Odd Lots - Why We're Now Living in The Golden Age of Snack Food

Episode Date: March 14, 2024

Want some Doritos? For years, you might have only been able to get one or two snack chip flavors. But right now on Amazon, you can find numerous varieties, from barbecue to nacho cheese, spicy sweet chili, or Late Night Loaded Taco. And this is really just scratching the surface. There are now dozens of flavors of Blue Diamond almonds, including blueberry, smokehouse, toasted coconut, sriracha, habanero BBQ, and wasabi and soy. So how did this happen? It turns out that some of it is a tech story. Thanks to breakthroughs in automation at both the plant and warehouse level, companies are able to create and ship more varieties than ever before. On this episode, we speak with Ryan Harlan, the director of business development at the E Tech Group, about the rapid changes in the industry over the last decade and how that turned into so many more consumer offerings.See omnystudio.com/listener for privacy information.

Thanks for listening to OddLots. Follow the show on Amazon Music for more future episodes or just ask Alexa play the podcast, OddLots on Amazon Music. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real. Lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a very big. It's a firm. It's a firm. It's a few. a commitment to your clients. We're talking top grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at vanguard.com

slash audio. That's vanguard.com slash audio. All investing is subject to risk vanguard marketing Corporation Distributor. Bloomberg Audio Studios. Podcasts, Radio News. Hello, and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthall. And I'm Tracy Allaway. Tracy, I think it's because of all of the illegal cannabis stores in New York City.

But this could go anywhere. I know. All right, go on. But the thing about them, and I guess it's kind of funny, and I guess it kind of makes sense. And maybe it's also kind of cool is that the other thing is like, So they sell various weed products, but they also seem to be the favorite vendors of all kinds of exotic snack foods in New York City. Right. So if you go into a corner store, probably... Or just look in the window.

Yeah. Yeah, exactly. You don't have to go in. You can just look. You will see weed. Probably a lot of these stores are still unlicensed. You will see energy drinks. You will see maybe some elf bars and things like that. Yeah. And then. then you will also see lots and lots of snacks. It's like the ultimate vice shop, right? Yes. Like you can satisfy all your cravings or almost all of them in one shop. Yes, absolutely. Not only did they have a lot of chips and snacks,

they have the type of snacks that used to be you would get only when one of your colleagues like went abroad, right? So you'd have a colleague that like took a trip to the Philippines or took a trip to Hong Kong or something. and then they would come back and they're like, oh, look, I brought like, you know, macho-flavored kidcats or Mapo-grilled tofu-flavored potato chips or durian-flavored potato chips. And then it never would have like, oh, is there so cool. But now they're everywhere in the stores here. They definitely are more available than they used to be. My experience with this personally is probably a little bit different to a lot of other people as someone who, you know, spent a lot of time in Japan. Yeah.

I mean, I have vivid memories of going into, like, a. Don Quixote, which is this big kind of department store, specifically to buy flavored Kit Katz. They were always in the basement. And there were like dozens of flavors even in, this would have been in like 2001, 2002. And I feel like flavored Kit Katz are to me probably what shrimp is to that character from Forrest Gump. I could sit here for the next 20 minutes and just like rattle off all the, flavors that I remember. I love Kit Katz. So in doing research for this episode, I came across this great website, takitos.net, which basically reviews every single snack. And so right now, they have links like, and I don't know if all the links work because I get the impression that

some of these flavors are cycled in and out, but there are links and reviews of 197 different flavors of Doritos that theoretically currently are at some point we're sold on Amazon, Doritos Blue Grilled Steak, Doritos Golden Cheese Flavor, Doritos Late Night Tacos at Midnight, Doritos 3D Crunch Chili Cheese Nacho. And the list just goes on and on. It is nothing like when I was a kid in the U.S. where it was like there was like Doritos and Cool Ranch Doritos knows it. Like we're living in a golden age.

So I disagree a little bit on this point. So yes, there are lots more flavors that exist. But as you just pointed out, like they are not always. available. Okay. In New York, you know, you can go into a weed shop and there's a novelty value to buying like some exotic flavored potato chips alongside, you know, whatever else. But I feel like what this really kind of comes down to is this really, really intelligent marketing strategy where you create all these new types of flavors and you get people talking about them and maybe you don't produce them in huge quantities, but people like to talk about them. People like to talk about

them, people like to, you know, take pictures where they're eating macha flavored or like Sakura flavored Kit Katz or whatever. So like for the companies, it feels like this is kind of a win-win. Well, I agree with that. And you do see this like on Twitter a lot. It was like, oh, Doritos just teamed up with, you know, Jack in the Box or Doritos just teamed up with so-and-so and then there's like a short run thing. So I do get the impression some of them are, by the way, I just came across Doritos gold Peking Duck flavored. Oh, that sounds so good. Sounds so good. All right. We're going to have to try to. Anyway, but it. it does raise the question like, how did this happen? I mean, it's great. I love it. I mean,

I don't eat that many chip. But in theory, I love it. How did we enter this world where we just have so much variety? And although a lot of them maybe are short run, like a lot of them do exist. You have to work a little bit. But while we're waiting, I did order like a 12-pack Doritos pack and a 16-pack different flavor kid-cats. So they are getable, you know, in various times. They are getable. I still have questions about the overall distribution strategy here. does seem like there is this trend towards a much wider and more exotic variety of flavors. And so I'm curious how that came to be, like what is the corporate strategy that's actually driving it? And also the technology, right? So how can it be that a company like Kit Kat? Well,

Kit Kat's not a company. In fact, I think Kit Katz are made by both Hershey's and Nestle, depending on what part of the world you're in. But how is it that they're able to do, you know, dozens and dozens of different chocolate flavors and variations of. Oh my God. Check out this flavor. Doritos roulette. Have you heard of this? This episode is just going to be us, like, looking at Doritos.

This is great. This is such a good idea. Doritos roulette originally came in a nacho cheese version, offering randomly placed hot chips among regular nacho cheese ones. That's such a good idea, like some excitement. Anyway, to me, this is a golden age. So I think we need to understand the sort of infrastructure and science. and technology that has created this era of chip abundance.

And I'm really excited. Chip abundance. And I'm a snack food abundance. This could be a different type of odd lots episode, but go on. Yeah, there's no shortage here. It's the lack of shortage that we're blown away by. We're going to be speaking with Ryan Harlan. He is a director of business development at E-Tech, a control systems integrator.

And he works with the various food and snack companies that are rolling these out across their assembly lines. And he also works on distribution. So, Ryan, thank you so much for coming on the podcast. Thank you for having me. So I think we're at a golden age. Tracy is a little skeptical. Where do you come down on this question?

I think we're almost in a golden age. I think we're getting there. I think within a lot of these snack food companies doesn't quite think we're to the maximum capacity for variety. We still haven't reached the peak. The best is yet to come. That sounds good. So maybe before we begin, can you explain what it is that you do in the snack food industry? to speak. Sure. So we work on the industrial automation side. So we're an engineering services firm

and panel shop. So we build control panels that contain the programmable logic computers, the PLCs, that have the programming that tie all of the various machine centers within a line that create the snacks. So you'd have your briars, dehydrators, fillers, cappers, baggers, palletizers, whatever you would have on the line for whatever type of snack you're producing. The control system, has the program tells what to start when, what to do, which process, and then eventually at the end, you get your product and then send it off to the warehouse where a different system picks it up. So I want to talk about, you know, the technology and how we got to this era. But first I want to actually establish the premise of the conversation.

Is it true, though, regardless of whether we've reached the true golden age or not, that we just have tremendous more variety of snacks than, say, when I was a kid, and I think there were like two flavors of Doritos. Yeah, no, that's absolutely true. And a lot of the snack production is local. So if you're buying Frito-Lay chips, you're probably getting them from a factory within a couple hours from you for the most part if you're in a large population center. And these factories have been around for 50 plus years in a lot of cases, and it's a local supply chain. So the change from two flavors to multiple flavors with a similar population typically in an area is due to enhanced production and throughput.

On that note, when did this become a thing or start to become a thing? And what was the proximate like trigger or development that kicked off? I mean, I imagine there was a company that was probably at the forefront of this. And maybe it was the maker of Kit Katz or maybe it was a potato chip company or something like that. But what was it that kind of set this development in motion? I actually think these soda producers were on the front lines of this for doing single runs. So you can. we'd find dozens of different mountain dew flavors going back 20 years, right? Oh, yeah. And limited time offerings. And soda's really easy to do this with because you have your recipe, you clean out your pipe. Everything is the same. It's a really simple industrial process.

And it's a lot more difficult when you're dealing with snack food comparatively. Before we even start talking about variety, though, how is it chip made? Let's just go think about like a single bag of fritos. I like fritos. You know, just like when we think conceptually, like, what is the process that exists? probably 40 years ago, 20 years ago, 10 years ago, in which we got Freeto's. What happens to make a Frito? So if you look at the ingredients for a normal Frito, I think it's corn, corn,

oil, and salt if you don't have any other seasoning on it. So you're going to have your ground corn product. You're going to fry it. You could make a Frito at home, right? You could deep fry some corn flour and oil holding together into different shapes. I've made Frito pie. I have not made homemade fridos, but maybe. I don't think they would turn it now.

out quite the same. But that's, it's very simple, right? So you're frying the corn and sending it through and that's really it. So that hasn't changed for the actual production of a frito. You've had enhancements on the consistency of the shapes, the volume you can do it once, the timings for various fries and how you might move it through. But the frito of 50 years ago looks a lot like how it's made today. So you're talking about the actual manufacturing process. But I mean, that is like in some respects that's kind of a later step in these snack food product cycles and the very beginning is you know I imagine there's a flavor lab somewhere at a large snack food company and you have all these people who are brainstorming ideas and then maybe there's research and development

that goes into thinking about a specific one there's consumer testing product testing seeing how people respond to it. It feels to me like maybe one of the big changes that has happened is that people have also figured out that, well, you can cut down a little bit on this huge R&D process just by producing a bunch of different flavors. So it's not like, it's not incredibly important to your company if you unveil this new flavor and it falls flat, so to speak. If you're unveiling a new flavor every other month. Right. And I think what they've gotten very good at is so they would have small-scale versions of

their factory or digital versions even now where you would produce something called the digital twin of your factory line. And you can simulate the R&D process through there for the actual production and then push everything through digitally to the factory. So you can say we know it's going to take this long to cook. We want to add this much flavor. We want to add this much salt, garlic powder, chili powder, whatever you're going to add to it, sugar.

And we can test all that digitally. We know how it's going to flow through the line and then send that recipe directly to the production factory to send it through a test run there. And doing that process, I think, has sped that up a lot. And they're using ingredients they already have, right? It's just a different ratio. They're not affecting their own supply chain as much as they're affecting their potential total throughput when they make these runs. Because you do have change over time. You do have recipe management traceability concerns that you have to do for various potential recall.

and things like that. So there's an opportunity cost, but it's pretty limited. If you feel confident, you can get this run in. Oh, that's really interesting. So you can come up with a flavor and then using digital technology, you can basically simulate what the production would look like using your existing system or maybe figuring out if you need to put anything new in place, although it sounds like for the most part they don't. Yeah, I think the real benefit for being able to put something new in place is say you wanted to change the bag sizes. And you wanted to look at maybe we have a line that goes through normally, but now it feeds into a one ounce, two and a half ounce and six ounce bag, potentially,

with quicker change over time so that you can have more variety running through a line. You could basically drag and drop the designs from an OEM into your line. And it runs sort of, I don't know if you guys are familiar with the factorio game. It's a big game for engineers. No, that sounds amazing. Factorio. It's really good. It's a computer game that lets you build a simulator.

factory with physics and everything. Oh, wow. And eventually your factory covers the whole planet. And it's still a video game. But it's really, it's really interesting that way. And we're doing that in real life now, where we can drag and drop different elements into the factory and potentially move pieces from other production lines to different lines for what we're trying to do. That really speeds up the R&D process. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bonn markets massive, murky, and let's be real. Lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a commitment to your clients.

We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself. at vanguard.com slash audio. That's vanguard.com slash audio. All investing is subject to risk Vanguard Marketing Corporation distributor. Eating well shouldn't be complicated,

but somehow it turns into recipes, prep, cleanup, and half your Sunday gone. Factor solves all that. These are fresh, ready-to-eat meals designed by dieticians, delivered to your door, and ready in just minutes. No prep, no cleanup, no excuses.

And it's not just about convenience. You're getting real food, balanced nutrition and zero artificial stuff. Meals that help you stay on track for all of your goals, without the grind of doing it all yourself. Grilled chicken, roasted veggies, steak plates, postables. They taste like something you get in a restaurant, but they come out of your microwave in two minutes flat.

If time, cost, or effort have been holding you back from eating better, Factor just took those off the table. Right now, get 11 meals, free shipping, and free sides for life. Hurry, this offer won't last long. Go to FactorMeals.com.C.A. and use code fit. That's 11 meals, free shipping and free size for life, but only with the code fit at facturemeals.ca. Factor, Canada's number one ready-to-eat meal delivery service. So let's talk about the increased throughput or the speed with which changeovers can happen, et cetera.

So let's imagine it's 2004 and someone at Dorito says, you know what I think that the consumer would like a shrimp-flavored Dorito? And maybe they've done some testing and some surveys and something like, yeah, there seems to be some appetite for a shrimp-flavored Dorito, et cetera. How difficult is that changeover in 2004 to get the line to like pause and go from regular Doritos to shrimp-flavored Doritos versus the difficult and ease of that technology or that changeover in 2024? In 2004, you're dealing with paper in a lot of that part of the factory. So you're getting, if you're an operator, you're getting a recipe on paper to go grab a 20-pound

bag of salt, go grab a 40-pound bag of this, go do this. And there's a lot more checking, rechecking, mistakes, quality issues. There isn't the digital feedback that you have now with the sensors down the line to check for quality. So now we have 3D vision systems that can dimensionally check a chip. Is it big enough? Is it unbroken? Check it for color. Does it look like it got enough seasoning?

Did it overcook? Is it a little too brown? Did we send it through the friar too long? Is it undercooked? Are we getting a bunch of chips that are stuck together? There's some issue on the front end. that things aren't working right after we made the changes. So all that can be detected in process now,

and things can be stopped a lot faster and corrected, where 20 years ago you're pulling something off the line, someone is standing there analyzing all with the lines running, and you could be producing 30 minutes of bad product before you catch it, right? The potential for mistakes was a lot higher, and the risk of lost revenue was significantly higher. Yeah, I wanted to get into it. Can you talk then a little bit about,

okay, the sort of business side of the, these decisions. So if you can catch mistakes faster, if you can make sure that the seasoning is applied consistently quicker on a new run, what opportunities does that open up for the OEM? Or the company in terms of like, okay, now the bar to make a decision, it's easier. We can try new things. Talk about the connection between that technology and then the confidence that a company has in trying new things. Yeah. So when we're talking about how an operations person or a plant manager would look at their production facility, there's sort of a triangle between throughput, uptime, and quality.

And they're weighing these three factors against each other for how they're producing to get ultimately get the number. It's a trilema, right? Because you can never be better than your worst metric really, right? So no matter how much you produce, if only 50% is good product, you've, you've only 50% effective, right? Saving that for my next performance review. Yeah.

But it's like that in, in particular. production. So what we're looking at really is the loss of uptime guaranteed when you are making changeovers. So you know you're going to have planned downtime as you do these changeovers. So you have to outperform on your quality and throughput side as this goes. So part of the digital transformation that you see in factories and the digitization of factories is that you can pull a lot more elements out of all of your various devices. In 2004, to use that example, if something failed in one machine center in the factory, if you were having an undercooking problem, you might not be able to correct it unless someone got into the program, made some changes,

and then adjust at the time or an operator caught it. And if you were 2 a.m., and it's the third shift, that operator might not be paying attention. It might be their second job. They just have probably not worked there that long, usually. And the programmers also work during the day, so they might not be able to fix it until the daytime. And now, because of the digital feedback, we can create a sort of machine learning environment potentially, or at least a closed loop environment, where we can use the quality data from 3D vision cameras later on in the system or any camera system we're using and feed that back to the earlier machine centers to say, we're undercooking, go longer, make that change, and I'll validate as this next batch of product

comes through, right? Because it's usually a continuous process. So as I start seeing good chips, I'll tell you that we're fine. And it operates a little like cruise control in your car, right? So you've got a loop system. You want to go 55. You're going 57. You slow down. You speed up until you get to a more ideal product, which in the past, a really good operator does that on their own. But truly, post-pandemic, we're at a loss of good operators and we're at a loss of people that want to be operators in the first place. As you're going through all these new technologies, I'm sort of like mouthing to Joe going, wow, for each of these. I'm coming round to the golden age of snack food idea, at least in terms of the actual manufacturing. process. But one thing I wanted to ask is, okay, so you described how new technology can kind of be used as a safety net almost for risk taking and punting on new types of flavors and makes it easier in many ways to create these things. Is there a way that technology can also inform the flavors being made? Like, for instance, would you get data from a digital assistant on the factory

floor, which would say like, okay, you're not using up all, I don't know, like the cheese or the garlic when you're doing this particular product. Maybe you want to look into doing a more cheese and garlic heavy version of this. Do you get that kind of feedback too? Yeah, that kind of feedback can absolutely be float upward towards the business process as we're collecting all this data. So that tends to get visualized in dashboards for business operations to look at and see what they're doing. That wouldn't be an automatic decision. But, absolutely we could see that we might be able to produce different product because we have a glut of some supply with how something is working or how that goes.

I think what informs production more ends up being what leaves through the supply chain on the logistics side, what goes out of the warehouse, what starts being ordered more, and that now can be a driver versus, I think, in the past, you would have kind of a monthly production run planned out in advance, and now I think it's much more day-to-day someone comes in and finds out what they're producing that day. So we've been talking largely in the chip idiom so far, so to speak. But another snack category that is like really blown up, and I know that you've worked in this, is nuts and particularly almonds and just the numerous flavors of packaged almonds you could get.

Like I think it used to be, okay, you could get raw almonds maybe in a bag and maybe toasted almond. And like if you went to like, you know, a hippie store, you could maybe get like Tamari or like soy sauce. almonds or something like that. But now there's just like so many, they've just really gone wild with the almond flavors. What was the thing you were looking at Tracy? Like what was the? Oh, there's a brand of Korean almonds. I think it's called Tom's or something like that. And I am slightly obsessed with them. They come in all sorts of flavors like tiramisu, um, honey. There's savory, spicy ones as well. Whenever I see them at any store, um, mostly Asian supermarkets, I buy like, you know, at least five packs.

They're so good. So talk to us what you've seen in the nut space, the almonds space. Yeah, California, obviously, well known for almonds, as everyone heard about during the drought. That's right. So out here in the Central Valley, we produce a lot of almonds. And the production factories that handle nut production out here, not just almonds, but pistachios as well when you talk about like the wonderful company. But when we're talking about almonds, it's typically you're going to hear Blue Diamond Growers is a co-op of growers that owns several factories. through the area. And typically what they had done is just produced almonds and sent them off

large amounts to Asia, large amounts to everywhere else in the world because something like 99% of almonds are grown in California. So if you've seen almonds somewhere, they were probably grown by a few of these large farms and sent off. And in 2020 during the pandemic, obviously Asian markets dried up as trying to shut down. A lot of the service industry that they might have sold to slowed down and they made a business transition into snacks, really out of necessity at first. And then it took off because people like yogurt covered almonds and they like lightly salted smoked almonds. They like spicy almonds. I think if you, there's a whole wall at the airport now if you go in to see all of these flavors. Totally. It's wild. Yeah, absolutely. It was a massive mistake

to record this episode right at lunchtime. Can I just say that? So on Amazon, you can buy a pack that has smokehouse. This is just the Blue Diamond Variety Pack. Smokehouse, Bold, which is wasabi and soy sauce, habanero barbecue, suracha, sweet Thai chili, salt and vinegar, blueberry. That sounds a little weird. I'm not going to lie. Whole natural, lightly salted, and then toasted coconut. Maybe. So how did this happen? How is a company that specialized just in, like, we're going to sell bulk almonds, then able to whip out like 11 different flavors like this? they made the production choice to build new facilities and new lines solely for snack production. During this time, the almonds don't stop growing. You have to harvest them.

So when you're dealing with growers, they have the product. So they were essentially able to vertically integrate themselves into becoming a snack producer. And once you've decided you're going to make these little snack packs and you can make a one ounce or a two ounce or six ounce bag of almonds, you have your various lines and you have various lines and you, They're all producing different sizes. And then all you're doing is roasting your almonds and flavoring them and then cleaning that out and changing it over and doing a different flavor. So you could run lightly salted and then you could run regularly salted without a real issue there, right? And then you could run maybe one more flavor after that before having to mess with things before you damage the flavor. When you talk to you mentioned, of course, you have to clean out the flavor because you don't want the blueberry. You know, you don't want to do the blueberry run and then the shirotra run right after and there's still.

there's still residue from the blueberry run. Has that process changed, the sort of switchover process of getting one flavor in and one flavor out since you started in the industry? Absolutely, it has. Depending on what your product is and what your pipes look like, you're sending steam through, essentially, doing what's called a clean-in-place process. So you're sending your cleaning fluid or steam through the pipe, and then you're changing out your nozzles and making sure that clean equipment is in there. Everything is stainless steel. It's food grade. It might get sprayed down, washed down.

But what we've been able to do now is detect a cleanliness within the pipe. That instead of running on timing, we can say, we know the pipe is clean when we see these certain parameters go through. Or we can understand that this sensor as it comes through, it's now clean. And that's allowed gains of, you know, somewhere, if it was a 30-minute process, maybe you've been able to gain four or five minutes. But if you want to do that three or four times a day, you're. you've gained a lot of production because you're doing maybe 200 bags a minute, right? So when you math that out, you're able to take these small, we sort of described it as the power of gaining 1%. You gain 1% in 12 different places.

You've gained the ability to produce a whole other product for an hour, you know, potentially. Eating well shouldn't be complicated, but somehow it turns into recipes, prep, cleanup, and half your Sunday gone. Factors solves all that. These are fresh, ready-to-eat meals designed by dietitians, delivered to your door, and ready in just minutes. No prep, no cleanup, no excuses. And it's not just about convenience. You're getting real food, balanced nutrition, and zero artificial stuff. Meals that help you stay on track for all of your goals without the grind of doing it all yourself.

Grilled chicken, roasted veggies, steak plates, postables. They taste like something you get in a restaurant, but they come out of your microwave in two minutes flat. If time, cost, or effort have been holding you back from eating better, Factor just took those off the table. Right now, get 11 meals, free shipping, and free sides for life. Hurry, this offer won't last long. Go to FactorMeals.ca and use code fit. That's 11 meals, free shipping and free sides for life,

but only with the code fit at factoramills.ca. Factor, Canada's number one ready-to-eat meal delivery service. If Belfib TV is now streaming, is it still TV? Is it still TV if there's no TV box? If I can stream all my favorite channels and pause and record shows, that's TV, right? A new era of FibTV. It's streaming, but it's still TV. Well, glad that's settled.

Bell, connection is everything. So Joe brought up the Korean almonds, and of course we started this episode mentioning Kit Katz among other things. But it does seem like Asia, in some respects, has had a head start on experimenting with lots of different types of flavors. Can you maybe talk about what enabled them to do that, you know, places like Japan and Korea? How are they manufacturing all these different varieties? And is it a case that we're sort of catching up to that technology? Or is it a case that the market was just more amenable to experimenting with these types of varieties. I'd say it's a mix of both.

I think the factories, when you're looking at production in Asia, tend to be newer, where the production in America is retrofitted older factories from some of these legacy companies that a lot of these factories have changed hands. There's an ice cream plant down here that I think has changed hands like six different times that makes Hogendoss bars. But it's been owned by a bunch of different companies and it's been around for 50 years. And you didn't see that in the Asian markets. And I think that when they came in there with American flavors to produce for Asian markets,

they didn't sell in the same way that they wanted them to. So they started experimenting locally by necessity to try and move product. I always think of it similarly to Procter & Gamble making spicier toothpaste for India, right? So they adjust to the local flavor. And I think some of that's market research and some of that's just sales data that they didn't perform. so they had the other flavors. And I think it took a long time for them to understand that America doesn't just want to eat barbecue chips, right? That we'd love to get.

I remember being very excited when I got my first lays, all-dressed bag of chips that I found in the store because I had seen online that they were big in Canada. And I don't know why that was exciting that I had the very. That's legitimately exciting. I'm excited for you. And they were good. I mean, I never bought them again, but they were good. And I think a lot of people have that experience where they want a snack variety, but they want it to taste good. And I think that's the fear is that variety will sell, but the flavor won't get another sale.

And I think we've proven that sort of wrong, that we can always just create more flavors. Right. This is exactly what I was going to ask next. So you mentioned you never bought that particular thing ever again. It does seem like there is a consumption pattern here where a lot of it is all about the novelty value. So a new flavor comes out. You try it. You either like it or you don't. But even if you like it, how much repeat business are these types of experimental flavors actually getting? It feels like it's very much about the cycle of launching new products. Yeah, it's definitely about the cycle of launching new products. And we've seen over the years that certain types of flavors have tended to hold up like a chili lime flavors on a lot of different chips have showed up and stayed.

Flaming hot varieties of every chip have stayed. So it seems with spicier flavors, they tend to stay. A lot of the novelty dessert flavors I don't think do very well that kind of bounce in and out. You know, cinnamon churro chips sound great and then they're fine. So I think if you trended, if you walked into your store and took a picture of your chip aisle every week for a year, you'd see a lot of different flavors and you'd see some new flavors never leave. And those kind of get added into the production rotation. And that's all built into the business analytics from these companies that they can see their selling.

They move off the warehouse shelves. You know, they have to move these chips within a certain amount of time for freshness reasons. If they're not leaving the shelves, they don't get made again. This might be a really stupid question, but obviously in the era of Instagram and DTC companies, you know, we know about Frito Lay and these big companies, but there's obviously a million smaller brands that try to, maybe they try to pretend to be a little bit healthier. or maybe, you know, whatever it is. Is it easy now? Like if Tracy and I had an idea for a chip shape and a chip flavor,

is there sort of like off the rack infrastructure and capacity for us to just sort of buy some time and space on a line and sort of without having to do any infrastructure investment ourselves, like have a chip brand? Yeah. So we call these companies copackers the same way you would use for beverage producers. And there was a fun example. I ran into the other day of a company like this, deciding they wanted to make a pea protein mix of a Cheeto, right?

Company had this idea, this manufacturer built it, and lo and behold, now you can buy petos at Costco. So they sold this to Costco, had this idea, found this company to make it, and the production facility was there for them. I'm sorry, I'm losing it a little bit at Pito. Sorry. I know. I wanted to bring it up. because I love the name. I thought it was so clever. I would try to think where to go next.

Okay. You've given... Sorry. What's the next big thing in snack food manufacturing? Sorry. I'm so sorry. That's a serious question. Okay, so you walked us through all the technological enhancements that have enabled us to develop these new types of flavors and manufacture them in a more efficient and faster way. You know, things like sensors detecting cleanliness, the ability to observe the chips that you are

producing for quality in a sort of automated way. What's next? What's really exciting in terms of that technology? I think the thing that's moving the technology along now is the movement of robotics into the production process in as many, many places as we can get it. So where, I'm starting to see it as so you would now see robotic arms in most manufacturing facilities at the end doing the palatizing process. So taking the finished boxes, it's a big robot arm, picks them up, puts them on a palette, arranges the palette, and then sends it off to the forklifts or automated guided vehicle back to the warehouse, right? And then we're starting to move where now we're even using robots to start picking packs of things or stacking different parts of the process to get them, you know, stack 10 rice cakes and get them in a line so they can get wrapped.

move to the process. So when you start to think of the technological innovation in a production line, you want to work backwards. So you can start at the warehouse because you'll never have a problem where you've created a bottleneck because you're already at the end. And then you can move to the palatizing process and the wrapping process because that's also the end. Now we're starting to move further and further through the production line. And we're having robots that move alarmingly fast as you stand next to them that are doing a lot of these processes that maybe weren't done by hand, but we're done with a series of blocks and conveyors where a line would make the product turn three times, and then it would get it into the right position to get into a bag and get everything moving.

And the speed that we're creating on the back end has driven a lot of the speed demand on the front end now, because we've got more production capabilities, and we are ready to move. and when I think about the future, it's just going to be more of this variety. I think that the food manufacturers have looked at things like OZempic as a challenge and the way that they're going to tackle it is through novelty, right?

Nestle just came out and talked about that we are going to innovate, and I don't know how Nessly can innovate except by making more product. OZemPEC is going to kill our demand for snack food, but the way they're going to respond is by just such tantalizing, incredible creative,

flavors that it will overwhelm the medicinal suppression of our appetites. I'm excited for this cat and mouse battle of whether they could just sheer innovate their way back to consumer demand. It's worked for me so far. I'm just thinking this is such a thematic all-thoughts episode because we talked about pallets, chips, although a different kind of chip. And then we're also talking about OZempic and automation processes. But Ryan, you alluded to this earlier. But what? What is the labor picture like right now for snack food manufacturing? And one of the reasons I ask is, I don't think my husband will mind me mentioning this, but one of his after school jobs in the UK was packaging chips.

And he said it was the most boring job and tedious job that he's ever done. And I think he did that for quite a while and just spent hours and hours putting like bags of chips together. But what is the labor picture? like right now? How easy is it to find workers for this type of job? It's very difficult to find workers that want to staff these facilities. It's a boring job and it's a stressful job sometimes. You know, things are going down. You're getting hollered at. You're holding up production depending on what you're doing and you may not know enough about the process, especially now where the machines have gotten so difficult. It's not a push button anymore. It's a iPad or it's a touchscreen that you have

on the line that is controlling things and you might need to click through several screens and make adjustments or start or stop something to cycle things to get everything back running. To go back to our 2004 example, what you might have seen in the past is staff at every single machine center. So you would have someone at the friar, you would have someone at the bagger at the palletizing station. Someone might be putting chips in a box like you mentioned, Tracy. And now what we're seeing is we can probably have an operator controlling two to three lines

potentially on an iPad, walking around, making sure that nothing's breaking, looking at and acknowledging alarms on their system. And when we talk about things like robotics in the palatizing station, so typically you're going to use two to three people per shift to do palatizing if you don't have a robot there, someone stacking boxes or you've got a machine and what you're doing. So one robotic arm eliminates somewhere between six and nine jobs for a three shift factory per line. So these products and these processes are removing operators, but out of necessity, really, these jobs are very difficult to hire for and are always at a staff shortage. Every factor I walk

into as a hiring sign, we can interview it today, you know. So speaking of robotics, you know, one of the things that I sort of actually, there was an interview with Jensen Wong, the CEO of InVIDIA about this, and I've heard this from else, is that the power of robots, you know, will really be amplified with AI. And I imagine, and the idea is, right, like, that if you have some sort of robotic arm picking up a bag, it helps if it has, like, the bag is at maybe like a 45-degree angle, that it can't just, like, it has to, like, shift a little differently or something like that. Can you talk a little bit about that more, like, how AI or maybe machine learning sort

of makes it so that robots are becoming more efficient? Is that something you see so that they can respond to deviations? or a weird chip shape comes through and it doesn't automatically, you know, it's still able to pick it up. Can you talk a little bit about this sort of intersection of AI and robotics and whether you see that as a force amplifier? Machine learning certainly when we're talking about it is already being used. And you'd be surprised how often a very slight tilt in something will disrupt a robot entirely. So that does make sense. It's looking for a very specific shape.

Sometimes you have to really build the process out in front of it. Because this is what I heard from someone recent. This is what I heard from someone. recently about why we still don't have, for example, like, robotic, like, pizzerias, which is just that they're still at the point where, like, if there's, like, if one of the pies is, like, a little bit smaller or a little bit bigger, et cetera, like, the robots still aren't nimble enough or agile enough that they would be able to respond, and then that would break the whole process. And so the argument is, well, if you have some sort of AI sensor vision

and stuff like that, then in theory, it can respond to these deviations faster. Yeah. Right. Right. Right. Now where we are at with robots is that you'll see when they start to make deviations, sometimes they can respond for the first few issues, but they have trouble coming back to a home position to reset when the product is good again. So they can sometimes function for up to an hour in a sort of failing state and then they fail entirely. And then the process has to be, they have to be put back onto their, where they are in the

grid and relearn where they are and then you can fire it back up. So with robotics, we still have a lot of limitations. And I think those limitations don't have to exist, but for the mass-produced robots that we're using right now in production facilities, we still have those limitations. So I don't think Jensen is wrong that we could start using AI in these processes. And I think robotics is probably the first place to look. When we talk about machine learning, we're using that all the time, where we're a closed-loop process that the machine can determine. Dairies are especially good applications for it. cheese making where you're heating the product and moving it through. You're able to adjust times

depending on variations of the product and you can visualize what an ideal product would look like and know that and make adjustments with all the different sensing units you have. You're like, I need this moisture content. I need this temperature. I need it to get to at least this. It needs to be this color. If it's not this, continue. All that's happening, but we are not to a point where we're letting anything sort of make decisions on its own. By the way, there are a bunch more blue diamond almonds than I said before. So anyway, there's various chocolate covered ones too. All right, I have one last question.

One thing we haven't talked about is the distributions time, because I have to imagine that, like, okay, it's great if the manufacturer can quickly change over their lines and reduce, not have to worry about downtime as much when they're shifting from one stable process to another. But then you have this explosion of skews. and I have to imagine that makes a warehouse, you know, you have before you might have had a warehouse that had two kinds of fritos and now you have a warehouse or probably, you know, 100 kinds. What is required on the sort of distribution side to handle the explosion of variety of snack food? Yeah, so we're seeing the rise of fully automated warehousing.

And essentially what a fully automated warehouse looks like when you're dealing with pallet-sized product is you're going to have a series of conveyors and you're going to build it up in a multi-story elevator situation. and you'll have carts that are not operating dissimilarly to what you would have in an Amazon warehouse where they're picking and placing something and going, but they're taking small totes, right? And we're dealing with pallets. So we're almost running at like trains and elevators, moving to certain locations that are then visible on a 3D grid for the warehouse operator. So it's typically we can have one or two people operating this warehouse now and calling down for the packages they need in an automated way. ISO saying, we're going to fill this truck with these pallets in this order so that when we get to the various stops it's going to make, it unloads in the proper order. And all these different pallets are located in bin 114 on floor five of our system and pulling through.

Where in the past, right now in a sort of a traditional warehouse, you'll have a sticker on the outside of a palette and someone drives up with a forklift and scans it and then pulls it in based on what order they're pulling something from. And it's a lot more hectic to deal with multiple skews. And you see a lot of forklift drivers moving pallets to get to a pallet behind it because of something that happened where you don't see that in an automated situation. Tracy, are you convinced now that we are indeed in the golden age of snack food? In terms of technology, yes. Yes. Well, and I am very intrigued by the idea that maybe in an era where people are eating less if OZempic and the GLP1 drugs become. even more popular that food companies are going to have to offset that loss of consumption with

creating new and tempting varieties of things to try. However, I will say not all of the flavors are evenly distributed. And you and I were experimenting with this earlier, trying to order particularly exotic varieties of stuff. And you can't find them everywhere. You can get most of the things off Amazon, but they're not in every grocery store. And also, like, prices. are still pretty high. I don't know if you've bought lays or something recently, but it's kind of insane how much it costs nowadays. By the way, there's a lote Mexican street corn-flavored almonds, which you can buy from Blue Diamond. I'm going to buy them. Ryan Harlan, thank you so much for coming on Odd Lots. That was an absolutely fascinating conversation and a great

explainer of how technological innovation in the back end truly gives us this wonderful world of variety. So thank you so much. That was a lot of fun. Thank you for having me. Thanks, Ryan. I've never been more hungry. I'm the same. Joe, you know you mentioned the Mexican street corn flavored almonds. So this reminds me. I was in the supermarket the other day, and I saw there were Mexican street corn, alote-flavored Cheetos. And I was tempted.

Okay, yes. But I didn't buy them because I think it was like eight or nine bucks for a package. And I just couldn't justify it, like the novelty value. just like maybe a one-off though Tracy by the way I did order some Kit Katz and Doritos before this so maybe Tracy you can you know and I'll bring them into the office you'll subsidize my chip consumption no I'm saying now you get those just like a good industrial policy shit return the favor of me buying I will bring you actually I will bring you some of those Korean almonds okay because now that we've been talking about them I really want to go get some but just this idea so like there's so many fascinating things in the conversation for one thing I just love I just love you loved like how clear Ryan was about explaining how all these processes worked. So that was very cool. But then you think, okay, you have this factory and you try to get like some sort of like maximum like 99% uptime or maximum throughput. You can understand once you've achieved a certain level of throughput, why you'd be really hesitant under the old regime 2004 to like,

let's try something new. Yeah. This is what I find really fascinating. So the idea that in this one respect in the world of snack foods, it feels like technology has enabled risk taking. And so often we kind of see it go the other way, like people's perfect stuff and then they kind of like double down on efficiencies and then they get sort of like hardwired into doing one thing perfectly. It's really interesting to me that in this world, we're using technology to enable variety in a more of efficient and maybe interesting way. Totally. And I love like the simple example that you don't think about like, okay, let's say you have

to clean the pipes, which of course you do between different flavor runs. Before you're like, well, the solution in making sure you have clean pipes is to just let the washing process go along. So maybe 30 minutes. But what if you could do it in 20 minutes and you just those extra 10 minutes are a waste? And then you can like, you know, it's only seems like 10 minutes. But what was it the rule of 1%? If you can find 12, 1% efficiency gains, then you can get an extra hour of throughput.

put through a factory. And if you're doing hundreds of pallets. Right. It's exponential. Yeah. So it's pretty cool. But also, you know, Ryan mentioned that game factorial. And the idea that, okay, it's a video game. It kind of, I've never played it, but it kind of looks like SimCity. But for factories and you create your own simulation of a manufacturing process, the idea that that's actually happening in real life. So you can come up with an idea and then you can use software to basically figure out how you would produce this with your current resources in the cheapest and fastest way, presumably. That seems really interesting, too. And a big difference to, I guess, how things were previously manufactured where you would come

up with an idea. You'd have to do all this research and development, lots of customer testing, but you'd also have to talk to the factory floor and figure out how you would make these new things. Totally. I want to like see one of, first of all, I want to play Factoria or at least check out the trailer. It looks good. It looks really fun. And then also, yeah, this idea, I think, what did? Digital twin, I think was the term he used. So you could just create an entire digital version of the factory. And if the simulation is good enough, then you just run the whole test in the digital twin. That's a really cool idea.

Also, this idea that like that point at the end that robots still aren't very good, that if you could eventually, it becomes a problem. If too many of the bags are tilted and then they have to be manually. annually reset. Seems like there's potentially low-hanging fruit there if, I don't know, AI can make it so that the robot can just automatically do whatever. It's really exciting. We should have Ryan back in 2034 to talk about the state of snack food manufacturing. I'd be into that. And then maybe at that point, we really will be in the golden age of snack foods of cheap and abundant and interesting things to eat. Can't wait. All right. Shall we leave it there? Let's leave it there. This has been another episode of the Oddlots podcast.

I'm Tracy Alloway. You can follow me at Tracy Allaway. And I'm Joe Wisenthal. You can follow me at The Stallwart. Follow our producers, Carmen Rodriguez at Carmen Armin, Dashel Bennett at Dashbot, and Kale Brooks at Kale Brooks. Thank you to our producer, Moses, Andam. For more Oddlots content, go to Bloomberg.com slash oddlots.

We have transcripts, a blog, and a newsletter. And you can chat about these topics and more with fellow listeners in the Discord. Discord.G slash oddlots. And if you enjoy oddloths, if you want us to bring Ryan back on in 2034, then please leave us a positive review on your favorite podcast platform. And don't forget, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely add free. All you need to do is connect your Bloomberg account with Apple Podcasts. Thanks for listening. The news doesn't stop on the weekends.

Context changes constantly. And now Bloomberg is the place to stay on top of it all. Hi, I'm David Gura. Join us every Saturday and Sunday for the new Bloomberg this weekend. I'm Christina Rafini. We'll bring you the latest headlines, in-depth analysis, and big interviews. All the stories that hit home on your days off. And I'm Lisa Mateo. Watch and listen to Bloomberg this weekend for thoughtful, enlightening conversations about business, lifestyle, people, and culture. On Saturday mornings, we put the past week's events into context, examining what happened in the markets and the world. That on Sundays, we speak with journalists, columnists, and key politicians.

political figures to prepare you for the week ahead. Join us as soon as you wake up and bring us with you wherever your weekend plans take you. Watch us on Bloomberg Television. Listen on Bloomberg Radio, stream the show live on the Bloomberg business app, or listen to the podcast. That's Bloomberg this weekend. Saturdays and Sundays starting at 7 a.m. Eastern. Make us part of your weekend routine on Bloomberg Television, radio, and wherever you get your podcasts. What separates good leaders from transformational ones?

I'm Jessica Chen, and in season two of Leading By Example, we'll sit down with executives like Grace Chen of Bertie Gray to find out. It's important to understand where you spike, but also really acknowledge where you don't and find people who can fill those gaps. Listen to Leading By Example, executives making an impact on the IHeart Radio app, Apple Podcast, or wherever you get your podcast.