Right now, San Antonio Consumer Packaged Goods is a website, a desire and a panel discussion at San Antonio Startup Week. Andrew Anguiano knows it can be more.
The co-founder and CEO of Southside Craft Soda is working with others in the local packaged food industry to build an association — a support group, really — for those looking to start, grow and even sell their packaged food or beverage company.
“San Antonio has long been a maker community,” said Anguiano, a veteran civic activist who also served as the founding executive director of Southside First Economic Development Council.
But San Antonio hasn’t nurtured those businesses the way other major Texas cities have, he said, with thriving, supportive communities focused on consumer packaged goods, or CPGs. “San Antonio deserves that too.”
Packaged food has a long, storied history in San Antonio. C.H. Guenther & Sons built a flour mill here in 1859. In 1932, C.E. Doolin bought a corn chip recipe that would become the foundation for Frito-Lay, now owned by Pepsi Co. And David Pace perfected his picante sauce in 1947, building a company that Kit Goldsbury would sell in 1995 to the Campbell’s Soup Co. for $1.1 billion.
Just this month, Goldsbury’s Silver Ventures sold Nature Sweet, which, with its packaged “snacking tomatoes,” functions more like a CPG business than a traditional produce company.
Creating a company valuable enough to sell is an aspirational goal for many CPG companies, said Angiuano; getting shelf space in H-E-B, likely the biggest buyer of CPG products in Texas, is another.
Anguiano acknowledged the plethora of startup- and small business-related resources in San Antonio, including one specifically focused on launching food and beverage companies. But there’s not yet a single place where the CPG community can come together, he said — especially companies like his, that have achieved a certain level of growth but are now struggling to get to the next level.
A culinary accelerator for startups
The challenges facing CPG companies are plentiful, such as understanding and complying with food safety regulations, access to capital and a lack of small and midsize manufacturing infrastructure in the region.
Ryan Salts, who until recently served as director of Launch SA, the city’s small business and entrepreneur one-stop, developed a culinary business accelerator to help young companies navigate those challenges.
While Break Fast & Launch cohorts include restaurants, cafes and breweries, many CPG companies have gone through the program, successfully making the move from home kitchens into manufacturing facilities and on to store shelves. Salt name-checked just a few: Texas Black Gold Garlic, Madge’s Food Co., Tio Pelon’s Salsita and JD’s Chili Parlor.
“That was huge,” Salts said, “because the infrastructure didn’t really exist before, to help them grow.”
Now, some of those very companies are struggling with what he called “the level two version of scale,” such as finding bigger manufacturing space, purchasing custom equipment and finding investors knowledgeable about the CPG industry. He and others also noted more recent challenges, such as the rising cost and spotty availability of packaging supplies.
Tapping into capital looms large. Madge’s Food, which makes fermented products like kimchee, sauerkraut and fermented bloody mary mix, is maxed out at its current manufacturing space, said founder Mike Miller.
“I can’t keep up with demand,” said Miller, who sells his products on Amazon and in Whole Foods Market, among other places. Miller is now facing a chicken-and-egg dilemma: He doesn’t have the money to expand into a new manufacturing space to create more product, and he can’t sell more product to raise the money to do so.
Miller, who went through Break Fast & Launch in 2015 and later became a mentor in the program, said he and other local manufacturers had been talking about creating a CPG alliance before the pandemic.
“This business can be a grind,” he said. “That’s why I love the mentoring aspect; it’s a chance for me to give back and save someone else some time. The food business is only going to get tougher, so we need to circle the wagons to support each other.”
One of his own mentors, Kyle Koehler, who with his wife, Kelli, founded Wildway, had to turn to Austin when they wanted to grow their grain-free granolas back in 2012. Austin had a thriving natural food scene, he said, as well as investors willing to get behind fledgling food companies.
The food industry “is very, very tough,” said Koehler. “So most of my advice is to really just to make sure that they understand how hard it’s going to be and the amount of work that it’s going to take.”
‘Mentoring and advice’
Oscar J. Perez, the man behind the hand-drawn face on the labels of Tio Pelon’s Salsita, called himself “very naive” when he first started selling salsa based on his grandmother’s recipe via Facebook.
“My background is in architecture, so I had no idea what the consumer packaged goods industry was; I had no idea how to talk to H-E-B or even what a pallet consisted of.”
In 2018, Tio Pelon’s was a finalist in H-E-B’s 2018 “Quest for the Best” competition and won accolades in that year’s Texas Salsa Festival.
Today, Perez not only owns his own manufacturing facility, he also “co-packs” products for other companies, thanks in part to his business partner’s expertise in automation. But that doesn’t mean he’s not still struggling to grow in an industry dominated by a handful of food giants.
He likened it to “running through the mud blindfolded” and said he hopes his experiences can help others.
Perez will be on the “Consumer Packaged Goods in South Texas: How to Find Success” panel hosted by Anguiano on Oct. 16, the first day of San Antonio Startup Week.
Also on the panel will be Chris Cook, founder of Special Leaf Tea and Andrea Ley, who has steadily expanded her business, Olla Express, from a coffee truck to a brick-and-mortar location and online shop that sells her star packaged product, piloncillo syrup.
For Ley, a zero percent interest small business loan through LiftFund helped get her business off the ground. But “it’s not just money resources that you need,” she said in a June interview with the San Antonio Report. “You also need mentoring and advice.”
Charles Woodin, CEO of Geekdom, which hosts San Antonio Startup Week and recently won a $1.7 million, three-year contract to run Launch SA, praised Break Fast & Launch and said the program would “absolutely” continue.
“I think there’s a need for us to put a lot of effort into that,” he said, including partnering with the nascent San Antonio Consumer Packaged Goods trade group, to help CPG companies “expand beyond [their] wildest dreams.”
Woodin noted that H-E-B is a sponsor of Startup Week this year, which will include the panel “Through Eyes of an H-E-B Supplier.”
Dan Yoxall, president and CEO of the San Antonio Manufacturers Association, (SAMA), also urged CPG companies to take advantage of the advocacy and programming it offers.
“We have a ton of members in that space,” he said, such as H-E-B (the largest food manufacturer in the region), Twang, Bolner’s Fiesta Brand and Kiolbassa Smoked Meats. And while those companies are bigger and well-established, Yoxall said small, multigenerational family-owned companies are also members.
SAMA includes CPG companies under its “diversified products” umbrella, which also includes furniture, medical equipment, jewelry, toys, textiles and apparel. Taken together, diversified manufacturing is responsible for 80% of the economic impact of manufacturing as a whole in the region, SAMA asserts, as well as more than half of all manufacturing employment.
Employment in food and beverage manufacturing has only grown “modestly,” since 2001, according to SAMA’s website but still makes up roughly one-fifth of overall manufacturing employment.
Anguiano said he appreciates the advocacy SAMA offers and hopes to connect every possible resource for CPG companies as part of his work to create a thriving trade group. He’s hoping to announce a lineup of “digital huddles” and in-person meetups at his Startup Week panel.
“So many people just don’t know what’s out there, what exists and where we are as an industry,” he said. “But we’re on the cusp.”
Disclosure: H-E-B is a financial supporter of the San Antonio Report. For a full list of business members, click here.
