By Gregory Daurer | Jan 03, 2022
Co-packing services for food brands
After Anderson's Zilks Foods -- a Texas manufacturer of dip and salsas, and, at one time, hummus -- raised $1.6 million in order to grow the brand, his business moved into a 12,000-square-foot facility, giving it nearly a tenfold increase in overall space.
Today, Anderson acknowledges that -- in terms of Zilks Foods -- the money would have been better spent on sales and marketing, after perhaps switching to an outside co-packer. But he happily admits, "It was the best mistake we ever made."
Zilks Foods, founded in 2012, had experienced initial success. However, there were operational setbacks by 2014. In 2015, the situation led Anderson to found ATX Specialty Foods, which offers co-packing services to outside food businesses, thus expanding the use of Zilks Foods' space and equipment. Anderson notes how, "We said, 'Hey, look, we're really good at making product. You're really good at selling product. Let us make your product, and you just worry about selling it.'"
Today, ATX Specialty Foods produces items Anderson categorizes as "sauces and dressings" for about a dozen customers: Two-thirds are restaurants and one-third are the makers of CPG products. The company is able to provide retail packaging for its clients, which will be sold in stores or online. And it can fill bags of sauces, for instance, which can be opened for use within the restaurant kitchens themselves. Among its clients, the company counts Julio's Seasonings and Corn Chips, the Kerbey Lane Cafe, and Antone's Famous Po' Boys (for whom ATX makes that company's signature relish). "We are approaching the $10 million mark [in annual revenue]," says Anderson.
Earlier in 2021, the company broke ground on a new 73,000-square-foot facility south of Austin in Kyle, Texas, of which ATX Specialty Foods will occupy just more than two-thirds of the entire building. "We really want to grow [ATX Specialty Foods] substantially from even where we are today," Anderson says of the company's forward-looking approach. "We're having some very preliminary conversations with national restaurant chains that you and I have both heard of that are very prominent."
One key to ATX's success, according to Anderson: offering transparency to customers who sometimes haven't found that previously while working with other co-packers. The company shares its pricing models with clients, letting them know how much ingredients are costing ATX and how much it costs to run its operation. "I don't ever want my customers to think we're cutting corners or cheapening ingredients, because that's where I think mistrust can creep in," says Anderson. In terms of what it has to offer, the company's web site describes the business as "one of the few certified USDA Organic, Non-GMO, and Gluten Free facilities in Texas."
Anderson -- who calls himself "about as left-brained as they come" -- looks back happily at his business decision to offer co-packing services. Ultimately, he says, he embraces the manufacturing over the marketing. Previously, Anderson had worked in Dallas as an analyst for Goldman Sachs, then as an associate at the Hunt Private Equity Group, and finally at Falcon Investments, which often negotiated food and beverage deals. "That's really where I became much more fascinated in the industry," says Anderson.
Despite his onetime desire to kill Zilks Foods, the brand continues to enjoy popularity, especially with the Whole Foods chain -- which Anderson, at one time, provided private labeling for. But Whole Foods requested he re-brand those very same products under the banner of Zilks Foods in order to spotlight their regional origin. "Austin is a breeding ground for entrepreneurs and new businesses," says Anderson, who also compares its positive associations in the food world to that of Boulder, Colorado. (The name "Zilks" pays homage to Austin's Zilker Park.) Zilks Foods' products -- pimento cheeses, salsas, and spinach-artichoke dip -- can be found in nine states, mostly across the Southwest and Rocky Mountain Region.
Anderson highlights ATX Specialty Foods' quality control, which products for Zilks Foods and ATX's other clients undergo. He says, "We made a conscious decision to put a lot of time and energy and capital into our quality department." His four-person team is "probably way bigger than it needs to be for a company our size, but we take quality [control] very seriously." In addition to running tests to ensure, for instance, correct pH and salinity, the company also tests for organoleptic qualities -- the food's taste, smell, texture, and appearance.
"Our slogan internally is, 'We're committed to getting it right,'" says Anderson.
Challenges: Besides rising food costs and supply chain issues, it's maintaining a spirited and respectful workplace. Anderson says, "I love working with people -- but people are also very challenging. It's so fun to see people succeed." He says his team does a "fantastic job," but Anderson still asks himself, "How do we foster and continue to improve the culture that we have?"
Opportunities: "We're operating out of a physical space that has severe limitations," says Anderson. He's looking forward to the company's move into its new facility and the eventual purchase of "better equipment, more automated equipment," leading to potentially larger accounts. "It's going to be really fun for us to have a building and a space and office that we're proud of," Anderson says.
Needs: "Opportunities for us to automate, but also to have better systems: equipment, software, processes on how we do things," says Anderson.