN.

Hearthside defines contract manufacturing: But how does Mr. Scalise define co-manufacturing? Co-manufacturing means Hearthside doesn’t sell directly to retailers or foodservice operators, and it doesn’t have any direct communication with consumers. Rather, it produces snacks and baked goods for customers that ultimately sell their branded products to retailers. Private-label products are typically sold under supermarket or store brands and sold directly to consumers.