Odd LotsWhy We're Now Living in The Golden Age of Snack Food
Want some Doritos? For years, you might have only been able to get one or two snack chip flavors. But right now on Amazon, you can find numerous varieties, from barbecue to nacho cheese, spicy sweet chili, or Late Night Loaded Taco. And this is really just scratching the surface. There are now dozens of flavors of Blue Diamond almonds, including blueberry, smokehouse, toasted coconut, sriracha, habanero BBQ, and wasabi and soy. So how did this happen? It turns out that some of it is a tech story. Thanks to breakthroughs in automation at both the plant and warehouse level, companies are able to create and ship more varieties than ever before. On this episode, we speak with Ryan Harlan, the director of business development at the E Tech Group, about the rapid changes in the industry over the last decade and how that turned into so many more consumer offerings.
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Hello and welcome to another episode of the Odd Lots podcast.
I'm Joe Wisenthal and I'm Tracy Alloway.
Tracy, I think it's because of all of the illegal cannabis stores in New York City.
But this could go anywhere. I know, all right, go on.
But the thing about them, and I guess it's kind of funny, and I guess it kind of makes sense, and maybe it's also kind of cool, is that The other thing is like, so they sell various weed products, but they also seem to be the favored vendors of all kinds of exotic snack foods in New York City.
Right, So if you go into a corner store in the window, yeah, yeah, exactly, you don't have to go in, you can just look. You will see weed probably a lot of these stores are still unlicensed. You will see energy drinks, you will see maybe some alf bars and things like that. Yeah, and then you will also see lots and lots of snacks. It's like the ultimate vice shop, right, like you can satisfy, you can satisfy all your cravings or almost all of them in one shop.
Yes, absolutely, not only do. They have a lot of chips and snacks. They have the type of snacks that used to be you would get only when one of your colleagues like went abroad, right, So you'd have a colleague that like took a trip to the Philippines or took a trip to Hong Kong or something, and then they would come back and they're like, oh, look I brought like, you know, Macha flavored kid kats or mapo grilled tofu flavored potato chips, or diry and flavored potato chips. And then it never was there so cool. But now they're everywhere in the stores here.
They definitely are more available than they used to be. My experience with this personally is probably a little different to a lot of other people, as someone who you know, spent a lot of you that in Japan. Yeah, I mean I have I have vivid memories of going into like a don Keyixote, which is this big kind of department store, specifically to buy flavored kit cats. They were always in the basement and there were like dozens of flavors. Even in this would have been in like two thousand and one, two thousand and two, and I feel like flavored Kitkats are to me probably what shrimp is to that character from Forrest Gum. Like I could sit here for the next twenty minutes and just like rattle off all the flavors that I remember. I love Kitkats.
So in doing research for this episode, I came across this great website, takitos dot net, which basically refused every single snack and so right now they have links like and I don't know if all the links work, because I get the impression that some of these flavors are cycled in and out, but there are links and reviews of one hundred ninety seven different flavors of Dorito's that theoretically currently or at some point we're sold on Amazon, Dorito's blue Grilled Steak, Dorito's Golden Cheese Flavor, Dorito's late Night Tacos at Midnight, Dorito's three D crunched chili cheese Nacho, and then I mean it just the list just goes on and on. It is nothing like when I was a kid in the US, whereas like there was like Dorito's and cool Ranch Dorito's. Yeahs it, We're living in a golden age.
So I disagree a little bit on this point. So, yes, there are lots more flavors that exist, but as you just pointed out, like they are not always available. And Okay, in New York, you know, you can go into a weed shop and there's a novelty value to buying like some exotic flavored potato chips alongside you know whatever else. But I feel like what this really kind of comes down to is this really really intelligent marketing strategy where you create all these new types of flavors and you get people talking about them, and maybe you don't produce them in huge quantities, but people like to talk about them. People like to you know, take pictures where they're eating Matcha flavored or like Soccer of flavored kit cats or whatever. So like for the companies, it feels like this is kind of a win win.
Well I agree with that, and you do see this, like on Twitter, a lot of it's like, oh, Dorito's just teamed up with you know, Jack in the Box, or Dorito's just teamed up with so and so, and then there's like a short run thing. So I do get the impression some of them are by the way, I just can't he Dorito's gold picking Duck flavored. Oh that sounds so good, so good. A right, We're gonna have to try to anyway. But it does reason the question like how did this happen? I mean, it's great, I love it. I mean I don't need that many chip, but in theory I love it. How did we enter this world where we just have so much variety? And although a lot of them maybe are short run, like a lot of them do exist, you have to work a little bit. But while we're waiting, I did order like a twelve pack Dorito's pack and a sixteen pack different flavored kid Cat So they are gettable, you know, at various times.
They are gettable. I still have questions about the overall distribution strategy here, but it does seem like there is this trend towards a much wider and more exotic variety of flavors, and so I'm curious how that came to be, Like what is the corporate strategy that's actually driving it? And also the technology? Right, so how can it be that a company like well, Kitkat's not a company. In fact, I think Kitkats are made by both Hershey's and Nestley, depending on what part of the world you're in. But how is it that they're able to do you know, dozens and dozens of different chocolate flavors and variations of.
Oh my god, I check out this flavor Dorito's Roulette. Have you heard of this?
This episode is just going to be us like looking at this is great.
This is such a good idea. Dorito's Roulette originally came in a Nacher Cheese version, offering randomly placed hot chips among regular Nacher cheese works. That's such a good idea, like some excitement anyway. To me, this is a golden age, So I think we need to understand and the sort of infrastructure and science and technology that has created this era of chip abundant And I'm really chip abundance memorous snack food of us.
This could be a different type of Loots episode.
Put go on, Yeah, there's no shortage here. It's the lack of shortage that we're blown away by. We're going to be speaking with Ryan Harlan. He is the director of business Development at Etech Control Systems Integrator, and he works with the various food and snack companies that are rolling these out across the assembly lines. And he also works on distribution. So, Ryan, thank you so much for coming on the podcast.
Thank you for having me.
So I think we're a golden age. Tracy is a little skeptical. Where do you come down on this question.
I think we're almost in a golden age. I think we're getting there. I think within a lot of these snack food companies. Doesn't quite think we're to the maximum capacity, right, We're.
Still haven't reached out.
The best is yet to come?
Is yet to come?
That sounds good. So maybe before we begin, can you explain what it is that you do in the snaw back food industry so to speak.
Sure.
So we work on the industrial automation side. So we're an engineering services firm and panel shop. So we build control panels that contain the programmable logic computers the PLCs that have the programming that tie all of the various machine centers within a line that create the snacks. So you'd have your buyers, dehydrators, fillers, cappers, baggers, palatizers, whatever you would have on the line for whatever type of snack you're producing. The control system has the program tells what to start, when, what to do which process, and then eventually at the end you get your product and then send it off to the warehouse where a different system picks it up.
So I want to talk about the technology and how we got to this era, but first I want to actually establish the premise of the conversation. Is it true, though, regardless of whether we've reached the true Golden age or not, that we just have tremendous more variety of snacks than say, when I was a kid, and I think there were like two flavors of Dorito's.
Yeah, no, that's absolutely true. And a lot of the snack production is local. So if you're buying Freedola chips, you're probably getting them from a factory within a couple hours from you for the most part. If you're in a large population center, and these factories have been around for fifty plus years in a lot of cases, and it's a local supply chain. So the change from two flavors to multiple flavors with a similar population typically in an area, is due to enhance production and throughput.
On that note, when did this become a thing or start to become a thing and what was the proximate like trigger or development that kicked off. I mean, I imagine there was a company that was probably at the forefront of this, and maybe it was the maker of kit kats, or maybe it was a potato chip company or something like that, But what was it that kind of set this development in motion?
I actually think these soda producers were on the front lines of this for doing single runs, so you could dozens of different mountain dew flavors going back twenty years right, and limited time offerings. And soda is really easy to do this with because you have your recipe, you clean out your pipe, everything is the same. It's a really simple industrial process and it's a lot more difficult when you're dealing with snack food comparatively.
Before we even start talking about variety though, how is it chip made? Let's just go think about like a single bag of Fritos, I like Frito's, you know, just like when we think conceptually, like what is the process that existed probably forty years ago, twenty years ago, ten years ago in which we got free doos? What happens to make a frido?
So if you look at the ingredients for a normal freedo, I think it's corn, corn oil, and salt. If you don't have any any other seasoning on it. So you're going to have your ground corn product, you're going to fry it. You could make a frito at home, right, you could deep fry some corn flour and oidy together into different shapes.
I've may squeeze it into shapes and fry it.
I have not made homemade fri doos, but maybe sorry.
I don't think they would turn out quite the same. But it's very simple, right, So you're frying the corn and sending it through and that's really it. So that hasn't changed for the actual production of a free doo. You've had enhancements on the consistency of the shapes, the volume you can do it once, the timings for various fries, and how you might move it through. But the freedom of fifty years ago is looks a lot like how it's made today.
So you're talking about the actual manufacturing process. But I mean that is like in some respects, that's kind of a later step in these snack food product cycles. And the very beginning is you know, I imagine there's a flavor lab somewhere at a large snack food company and you have all these people who are brainstorming ideas and then maybe there's research and development that goes into thinking about a specific one, there's consumer testing, product testing, seeing how people respond to it. It feels to me like maybe one one of the big changes that has happened is that people have like also figured out that, well, you can cut down a little bit on this huge R and D process just by producing a bunch of different flavors. So it's not like it's not incredibly important to your company if you unveil this new flavor and it falls flat, so to speak, if you're unveiling a new flavor every other.
Month, right, And I think what they've gotten very good at is so they would have small scale versions of their factory or digital versions even now, where you would produce something called the digital twin of your factory line and you can simulate the R and D process through there for the actual production and then push everything through digitally to the factory so you can say, we know it's going to take this long to cook, we want to add this much flavor, we want to add this much salt, garlic powder, chili powder, whatever you're going to add to it, sugar, and we can test all that digitally. We know how it's going to flow through the line and then send that recipe directly to the production factory to send it through a test run there. And doing that process I think has sped that up a lot. And they're using ingredients they already have, right, it's just a different ratio. They're not affecting their own supply chain as much as they're affecting their potential total throughput when they make these runs. Because you do have change over time, you do have recipe management, traceability concerns that you have to do for various potential recalls and things like that. So there's an opportunity cost, but it's pretty limited if you feel confident you can get this run in Oh.
That's really interesting. So you can come up with a flavor, and then using digital technology, you can basically simulate what the production would look like using your existing system or maybe figuring out if you need to put anything new in place, although it sounds like for the most part they don't.
Yeah, I think the real benefit for being able to put something new in place is say you wanted to change the bag sizes and you wanted to look at maybe we have a line that goes through normally, but now it feeds into a one ounce, two and a half ounce, and six ounce bag potentially with quicker change over time, so that you can have more variety running through a line. You could basically drag and drop the designs from an OEM into your line and it runs sort of. I don't know if you guys are familiar with the Factorio game. It's a big game for engineers.
No, that's so amazing.
It's really good.
It's a it's a computer game that lets you build a simulated factory with physics and everything. Oh wow, and eventually your factory covers the whole planet. And it's still a video game, but it's it's really it's really interesting that way. And we're doing that in real life now, where we can drag and drop different elements into the factory and potentially move pieces from other production lines to two different lines.
For what we're trying to do. That really speeds up the R and D process.
So let's talk about the increased throughput or the speed with which changeovers can happen, et cetera. So let's imagine it's two thousand and four and someone at Dorito says, you know what, I think that the consumer would like a shrimp flavored dorito, and maybe they've done some testing and some surveys and something like there seems to be some appetite for a shrimp flavored dorito, et cetera. How difficult is that changeover in two thousand and four to get the line to pause and go from regular doritos to shrimp flavored doritos versus the difficult and ease of that technology or that changeover in twenty twenty four.
In two thousand and four, you're dealing with paper in a lot of that part of the factory. So you're getting, if you're an operator, you're getting a recipe on paper to go grab a twenty pound bag of salt, Go grab a forty pound bag of this, Go go do this. And there's a lot more checking, rechecking mistakes, quality issues. There isn't the digital feedback that you have now with the sensors down the line to check for quality. So now we have three dvision systems that can dimensionally check a chip. Is it big enough, is it unbroken? Check it for color? Does it look like it got enough seasoning? Did it overcook? Is it a little too brown? Did we send it through the fry or too long? Is it undercooked? Are we getting a bunch of chips that are stuck together? There's some issue on the front end that things aren't working right after we made the changes. So all that can be detected in process now and things can be stopped a lot faster and corrected. Where twenty years ago, you're pulling something off the line, someone is standing there analyzing all the lines running, and you could be producing thirty minutes of bad product before you catch it right, the potential for mistakes was a lot higher and the risk of lost revenue was significantly higher.
Yeah, I wanted to get into the talking changeovers. Can you talk then a little bit about okay, the sort of business side of these decisions. So, if you can catch mistakes faster, if you can make sure that the seasoning is applied consistently quicker on a new run, what opportunities does that open up for the OEM or the company in terms of like, okay, now the bar to make a decision. It's easier, we can try new things. Talk about the connection between that technology and then the confidence that a company has in trying new things.
Yeah, So when we're talking about how an operations person or a plant manager would look at their production facility. There's sort of a triangle between throughput, up time and quality, and they're weighing these three factors against each other for how they're producing to get up the number. It's a trilemma, right, because you can never be better than your worst metric really, right, So no matter how much you produce, if only fifty percent is good product, you've only fifty percent effective, right.
Saving that for my next performance review.
Yeah, but it's it's like that in production. So what we're looking at really is the loss of uptime guaranteed when you are making changeovers. So you know you're going to have planned down time as you do these changeovers, so you have to outperform on your quality and throughput side as this goes.
So, part of.
The digital transformation that you see in factories and the digitization of factories is that you can pull a lot more elements out of all of your various devices. In two thousand and four, to use that example, if something failed in one machine center in the factory, if you were having an undercooking problem, you might not be able to correct it unless someone got into the program made some changes and then adjusted the time or an operator caught it. And if you were two am and it's the third shift, that operator might not be paying attention. It might be their second job. They just have probably not worked there that long usually, and the programmers also worked during the day, so they might not be able to fix it until the daytime. And now, because of the digital feedback, we can create a sort of machine learning environment potentially, or at least a closed loop environment where we can use the quality data from three division cameras later on in the system, or any camera system we're using, and feed that back to the earlier machine centers to say we're undercooking. Go longer, make that change, and I'll validate as this next batch of product comes through. Right, because it's usually a continuous process, so as I start seeing good chips, I'll tell you that we're fine. And it operates a little like cruise control in your car. Right, So you've got a loop system. You want to go fifty five, you're going fifty seven, you slow down, you speed up until you get to a more ideal product, which in the past, a really good operator does that on their own. But truly post pandemic, we're at a loss of good operators, and we're at a loss of people that want to be operators in the first place.
As you're going through all these new technologies, I'm sort of like mouthing to Joe, going wow, Yeah, for each of these, I'm coming round to the golden age of snack food idea, at least in terms of the actual manufacturing process. But one thing I wanted to ask is, Okay, so you described how new technology can kind of be used as a safety net almost for risk taking and punting on new types of flavors and makes it easier in many ways to create these things. Is there a way that technology can also inform the flavors being made? Like, for instance, would you get data from a digital assistant on the factory floor which would say, like, Okay, you're not using up all I don't know, like the cheese or the garlic when you're doing this particular product. Maybe you want to look into doing a more cheese and garlic heavy version of this. Do you get that kind of feedback to.
Yeah, that kind of feedback can absolutely be flowed upward towards the business process as we're collecting all this data, So that tends to get visualized in dashboards for business operations to look at and see what they're doing. That wouldn't be an automatic decision, but absolutely we could see that we might be able to produce different product because we have a glut of some supply with how something is working or how that goes. I think what informs production more ends up being what leaves through the supply chain. On the logistic side, what goes out of the warehouse, what starts being ordered more, And that now can be a driver versus I think in the past you would have kind of a monthly production run planned out in advance, and now I think it's much more day to day. Someone comes in and finds out what they're producing that day.
So we've been talking largely in the chip idiom so far, so to speak. But another snack category that is like really blown up, and I know that you've worked in this is nuts and particularly almonds and just the numerous flavors of packaged almends. You could get, like I think it used to be okay, you could get raw almonds, maybe in a bag and maybe toasted almonds, and like if you went to like you know, a hippie story, you could maybe get like tomorrow or like soy sauce almonds or something like that. But now there's just like so many they've just really gone wild with the almond flavors. What was that thing you were looking at, Tracy, Like, what was the.
Oh, there's a brand of Korean almonds. I think it's called Tom's or something like that, and I am slightly upset with them. They come in all sorts of flavors like tirami, sou honey, there's savory, spicy ones as well. Whenever I see them at any store, mostly Asian supermarkets, I buy, like, you know, at least five packs. They're so good.
So talk to us what you've seen in the nut space, the almonds space.
Yeah, California obviously well known for almonds, as everyone heard about during the drought. That's right, So out here in the Central Valley we produce a lot of almonds, and the production factories that handle nut production out here not just almonds, but pistachios as well. When you talk about like the Wonderful Company, but when we're talking about almonds, it's typically you're going to hear Blue Diamond Growers is a co op of growers that own several factories through the area, and typically what they had done is just produced almonds and sent them off large amounts to Asia, large amounts to everywhere else in the world. Because something like ninety nine percent of almonds are grown in California, So if you've seen almonds somewhere, they were probably grown by a few of these large farms and sent off.
And in twenty twenty, during the.
Pandemic, obviously Asian markets straight up, as China shut down, a lot of the service industry that they might have sold to slowed down, and they made a business transition into snacks really out of necessity at first, and then it took off because people like yogurt covered almonds, and they like lightly salted, smoked almonds, they like spicy almonds. I think if there's a whole wall at the airport now, if you go in to see all of these flavors.
Wh Yeah.
Absolutely, it was a massive mistake to record this episode right at lunchtime. Can I just say that?
So on Amazon you can buy a pack that has Smokehouse. This is just the Blue Diamond variety pack Smokehouse Bold, which is with sabi and soy sauce, hob and narow barbecue, shiraja, sweet tied chili, salt and vinegar, blueberry. It sounds a little weird. I'm not gonna lie whole natural, lightly salted and then toasted coconut and maybe, So how did this happen? How is a company that specialized just in like we're gonna sell balk almonds then able to whip out like eleven different flavors like this.
They made the production choice to build new facilities and new lines solely for snack production during this time. The almonds don't stop growing. You have to harvest them, so when you're dealing with growers, they have the product. So they were essentially able to vertically integrate themselves into becoming a snack producer. And once you've decided you're going to make these little snack packs and you can make a one ounce or a two ounce or six ounce bag of almonds, you have your various lines and they're all producing different sizes, and then all you're doing is roasting your almonds and flavoring them and then cleaning that out and changing it over and doing a different flavor. So you could run lightly salted, and then you could run regularly salted without a real issue there, right, and then you could run maybe one more flavor after that before having to mess with things before you damage the flavor right.
When you touch it. You mentioned, of course you have to clean out the flavor because you don't want the blue but you know you don't want to do the blueberry run and then the shir rocher run right after and there's still they're still residue from the blueberry run. Has that process changed, the sort of switchover process of getting one flavor in and one flavor out since you started in the industry.
Absolutely it has, depending on what your product is and what your your pipes look like. You're sending steam through essentially doing what's called the clean in place process, so you're sending your cleaning fluid or steam through the pipe, and then you're changing out your nozzles and making sure that clean, clean equipment is in there. Everything is stainless steel, it's food grade, might get sprayed down, washed down. But what we've been able to do now is detect a cleanliness within the pipe that instead of running on timing, we can say we know the pipe is clean when we see these certain parameters go through or we can we can understand that this sensor as it comes through, it's it's now clean, and that's allowed gains of you know, somewhere. If it was a thirty minute process, maybe you've been able to gain four or five minutes. But if you want to do that three or four times a day, you've gained a lot of production because you're doing maybe two hundred bags a minute, right, So when you math that out, you're able to take these small We sort of described it as the power of gaining one percent. You gained one percent in twelve different places. You've gained the ability to produce a whole other product for an hour.
Wow, you know, potentially.
So Joe brought up the Korean almonds, and of course we started this episode mentioning kit kats among other things. But it does seem like Asia, in some respects has had a head start on experimenting with lots of different types of flavors. Can you maybe talk about what enabled them to do that? You know, places like Japan and Korea, how are they manufacturing all these different varieties And is it a case that we're sort of catching up to that technology or is it a case that the market was just more amenable to experimenting with these types of varieties.
I'd say it's a mix of both.
I think the factories when you're looking at production in Asia tend to be newer, where the production in America is retrofitted older factories from some of these legacy companies that a lot of these factories have changed hands. There's an ice cream plant down here that I think has changed hands like six different times and makes Hagendaws bars, but it's been owned by a bunch of different companies and it's been around for fifty years. And you didn't see that in the Asian markets. And I think that when they came in there with American flavors to produce for Asian markets, they didn't sell in the same way that they wanted them to. So they started experimenting locally by necessity to try and move product. I always think of it similarly to Procter and Gamble makeing spicier toothpaste for India, right, So they adjust to the local flavor. And I think some of that's market research and some of that's just sales data that they didn't perform, so they had the other flavors, and I think it took a long time for them to understand that America doesn't just want to eat barbecue chips right, that we'd love to get. I remember being very excited when I got my first Lais all dressed bag of chips that I found in the store, because I had seen online that they were big in Canada. And I don't know why that was exciting that I had the that's legitimately exciting.
I'm excited for you.
And they were good.
I mean I never bought them again, but they were good. And I think a lot of people have that experience where they want a snack variety, but they want it to taste good. And I think that's the fear, is that variety will sell, but the flavor won't get another sale. And I think we've proven that sort of wrong, that we can always just create more flavors.
Right, This is exactly what I was going to ask next. So you mentioned you never bought that particular thing ever. Again, it does seem like there is a consumption pattern here where a lot of it is all about the novelty value. So you know, a new flavor comes out, you try it, you either like it or you don't. But even if you like it. How much repeat business are these types of experimental flavors actually getting. It feels like it's very much about the cycle of launching new products.
Yeah, it's definitely about the cycle of launching new products. And we've seen over the years that certain types of flavors have tended to hold up. Like a chili lime flavors on a lot of different chips have showed up and stayed flaming hot varieties of every chip have stayed. So it seems with spicier flavors they tend to stay. A lot of the novelty dessert flavors I don't think do very well that kind of bounce in and out. You know, cinnamon churro chips sound great and then they're fine. So I think if you trend it, if you walked into your store and took a picture of your chip aisle every week for a year, you'd see a lot of different flavors, and you'd see some new flavors never leave, and that those kind of get added into the production rotation. And that's all built into the business analytics from these companies that they can see their selling they move off the warehouse shelves, you know, they have to move these chips within a certain amount of time for freshness reasons. If they're not leaving the shelves, they don't get made again.
This might be a really stupid question, but obviously in the era of Instagram and DTC companies. You know, we know about freedom Lay and these big companies, but there's obviously a million smaller brands that try to maybe they try to pretend to be a little bit healthier or maybe you know, whatever it is. Is it easy now, Like if Tracy and I had an idea for a chip shape and a chip flavor, is there sort of like off the rack infrastructure and capacity for us to just sort of buy some time and space on a line and sort of without having to do any infrastructure investment ourselves, like have a chip brand.
Yeah? There.
So we call these companies coe packers, the same way you would use for for beverage producers. And there was a fun example I ran into the other day of a company like this deciding they wanted to make a pea protein mix of a cheeto. Right, the company had this idea, this manufacturer built it and lo and behold, Now you can buy pedos at costco. So they sold this to Costco, had this idea, found this company to make it, and the production facility was there for them.
So I'm sorry, I'm losing it a little bit at Sorry.
I know that's I wanted to bring it up because I love the name. I thought it was so clever.
I would try to think, where did go next? Okay, you've given pta? Sorry, what's the next big thing in snack food manufacturer? Sorry? I'm so sorry, that's a serious question. What Okay, So you walked us through all the technological enhancements that have enabled us to develop these new types of flavors and manufacture them in a more efficient and faster way. You know, things like sensors detecting cleanliness, the ability to observe the chips that you are producing for quality in a sort of automated way. What's next? What's really exciting in terms of that technology.
I think the thing that's moving the technology along now is the movement of robotics into the production process in as many many places as we can get it. So where I'm starting to see it is so you would now see robotic arms and most manufacturing facilities at the end doing the palatizing process. So taking the finished boxes, it's a big robot arm picks them up, puts them on a pallette, arranges the palette, and then sends it off to the forklifts or automated guided vehicle back to the warehouse. Right, and then we're starting to move where now we're even using robots to start picking packs of things or stacking different parts of the process to get them, you know, stacked ten rice cakes and get them in a line so they can get wrapped and move to the process. So when you start to think of the technological innovation in a production line, you want to work backwards. So you can start at the warehouse because you'll never have a problem where you've created a bottleneck because you're already at the end. Then you can move to the palatizing process because in the wrapping process, because that's also the end. Now we're starting to move further and further through the production line, and we're having robots that move alarmingly fast as you stand next to them, that are doing a lot of these processes that maybe weren't done by hand. But we're done with a series of blocks and conveyors where a line would make the product turn three times and then it would get it into the right position to get into a bag and get everything moving. And the speed that we're creating on the back end has driven a lot of the speed demand on the front end now because we've got more production capabilities and we are ready to move.
And when I think.
About the future, it's just going to be more of this variety. I think that the food manufacturers have looked at things like ozembic as a challenge and the way that they're going to tackle it us through novelty. Right, Nesley just came out and talked about that we are going to innovate.
And I don't know how.
Oh zempig is going to kill our demand for snack food, but the way they're going to spond is by just such chantalizing, incredible creative flavors that it will overwhelm the medicinal suppression of our appetites. I'm excited for this cat and most battle of whether they could just shear innovate their way back to consumer demand.
It's worked for me so far.
I'm just thinking this is such a thematic all thoughts episode because we talked about palettes chips, although a different kind of chip and then we're also talking about ozembic and automation processes. But Ryan, you alluded to this earlier. But what is the labor picture like right now for snack food manufacturing? And one of the reasons I ask is I don't think my husband will mind me mentioning this, but one of his after school jobs in the UK was packaging chips and he said it was the most boring job and tedious job that he's ever done. And I think he did that for quite a while and just spent hours and hours putting like bags of chips together. But what is the labor picture like right now? How easy is it to find workers for this type of job.
It's very difficult to find workers that want to staff these facilities. It's a boring job and it's a stressful job. Sometimes you know things are going down, you're getting hollered at, you're holding up production depending on what you're doing, and you may not know enough about the process, especially now where the machines have gotten so difficult. It's not a push button anymore. It's a iPad or it's a touch screen that you have on the line that is controlling things and you might need to click through several screens and make adjustments or start or stop something to cycle things to get everything back running. To go back to our two thousand and four example, what you might have seen in the past is staff at every single machine center. So you would have someone at the fryer, you would have someone at the bagger, at the palatizing station, someone might be putting chips in a box like you mentioned Tracy. And now what we're seeing is we can probably have an operator controlling two to three lines potentially on an iPad, walking around making sure that nothing's breaking, looking at and acknowledging alarms on their system. And when we talk about things like robotics in the palatizing station, so typically you're going to use two to three people per shift to do palatizing. If you don't have a robot there, someone's stacking boxes or you've got a machine and what you're doing. So one robotic arm eliminates somewhere between six and nine jobs for a three shift factory per line. So these products and these processes are removing operators. But out of this, really these jobs are very difficult to hire for and are always at a staff shortage. Every factor I walk into as a hiring sign. We can interview today, you know.
So speaking of robotics, you know, one of the things that i've sort of actually there was an interview with Jensen Wong, the CEO of in video about this and I've heard this from else is that the power of robots will really be amplified with AI and I imagine and the idea is right like that if you have some sort of robotic arm picking up a bag, it helps if there it has like the bag is at maybe like a forty five degree angle that it can't just like it has to like shift a little differently or something like that. Can you talk a little bit about that more like how AI or maybe machine learning sort of makes it so that robots are becoming more efficient. Is that something you see so that they can respond to deviations or a weird chip shape comes through and it doesn't automatically, you know, it's still able to pick it up. Can you talk a little bit about this sort of intersection of AI and robotics and whether you see that as a force amplifier.
Machine learning certainly when we're talking about it is already being used and you'd be surprised how often a very slight tilt in something will disrupt a robot entirely. So that does make sense. It's looking for a very specific shape. Sometimes you have to really build the process out in front of it.
Because this is what I've heard from someone recent This is what I heard from someone recently about why we still don't have, for example, like robotic like pizzerias, which is just that they're still at the point where like if there's like if one of the pies is like a little bit smaller or a little bit bigger, et cetera, like, the robots still aren't nimble enough or agile enough that they would be able to respond, and then that would break the whole process. And so the argument is, well, if you have some sort of AI sensor vision and stuff like that, then in theory it can respond to these deviations faster.
Yeah, right now, where we are at with robots is that you'll see when they start to make deviations. Sometimes they can respond for the first few issues, but they have trouble coming back to a home position to reset when the product is good again. So they can sometimes function for up to an hour in a sort of failing state, and then they fail entirely. And then the process has to be they have to be put back onto where they are in the grid and relearn where they are, and then you can fire it back up. So with robotics, we still have a lot of limitations there, and I think those limitations don't have to exist, But for the mass produced robots that we're using right now in production facilities, we still have those limitations. So I don't think Jensen is wrong that we could start using AI in these processes, and I think.
Robotics is probably the first place to look when we talk about machine learning.
We're using that all the time, where we're a closed loop process that the machine can determine. Dairies are especially good applications for it. Cheesemaking, where you're heating the product and moving it through. You're able to adjust times depending on variations of the product, and you can visualize what an ideal product would look like and know that and make make adjustments. With all the different sensing units you have, You're like, I need this, I need this moisture content, I need this temperature.
I need it to get to at least this.
It needs to be this color, but it's not this continue like all that's happening, but we are not to a point where we're letting anything sort of make decisions on its own.
By the way, there are a bunch more blue diamond almonds than I said before, So anyway, there's various chocolate covered ones too. All Right, I have one last question. One thing we haven't talked about is the distribution side, because I have to imagine that, Like, Okay, it's great if the manufacturer can quickly change over their lines and reduce not have to worry about downtime as much when they're shifting from one stable process to another, But then you have this explosion of skews, and I have to imagine that makes a warehouse you know you have before you might have had a warehouse that had two kinds of freidos, and now you have a warehouse or probably you know, one hundred kinds. What is required on the sort of distribution side to handle the explosion of variety of snack food.
Yeah, so we're seeing the rise of fully automated warehousing. And essentially what a fully automated warehouse looks like when you're dealing with Pallette sized product is you're going to have a series of conveyors and you're going to build it up in a multi story elevator situation, and you'll have carts that are not operating dissimilarly to what you would have in an Amazon warehouse where they're picking and placing something and going, but they're taking small tots right and we're dealing with palettes, so we're almost running it like trains and elevators, moving to certain locations that are then visible on a three D grid for the warehouse operator. So it's typically we can have one or two people operating this warehouse now and calling down for the packages they need in an automated way, so saying, we're going to fill this truck with these pallets in this order so that when we get to the various stops that's going to make it unloads in the proper order, and all these different pallets are located in beIN one point fourteen on floor five of our system and pulling through where in the past at right now. In a sort of a traditional warehouse, you'll have a sticker on the outside of a palette and someone drives up with a forklift and scans it and then pulls it in based on what order they're pulling something from and it's a lot more hectic to deal with multiple skews, and you see a lot of forklift drivers moving palettes to get to a palette behind it because of something that happened where you don't see that in an automated situation.
Tracy, are you convinced now that we are indeed in the Golden Ager snack vision.
In terms of technology? Yes, yes, well, and I am very intrigued by the idea that maybe in an era where people are eating less, if ozepic and the golp one drugs become even more popular, that food companies are going to have to offset that loss of consumption with creating new and tempting varieties of things to try. However, I will say not all of the flavors are evenly distributed. And you and I were experimenting with this earlier, trying to order particularly exotic varieties of stuff, and you can't find them everywhere. You can get most of the things off Amazon, but they're not in every grocery store. And also, like prices are still pretty high. Like I don't know if you've bought Lays or something recently, but it's kind of insane how much it costs nowadays.
By the way, there's a lote Mexican street corn flavored elements which you can buy from Blue Diamond. I'm gonna buy them. Ryan Harlan, thank you so much for coming on Odd Lacks. That was an absolutely fascinating conversation and a great explainer of how technological innovation in the back end truly gives us this wonderful world of variety. So thank you so much. That was a lot of fun.
Thank you for having me.
Thanks Ryan, I've never been more hungry. Same Joe. You know, you mentioned the Mexican street corn flavor almonds, so this reminds me. I was in the supermarket the other day and I saw there were Mexican street corn a lotave flavored Cheetos, but and I was I was tempted. Okay, yes, but I didn't buy them because I think it was like eight or nine bucks for a pack a package, and I just couldn't. I couldn't justify it, like the novelty value.
Just like maybe a one off though. Tracy, by the way, I did order some kit Kats and Dorito's before this, so maybe Tracy, you can, you know, and I'll bring them into the office.
You'll subsidize my chip cons I'm saying, now you get those just like a good industrial policy.
Shit return return the favor of me buying.
I will bring you, Actually, I will bring you some of those Korean almonds, because now that we've been talking about them, I really want to go get some.
But just this idea, so like, there were so many fascinating things in the conversation. For one thing, I just loved like how clear Ryan was about explaining how all these processes work. That was very cool. But then you think, Okay, you have this factory and you try to get some sort of like maximum like ninety nine percent up time or maximum groupput. You can understand once you've achieved a certain level of throughput, why you'd be really hesitant under the old regime two thousand and four to like let's try something new.
Yeah, this is what I find really fascinating. So the idea that in this one respect, in the world of snack foods, it feels like technology has enabled risk taking. Yeah, and so often we kind of see it go the other way, like people's perfect stuff and then they kind of like double down on efficiencies and then they get sort of like hardwired into doing one thing perfectly. It's really interesting to me that in this world we're using technology to enable variety in a more efficient and maybe interesting way.
Totally, and I love like the simple example that you don't think about, Like, Okay, let's say you have to clean the pipes, which of course you do between different flavor runs before you're like, well, the solution and making sure you have clean is to just let the washing process go along. So maybe thirty minutes, but what if you could do it in twenty minutes and you just those extra ten minutes are a waste and then you can like, you know, it's only seems like ten minutes, but what was it the rule of one percent? If you can find twelve one percent efficiency gains, then you can get an extra hour of throughput through factory, and if you're doing hundreds of pallets.
Y, it's exponential.
Yeah, so it's pretty cool.
But also, you know, Ryan mentioned that game Factoria and the idea that okay, it's a video game, it kind of I've never played it, but it kind of looks like some city but for factories, and you create your own simulation of a manufacturing process. The idea that that's actually happening in real life. So you can come up with an idea and then you can use software to basically figure out how you would produce this with your current resources in the cheapest and fastest way. Presumably. That seems really interesting too, and a big difference to I guess how things were previously manufactured, where you would come up with an idea, you'd have to do all this research and development, lots of customer testing, but you'd also have to talk to the factory floor and figure out how you would make these new things.
Totally. I want to like see one of the first of all, I want to play Factoria, or at least check out the trailer. It looks good, it looks really fun. And then also, yeah, this idea I think what digital twin I think was the term huge. So you could just create an entire digital version of the factory and if the simulation is good enough, then you just run the whole test in the digital twin. That's a really cool idea. Also, this idea that like that point at the end that robots still aren't very good, that if you could eventually it becomes a problem if too many of the bags are tilted and then they have to be manually reset. Seems like there's potentially low hanging fruit there. If I don't know, AI can make it so that the robot can just automatically do whatever. That's really exciting. Let's we should have Ryan back in twenty thirty four to talk about the state the state of snack food manufacturing.
I'd be in that, and then maybe at that point we really will be in the golden age of snack foods, of cheap and abundant and interesting things to eat.
Can't wait?
All right? Shall we leave it there?
Let's leave it there.
This has been another episode of the Odlots podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.
And I'm Joe Wisenthal. You could follow me at the Stalwart. Follow our producers Carmen Rodriguez at Carmen erman Dashel Bennett at Dashbot and Kelbrooks at Kelbrooks. Thank you to our producer Moses Onam. For more Oddlots content, go to Bloomberg dot com slash odd Lots. We have transcripts, a blog, and a newsletter, and you can chat about these topics and more with fellow listeners. In the discord, discord dot gg slash.
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