Bobo's CEO on supply chain woes: 'It’s going to get a lot worse before it gets better'
"It’s going to get a lot worse before it gets better. We’re having anxious meetings every single week around any possible ingredient that we’re buying," McIntyre told FoodNavigator-USA at the Sweets & Snacks Expo in Chicago last week, where the brand was featuring its expanded line of original oat bars, bites, toaster pastries, and stuffed snacks.
While the company's issues finding labor have improved since last year, having a stable workforce of bakers is still not a guarantee and will be put more into focus once the company has its roughly 125,000-square-foot facility up and running in September 2022, more than doubling its current production footprint, said McIntyre.
As for its hero ingredient, oats, the situation is still very challenging but with some possible upside, he said.
"It’s a disaster. North America has not sourced oats outside the US and Canada historically. We’re going to Finland and Chile," he said, adding that while it is more costly for the business, it does provide the company with year-round access to oats as the Southern Hemisphere operates on an opposite growing cycle.
"We think that supplier diversification is going to give us the security we need," added McIntyre.
However, conditions are shaping up to be more favorable for the North American oat supply this year, McIntyre pointed out, adding that soil conditions have been positive and that an abundant yield may be in the cards this year (oats are typically harvested in the mid-summer months depending on growing conditions).
"It’s a once a year harvest, so I think the entire industry has their fingers crossed. We’re working closely with our Canadian oat millers, and they have confidence it’s going to be a good yield," he said.
'This is a significantly profitable company with a very strong margin'
But what does this all mean for the end consumer of Bobo's products?
According to McIntyre, as much of the industry especially companies in the nutrition and cereal bar categories have taken price increases Bobo's has absorbed the cost increases across its business and is instead focused on driving growth and revenue through velocity gains and channel diversification.
"We’ve absorbed three pay raises so far. The cost of all of our ingredients has increased and oats has doubled, and that’s very significant for us as an oat bar company. While we’ve watched the entire industry take price... Bobo’s has taken no price increases, and instead we’re going to dig in and fight more aggressively for velocity and picking up new consumers," said McIntyre.
"We’re going to win a lot of consumers that way, and we’re able to because we control our own manufacturing. This is a significantly profitable company with a very strong margin and come September 2022 when we open our new facility we’re going to drive at least 300 basis points of margin improvement, possibly as much as 550."
Bobo’s has taken no price increases
Instead of chasing diet trends (paleo, keto, etc.) like many of its competitors, Bobo's remains hyper-focused on delivering wholesome and satiating products that feel homemade, said McIntyre.
"A big part of our growth during and coming out COVID is related to the channel diversification that we have. We’re certainly focused on national and conventional, and we’re up in Canada, and mass and club are big sources of growth, but we’re also doing very well in subscription and away from home more broadly," he said, adding how Bobo's is showing up in less likely places such as airplanes and in hardware stores along with a plan to launch into international markets.
"E-commerce is one of the fastest growing segments. We have a ton of opportunity working with Amazon that we’re planning to accelerate. Our own eatbobos.com business is close to parity with our Amazon business, and we know Amazon should be about 2x compared to eatbobos.com," said McIntyre.
McIntyre added that Bobo's bites, which are half-sized portions of its original bars, have become standout performers within its portfolio, now accounting for half of the company's total business.
Future product innovation
With its new expanded mega-facility coming online in September 2022, McIntyre said it will allow the company to pick up where it left off with a few of its product innovations such as its toaster pastries and stuffed line.
"We've struggled with capacity over the past year with toaster pastries and we kind of had to hold back because we had limited capacity in our production facilities, but we’ve solved that the problem," he said.
"As we think about innovation, we know we can play in breakfast broadly, we know we can play in cookies and we have an innovation pipeline that’s in deep ideation for those categories, but we want to get $100m in revenue before we even look past the nutrition bar and cereal categories."