While long runs of five, six or seven days may be good for the bottom line, the ultimate irony in the world of co-manufacturing is that Hearthside may lose that business if a product becomes too successful and the customer decides it’s time to produce it in-house.
“Sometimes, a product will reach a scale where it makes sense for one of our customers to repatriate that product,” Mr. McNamara said. “But when that happens, we’ll give them one SKU, but they’ll often give us two back. We may get a little less efficient, but we don’t lose the scale of our business. Those things happen in terms of business, but they don’t destroy partnerships if your business with them is strategic instead of transactional.”
As a result, he added, Hearthside needs to be aggressive in building its business to achieve steady growth in the long run. “We often find that you have to grow 30% a year in order to grow 10% in the long run because you can lose some of that business, if it becomes too successful,” Mr. McNamara said.
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