In addition to opening a cold storage facility, John Rotella, general manager, Rotella’s Italian Bakery, Omaha, Neb., has turned some of the company’s waste — bakery by-products — into a new revenue stream and company. Ag Alchemy Animal Nutrition, his companion animal food business, was born from a constant evaluation of how the bakery can improve its sustainability initiatives. 

“No matter how efficient a bakery is there will always be some product that doesn’t meet our specs whether it’s too small, too big, too light, too dark,” John Rotella said. 

Rotella’s had always sent its waste to farmers as feed, but John Rotella asked himself if they could do more.

“Seeing these phenomenal ingredients go to the hog farms, I just wondered if there was something more we could do with all this nutrition,” he said.

On the company’s main campus, the south warehouse offered about 30,000 square feet of unused space. John Rotella asked his father to use it to test his idea. With some equipment at his disposal and R&D, he tested turning the company’s out-of-spec white bread into agriculture products and companion animal treats. 

After getting encouraging feedback, he decided to start Ag Alchemy Animal Nutrition, using the bakery by-product to create rotary moulder biscuits, soft and chewy, and some baked extruded products for its own brand and private label. He hired a team — many of them family friends — and after the newly hired business developer rebranded the product, sales took off nationwide.

“Now we have a complete line of more than 50 different varieties of companion animal dog treats,” John Rotella said. “And now at five years, we’re going to be putting in another high-speed production line within the next 16 months. We’re filling a void in the market for both co-packing and private label.”

While animal companion treat production is very similar to snack and cookie production, there were notable differences between baking bread for humans and cookies for dogs. R&D has taken longer. While Rotella customers may visit the bakery for two days of testing, an Ag Alchemy customer may be on-site for two weeks. That’s largely due to the specific diets companion animal customers are trying to navigate. There’s also more sanitation required to ensure there is no cross-contamination between products.

“We do a lot with nutritional diets, and so when we do a new product run, we are constantly checking and analyzing product in the lab,” John Rotella explained. “We check water activity on everything we run for extended shelf life to ensure it meets all the specifications. There’s just a lot more testing on the product.”

The Rotellas’ decades of experience in the baking industry has given Ag Alchemy a leg up. Capital investment, food safety, R&D and quality assurance lessons have enabled John Rotella to deliver products to customers that exceed their expectations.

“All of that is a walk in the park because it’s what we’ve always done,” he said. 

About 10% to 15% of the company’s bakery by-products go into the dog treats. About 40% of the business is the company’s own brand while 60% is co-packing or private label. With large players in the companion animal industry coming to Ag Alchemy for additional capacity, John Rotella is designing the next production line, which will add 25,000 square feet. Current production is shipping 300 to 400 cases of product a day.

Although products are made on the Rotella’s Italian Bakery campus, Ag Alchemy is a separate entity. The company has its own staff, production space, lab, offices for food safety, and distribution. In the lab, ingredients and finished products are tested for water activity, pH and other markers of quality. Major and minor ingredients are blended in Topos Mondial batch mixers before being fed into the Reading Bakery Systems (RBS) rotary moulder. The line has 15 different dies for the moulder for different shapes and sizes, but John Rotella anticipates that will increase with the new line. Product is fed to an RBS tunnel oven to be baked and then a dryer to eliminate the last bit of moisture. The packaging department can handle bulk bag-in-box packaging as well as freestanding pouches, vertical form/fill/seal and flow wrapping.

Thirty-five employees work across two 8-hour shifts, seven days a week, but the company will add a third shift and 15 more employees. With the current production at 90% capacity and the growth Ag Alchemy has seen, John Rotella is working with RBS to design a second 1.6-meter high-capacity production line for installation in 2025.

“We’re looking into new capabilities, new categories and product lines,” John Rotella said. “I’d love to get into pet food in addition to treats. It’s a fast-growing industry for us, so the sky’s the limit.”

With their commitment to quality and customer service, there seems to be no end to what the Rotella family can do.

This article is an excerpt from the December 2024 issue of Baking & Snack. To read the entire feature on Rotella's Italian Bakeryclick here.