For a sector that deploys cutting edge tech in everything from logistics to pathogen control, the food industry is still stuck in the dark ages when it comes to finding co-manufacturers, says the cofounder of Keychain, a rapidly growing startup on a mission to become the ‘Angi’ of CPG.
If you’re a brand or a retailer looking for someone to manufacture a food or beverage product, says Oisin Hanrahan, the options are not great: word of mouth and existing contacts, trade shows, pricey consultants, brokers, and if all else fails, Google.
The problem with these approaches, he says, is that they are both limited by the size and scope of your existing network, expensive, time-consuming, and in the case of online searches, very imprecise: does manufacturer X have the equipment that can actually make your product?
“Trade shows are an amazing way of deepening relationships but an awful way of solving a structured data problem,” Hanrahan tells AgFunderNews. “If I want to make a low sugar, high protein bar, wandering the floors of the Las Vegas Convention Center hoping to find a company who can do that to my exact specs is a horrendous use of my time.
“However, if I’ve already met those people on Keychain and then I go to the show and set up meetings with all of them, it’s a great use of my time.”
20,000 US manufacturers indexed on platform in under eight months
Hanrahan, who cofounded online home maintenance platform Handy HQ before selling it to Angie’s List (now Angi), is now applying the Angi playbook to CPG manufacturing.
“We started doing the research and realized that it [finding and onboarding a co-manufacturer] is an incredibly manual process,” he explains.
“So we took everything we learned at Handy and Angi and decided to build technology for brands and retailers to manage their relationship with manufacturers, ingredient companies and packaging companies,” adds Hanrahan, who raised an $18 million seed round late last year led by Lightspeed Venture Partners.
“We got the seed capital and started building what is now the deepest data set of manufacturing in the United States that allows any brand or retailer to look up over a million SKUs [stock keeping units] and find co-manufacturers with the capabilities to produce them.”
He adds: “If you’re in the private [label] sourcing department of a large retailer, for example, we’ve already indexed all of your products from over 300 sources online, plus some data feeds we’ve bought. We then have our own data models that analyze every single product and tag it on a process level and at a packaging level.
“Say you want to find a co-packer for a certain kind of trail mix. We use AI to analyze the packaging and the ingredients in the description in order to determine what processing and packaging equipment is needed to manufacture it. We then show you which of the 20,000 US manufacturers on our platform can make it.
“You can then filter them by certification or location, for example.”
10,000 brands and retailers
But where does Keychain get its information about co-manufacturers?
“We’ve been doing this for 14 years in other categories,” says Hanrahan. “In home services, for example, it’s the exact same problem where many plumbers, painters, carpenters, are not listed online, but somehow they exist on Angi.
“Most people who come into this start by doing online searches. We do the opposite and start by looking at every single company that’s listed as a private enterprise in the United States. And then we use that data set to identify which ones we think are manufacturers based on the signals we get from NAICS codes [used to categorize companies based on their primary business activity] and all the rest.
“Then from there, we do online data collection, most of it automated, coupled with manual research. We also have relationships with sellers of equipment and machinery who tell us who they’ve sold machinery to, which allows us to enrich the data.”
But ultimately, he says, “What drives more manufacturers to engage on Keychain is the fact that we have so many brands and retailers engaged, and they want to be a part of it. So it becomes a virtuous cycle [as they help Keychain populate its platform]. So we started work last summer, we launched in February this year and we’ve already had over 10,000 brands and retailers engaged with Keychain in less than eight months; they’ve submitted over $200 million of projects just in the last month.”
Subscription model
Keychain is free for brands and retailers. For manufacturers, it is free to have a basic profile, says Hanrahan, noting that manufacturers who see their profile on the site and spot any errors can submit change requests to Keychain.
To truly benefit from the site, however, “Manufacturers can have a partnership relationship with us where they pay an annual subscription fee from $5,000 to $100,000 depending on the number of categories they are in, the size of the business and so on,” he says. “This gives them influence over the quality of images and the way in which their information is presented, which key capabilities they want highlighted, which production processes, packaging options, certifications are verified and so on.
“But we don’t charge a percentage, we don’t charge a brokerage fee, and as a result, people love it.”
For manufacturers that see their profile on the site and spot any errors, he says, they cannot amend their own data, but can submit change requests to Keychain.
Beyond search: Onboarding and ongoing workflow tools
But like most platforms attempting to connect partners in any given industry, Keychain is looking to be far more than a CPG matchmaking site, he stresses. “We are building the full stack to go from search and discovery to scheduling the call, signing an NDA, going through your product specs, packaging approval, going through master service agreement negotiations, final nutrition panel sign off, and so on.
“Ultimately, we’ll probably get to financing as well, but we’re building in each of those individual segments. And each of these workflows will become their own marketplaces in areas such as ingredients and packaging where we’re bringing in suppliers. So we see this platform supporting all of the different parts of the supply chain. It’s about bringing the entire ecosystem together end to end.”
‘Before AI it probably would have cost us 10 times as much’
Stepping back to look at the bigger picture, Hanrahan notes that many CPG manufacturing plants “over-invested during COVID” when food consumption shifted to the home and were left with extra capacity when the foodservice industry recovered. But at the same time, he notes, there has also been an increase in private label consumption and startup brands looking to outsource manufacturing.
From a tech perspective, meanwhile, we now have AI tools that enable firms such as Keychain to build the software to help bring these ecosystems together.
“We probably invested $3 million in building the data asset; before AI it probably would have cost us 10 times as much. But I think we’ve also grown so quickly because we’ve done this before; we’re just applying those skills to a different industry.”
As for the accuracy of the data on Keychain, he claims, “20 of our people are focused on data accuracy, research and operations, in addition to our own AI tool, which monitors all of our data all of the time to increase the accuracy.
“We’re doing hundreds of calls a week with manufacturers to talk to them about Keychain, and every one gathers more information about their capabilities. Then every time we introduce brands to manufacturers and they say hey, I can do this product but I can’t do that, we aggregate all that data to make our profiles even richer. So the data is just constantly getting better.”
Success so far and next steps: ‘We’ve signed up paying manufacturers at a much faster rate than we ever anticipated’
According to Hanrahan: “When we started, we knew that brands and retailers were desperate for a search and discovery platform. But what’s surprised us most has been the interest in the workflow tools we’ve put up, being able to post a spec sheet in addition to the raw search or post a project [capabilities]. So now we’re building out a much richer set of workflow tools.”
On the co-manufacturer side, meanwhile, he says, “We’ve signed up paying manufacturers at a much faster rate than we ever anticipated.”
Right now, Keychain is focused on the US but is looking to expand both its geographical reach and the number of categories it covers, he says.
“So today we do food and beverage in the US, but we’re obviously looking at Canada and Mexico and other markets as well as categories such as supplements, pet care, household beauty, and personal care.”
Further reading:
Cromatic unveils AI-powered ‘Sourcerer’ vendor search tool for outsourcing R&D in the life sciences
Exclusive: ReScale emerges from stealth with $2.3m to address ‘biggest pain point’ for small brands
Guest article: The real impact of tariffs on US produce prices