This article was published in the June 2020 issue of Pet Food Processing. Read it and other articles from this issue in our June digital edition.
Most who have managed a business of any size would say that it is not a straight path. Manufacturing businesses are particularly challenging, and companies are presented with many twists and turns along their journey. Being resilient as a company doesn’t necessarily mean staying the course. A resilient company is able to identify the path through whatever stands in its way.
Pet Food Processing talked with pet food and treat processors, both big and small, and industry leaders about what is required for a company to be resilient in good and bad times, as well as some of the key strategies helping companies be resilient in today’s market upheaval.
#1: Capital, of course
Enough capital or a plan to obtain more capital is ideal, if not always possible, said John Kuenzi, president and chief executive officer of consulting company NQV8, Manhattan, Kan. Companies need to plan ahead to have adequate cash reserves or the ability to source funding when needed. Kuenzi said good relationships with vendors, bankers and investors help make that possible.
“It’s always better to be well-capitalized to the point that you can withstand a sustained period of poor income generation, but that’s not always the reality of a startup or someone already struggling,” Kuenzi said. “This requires adequate funding by design and additional resources as necessary to withstand retractions and having enough runway for the dry spell. Most startups by definition are undercapitalized.”
“It’s always better to be well-capitalized to the point that you can withstand a sustained period of poor income generation, but that’s not always the reality of a startup or someone already struggling,” said John Kuenzi, NQV8.
At a minimum, Alexis Berglund, president, The Pound Bakery, Harvard, Ill., recommends that small companies have emergency funds set aside to cover three to six months of expenses or an available line of credit to tap to get through a rough patch.
A common mistake Richard Thompson, founder of Factory LLC, an accelerator program in Bethlehem, Pa., has seen from working with startups is how far in advance they plan what capital the business will require. Thompson said many young companies plan what capital they will need over the coming 12 to 18 months. He suggests looking farther ahead.
“A better approach is a three- or five-year plan and raise all the capital at once based on performance milestones,” Thompson said. “A lot of people [who] just get capital on an annual basis run out, and then it becomes an emergency.”
Adding that hope isn’t the best business strategy especially in the current economy, Thompson said, “You just can’t be a startup and hope that it’s all going to work. You really need a lot of capital as well as really good management. It was difficult to get both of those before this health crisis and now, it’s even harder to find the capital.”
#2: Priority to the people
A clear understanding of the company’s hierarchy of priorities, as a standard rule, and clearly defined priorities during a crisis are key. For many companies, but not all, the people working for the company — the people making it possible for the company to provide a product or service — are the top priority because, as Thompson pointed out, you don’t have a company without the people.
A company’s ability to be resilient depends on the employees being the top priority, according to Chris Hamilton, president and chief executive office, Red Collar Pet Foods, Franklin, Tenn.
“To create a resilient company, the culture needs to be anchored in responsibility,” Hamilton said. “At Red Collar, we strive to have each associate feel a personal connection to the business and a responsibility toward the success of themselves and the business.
“One thing a lot of the companies are facing right now is how strong that commitment is to resilience from the leadership team,” he added. “The culture needs to be strong from the senior team through everyone in the company so that resilience and the responsibility for the business overall and for the associates are felt throughout all aspects of the organization.”
Having clearly defined priorities becomes even more important in a crisis.
“Early on [in the COVID-19 crisis] we made the determination to make decisions through the lens of the safety and well-being of our associates because, without our associates, we don’t have a business,” Hamilton said.
#3: Be visible and communicate often
As a leader, being seen and frequently communicating with employees helps to make informed decisions and address challenges. Hamilton believes the leaders of an organization need to take decisive action in real-time during a crisis with the best possible information available, which points to the importance of communication.
“The leadership team has met [virtually] every day at 9 a.m., seven days a week during the pandemic crisis,” he said. “We discuss the last 24 hours, what decisions need to be made as a team and the internal and external resources required for those decisions. We then turn around and have two calls a day with our operational sites. No one is making decisions with information that is more than 24 hours old.”
Chris Hamilton from Red Collar credits the company’s annual mock crisis exercises facilitated by FleishmanHillard HighRoad, Toronto, for preparing Red Collar to address COVID-19.
As a part of normal business operations at Red Collar, providing frequent opportunities for two-way communication between associates and the leadership team has benefitted the company.
“Our policies have evolved at Red Collar based on our associate feedback,” Hamilton said. “In working in conjunction with them, we are able to make our policies better and our company more resilient.”
#4: Build strong partnerships
Anne Carlson, chief executive officer, Jiminy’s, Berkeley, Calif., said company leaders should always be building relationships but, when faced with a crisis, that foundation comes in handy.
“Good relationships with vendors, suppliers, and customers can get you through difficult times as communication and clarity are vital,” Carlson said. “Relationships built on trust enable partners to ask for help when necessary. Actions, like offering extra time for a payment or sharing ideas on new ways to reach consumers with emerging new behaviors, will occur a lot easier and more frequently if you’ve built a good relationship with your partners.”
Purina PetCare shared that closely monitoring the supply chain and keeping in contact with all parties is critical when managing something as broad and far-reaching as the challenges created by COVID-19.
“We are reviewing new information daily and working with both our supply and retail partners to put actions in place to alleviate any impacts,” said Joe Toscano, director of sales at Purina PetCare, St Louis. “For us, close collaboration and regular communication with all of our partners is key.”
Thompson pointed out that a crisis quickly identifies which partners a company can count on.
“Businesses have seen [during the COVID-19 crisis] who their partners are and who they can depend on, who was able to really help them and who was willing to step forward and do what’s necessary to help move them forward,” Thompson said. “Companies have found out who is on their team.”
#5: No waffling
Navigating a business through challenges requires action. Often, there is no time for waffling. Kuenzi shared that companies who have leaders willing to take action tend to fare better when faced with a challenge. He added that the key to managing a crisis is strong and level-headed leadership.
“A good leader should develop a great dashboard and a bias to action, pivoting when necessary but always open to new methods, technologies and approaches in light of new market conditions,” Kuenzi said.
“A good leader should develop a great dashboard and a bias to action, pivoting when necessary but always open to new methods, technologies and approaches in light of new market conditions,” said John Kuenzi, NQV8.
He added leaders must survey the environment and make decisions with the information that is currently available to them.
Hamilton said he believes Red Collar’s decision to act quickly concerning the COVID-19 pandemic has worked in the company’s favor.
“We did our best to get ahead of it and that made a huge difference,” Hamilton said. “The second Saturday of March, our chief operating officer and I decided to assemble the crisis management team and call it a crisis.”
For a company the size of Red Collar with six manufacturing facilities across the United States, following crisis management protocols costs the company both time and resources, but it puts the company in a better position to manage a crisis versus playing catch up.
“It seems simple, but by declaring we were actually in a crisis in early March, this marshaled together all the resources, the policies and procedures associated with our crisis protocol and brought them to bear on the issue,” Hamilton said.
#6: Willing to pivot
Being flexible to pivot directions based on new information or market fluctuations has never been more important than it is today. Kuenzi said that company leadership should have the flexibility and willingness to go in a different direction when necessary.
“Past success is no guarantee of future success,” Kuenzi said. “Be honest with yourself and do what you need to do. Sometimes the market — or cheese — moves, you have to move with it. Loyalty to a petrified opinion will not see you through a crisis.”
Berglund said companies are more resilient if they stay open-minded to trying new things.
“This pandemic will hopefully leave us all more willing to change business approaches to meet our customers’ demands,” Berglund said. “As things change, we need to change to meet our customers’ needs.”
Berglund points out that a diversified product offering to a broad customer base can often help a company respond to market fluctuations and endure tough times.
“As a manufacturer, we have found it very important to offer a large range of products that hit different markets,” Berglund said. “Throughout past recessions, we have seen certain markets grow where others have struggled. Some customer groups have almost completely stopped ordering overnight, while others have increased demand. Diversifying our efforts has helped us stay resilient.”
From Thompson’s viewpoint, a processor has a much greater ability to change and adapt when it controls its own manufacturing.
“I prefer to own my own manufacturing where I have my own intellectual property and flexibility,” Thompson said. “I’m a guy who likes to build factories and have the flexibility to do what I want, when I want, how I want.”
When faced with the market upheaval of the pandemic, Thompson said to focus on the products that work best and put other products on the back burner.
“Figure out what is the best-selling product you have and focus on that,” he suggested. “Focus on which of your existing products the consumer needs and get it into the marketplace. If you have product that is resonating with a buyer and a consumer [the pet], focus on that.”
Carlson described how the company has maintained its equilibrium in the midst of furious gear-shifting.
“We were just beginning our dog food launch when COVID-19 hit, so a big celebration would be tone-deaf and actually dangerous,” Carlson said. “That pushed us to pivot to information sharing and focusing in on how this new food helps everyone reduce their family’s carbon footprint – or, if you prefer, pawprint. When the river you’re paddling on is flowing rapidly toward a waterfall, staying on course doesn’t make much sense.”
Although the natural instinct in uncertain times is to hunker down and wait it out, Kuenzi said that sometimes the disciplined thing to do is take a calculated risk.
“Yes, leaders need to be good stewards of the company resources, but they also must take calculated risk and believe that good things can and will happen,” Kuenzi said. “Belief is a powerful thing.”
#7: Survival is winning
NQV8 advised every startup not to get wrapped up in what they believe progress should look like and how it matches up with their original, ideal scenario. This advice applies to companies of all sizes. The sooner a company recognizes its situation and takes steps to mitigate or improve it, the better the company can weather the storm.
Kuenzi said attitude, effort and movement go a long way to help a company be resilient, especially in times like these.
“Stay positive… lean in and lend a hand wherever possible,” Kuenzi said. “… All in all, no problem can survive a sustained effort against it.”
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