DOWNERS GROVE, ILL. — In 2015, Hearthside Food Solutions entered the arena of functional bar production with the acquisition of VSI, Leerdham, The Netherlands. Today, this contract manufacturing juggernaut controls a total of 3.2 million square feet of production space in 24 facilities with about 2.4 billion lbs of capacity annually, producing more than 1.5 billion bars worldwide each year.
From baked to cold-formed, and from granola, breakfast and snack-style to sports, energy and meal-replacement bars, Hearthside has the R.&D. and commercialization capabilities to produce thousands of potential varieties and, in some facilities such as VSI, with no minimum order quantity (MOQ).
But co-manufacturing can be a tricky proposition, along the lines of a “frenemy” relationship: A co-manufacturer’s customers are also its competitors. To remain successful, the concept of value must be handled with care.
“We’re always pressured to reduce our cost, ultimately for the end consumer, but also for our customers,” said Dwayne Hughes, senior vice-president, supply chain. “If we don’t stay competitive, our customers could potentially take the business in-house or even decide to invest in their own facility. We have to keep our quality scores up, consumer complaints down and costs low.”
It’s a similar value proposition across the pond. “VSI has the same type of pressures we have, from food safety, quality and costs, so we are both looking for ways to manage them,” Mr. Hughes said.
VSI brings that unique value with its R.&D. and formula development capabilities, which had not been a primary focus for Hearthside, the expert in large-scale production and commercialization.
“We do the development for our customers,” said Gerard Janssens, president, VSI. “This is what drives our business; we are No. 1 in bar development in Europe.”
As the demand for bars — niche products specialized for specific nutritional needs — exploded throughout the European market, VSI’s expertise followed suit. The company created more than 200 new bars last year, taking its number of stock-keeping units (s.k.u.s) to more than 1,200. In a market that has seen double-digit growth over the past decade, VSI went from producing almost 15 million bars to more than 150 million annually since its first bar line started up in 2003.
Between the explosive market demand and new product development, VSI became a viable acquisition target for Hearthside when it was ready to enter the nutritional bar fray.
“When you look at energy and nutritional bars today, they’re so much better … they’re chewy and great-tasting and have multiple layers with chocolate, caramel and nuts,” said Rich Scalise, chairman and chief executive officer of Hearthside Food Solutions. “VSI was one of those driving factors; they played hard in texture, flavor and aroma. They’ve helped us think about these types of bars in a different way.”