What the Science of Food Manufacturing Reveals About our Food System

Editor’s Note: Noemie Delfassy is founder of Finer Flavors, the startupbehind the natural, plant-based and sustainably crafted snack brand FRECIOUS. She has a background in chocolate, managed a sushi business in Florida, and started her career consulting for Boston Consulting Group in Texas after completing an MBA at Harvard Business School. Here she gives an in-depth account of the food manufacturing process and some of its woes.

From the most industrialized cheese-in-a-can to the most pristine pink lettuce, every food product goes through extensive amounts of handling and processing, regardless of whether it reaches the final consumer at a restaurant, a grocery store, a farmer’s market or via weekly home deliveries.

Unlike other traditional industries well on their way to becoming entirely virtual, food production remains tediously old-fashioned. When I pitched to a prominent family office for an investment in my food start-up, Frecious, members of the investment committee had a hard time wrapping their head around the business model I was describing: “you mean that you buy a bunch of things, you ship them to some central location, you transform and combine them in some way, and then you transport them again?” Yes, this is still the fundamental business model of food production. No, they did not choose to invest in Frecious.

Few of us get excited by the operational minutia and complexities involved in the food supply chain, yet those operational details are where the magic, or lack thereof, happens.

Since 2008, I have visited over a hundred food factories around the world, witnessing first hand the ins and outs of producing a myriad of foodstuffs from raw fish, palm oil, sourdough bread, gazpacho, pre-washed lettuce, chocolate eggs, and slaughtered hogs. Foodie or not, I believe we could all gain from knowing more about where and how our food takes form.

Principles of Food Manufacturing

Food manufacturing is informed by the science of operations and supply chain management.

The premise of operations management is that operating capabilities can be a source of competitive advantage. Not only because operating system performance drives customer satisfaction, but also because supply chain innovation can lead to an entirely unique customer experience — that was the thesis behind Nespresso capsules and the ephemeral juice startup Juicero.

Technically speaking, a production system is comprised of the five key elements below:

• inventory: raw materials, work-in-progress, and finished goods
• equipment
• processing techniques, which include quality assurance
• factory staff
• formal and informal rules (culture)

Every little decision in a factory will impact its performance, which is evaluated using a variety of parameters such as quality, cost, availability, or utilization rates.

While the word “quality” might conjure romantic notions of flavor, texture, and appearance, “quality” in the context of industrial manufacturing refers to zero defects from an established production standard — not to the sensation of pleasure that is brought upon by consuming the product itself.

Models of Food Manufacturing

In small-scale food manufacturing, it is the ingredient that drives operations design. A restaurant chef, for example chef Laurent Petit at his fabulous restaurant Le Clos des Sens in the French Alps, picks aromatic herbs in his vegetable garden, receives the day’s bounty from the local fishermen of Lake Annecy, gets first dibs on the seasonal harvest from local farmers, and, influenced by the color of the mountains that surround him, the smells in the crisp mountain air, and his fondness of harmony and coherence, he develops his dishes using a wide array of techniques and tools, inventing and iterating on his processes as he goes.

At the other end of the spectrum, in large-scale food manufacturing, operations design follows a top-down approach. Once a market opportunity is identified and quantified in terms of expected demand, other key factors such as input prices and logistics costs are estimated in order to compute the unit contribution margin (sales price — variable cost per unit). The decision to build a factory is based on simple math using three hypotheses: 1) unit contribution margin, 2) expected yield, adjusted for ramp-up time, and 3) upfront capital expenditures (Capex). Taken all together, these metrics make up ROIC (Return On Invested Capital), the principal criteria for making any sizable operational investment.

The design of the artisanal and the industrial food operations leads to an established system or set of procedures. See a comparison of the typical attributes characterizing both extremes in food manufacturing:

To increase the chances of success given the important risks involved in incurring upfront capital expenses, companies will pull together the resources required in one mega factory to serve the biggest addressable market at the lowest possible cost. In such high stakes calculations, little time is spent dwelling on the food itself — production capacity and volumes are the primary matters of concern.

Models Gone Astray: the Unintended Consequences of Established Frameworks

While a food artisan will seek flexibility, modularity and just-in-time production capabilities, industrial food manufacturers will solve for efficiency, scale, reliability, and standardization. As a consequence, it is critical in large food operations to eliminate raw material variability and avoid recipe modifications. Machines are perfectly calibrated to support an established process, and the factory’s modus operandi is to preserve this process without faltering.

Whenever possible, industrial manufacturers will purchase pre-processed (pre-washed, pre-cut, pre-portioned, pre-treated) ingredients to ensure high machine utilization and minimize downtime associated with set-up or rework. Ever-changing natural ingredients, subject to variations in price, availability of supply, or physical characteristics, are replaced by chemically manufactured substitutes, which can be purchased at fixed prices, with implacable predictability in their organoleptic and chemical properties. This is the reason many packaged foods taste and look exactly the same: they are made from a few processed ingredients that have themselves been pasteurized to extend their shelf life, and to which artificial flavors and colors must be added to counter what has been lost during initial processing (usually accomplished by adding preservatives and/or applying thermal treatments which tend to neutralize organoleptic and nutritional properties).

Ongoing cost reduction initiatives eventually lead to the holy grail of “recipe optimization,” in which noble natural ingredients are replaced by synthetic substitutes, or through which the relative proportions of different ingredients in a recipe are switched around to reduce the overall ingredient cost. In the chocolate world, cost savings in the range of 10–30% can be achieved by replacing cocoa liquor and cocoa butter, semi-finished products derived from processing pricy cocoa beans, with chocolate equivalents or alternatives called “compounds”, composed of vegetable fats (palm, soy, or coconut) and cocoa powder. Additional savings can also be enjoyed when increasing the amount of sugar, lecithin, or milk powder relative to the number of precious cocoa products. This is the reason your favorite chocolate cookies from childhood probably don’t taste the same today, as factories around the world have professionalized their management systems in the past several years.

This approach worked very well for some time — CPG (consumer packaged foods) companies made a straightforward promise: “Always the same great taste,” they competed on price and distribution, needing little more than witty catch lines in national advertisements to hook loyal consumers.

However, it appears this operational model may not be as relevant in our current food landscape, where tiny start-ups are stealing market share from established firms, touting promises of small batches and specialty ingredients with beneficial effects on health, wellness, spirituality and popularity on the ‘gram.

Rising from a rejection of “malevolent” packaged foods, entirely new food consumption habits are forming. Meal delivery companies are expanding their services at ever more competitive price points to simplify every day eating — some fulfilling the needs of a whole day’s food intake with an array of liquid, fresh or frozen meals, elixirs, and snacks sold directly to the end consumer. Discerning eaters who haven’t yet outsourced their every food decision can instead organize themselves to receive weekly staples of produce, raw goat milk or almond-flour paleo bread at their doorstep with the added benefit of supporting their local food communities.

Perhaps this signals the return of the artisanal model, with foods created akin to a live concert experience: the best ingredients coming together in a single place, at a unique point in time, to be enjoyed instantaneously, at a price determined by the highest bidder. Enter the $15 unpasteurized green smoothies, and charcoal lattes (add $1.00 for oat milk substitute) served with just the right amount of attitude at hipster cafés.

But what about those of us who like a simple, convenient approach to food that can be spontaneous, wholesome and delicious without being fancy, automated, or requiring an annual subscription? Must we give up on our desire to purchase high-quality foods at fair prices?

I believe there is room for better-packaged foods in today’s changing food landscape. I am confident that by figuring out how to manufacture them, we could not only help counter the degradation of our health outcomes and the depletion of our natural resources, we could also restore the broken trust in our food system.

Making Foods Differently

Albeit the recent departure of Campbells from the all-star team (the Company has recently announced it would sell its refrigerated food business, including fresh vegetable soups and juices) not all packaged foods companies have given up the fight to refresh their offering. They are trying to revamp their customer promise, invest in innovation, and rekindle notions of nutrition and flavor experience within their product development teams.

Judging from the absurd and aggressive behavior my Frecious team has encountered whenever we interacted with R&D staff from some of the big food co’s, my guess is that they have a long way to go in re-designing their operations, and their culture, to favor the development of the kinds of foods that consumers want to eat: healthful, flavorful, and natural.

One of the fundamental principles of Operations Management stipulates that one cannot change operational targets without changing operational systems. Translation: we cannot make different foods if we do not make food differently.

This is how my Frecious adventure began: I wanted to combine artisanal techniques with industrial equipment with the aim to industrialize fresh, natural, and health-supporting packaged foods accessible to all. After four years serving leading foodservice and retail establishments in Europe, I am excited to continue on this journey with peers from food companies, small and large, who also wish to develop different food production systems and the business models that will support them. While experimenting with the tenets of artisanal and industrial supply chains, I have already seen there is much to gain by exploring the way of the middle. We are developing a new approach to food manufacturing with intrinsic food quality, cost-efficiency, and sustainability at its core. Join us.