This article was published in the May/June 2025 issue of Pet Food Processing. Read it and other articles from this issue in our May/June digital edition.
Rotella’s Italian Bakery in Omaha, Neb., a 104-year-old family bakery that supplies frozen breads and rolls to foodservice customers across the country, produces millions of pounds of bread every year. For years, close to 3% of that product, which adds up to almost 18 million lbs per year, was wasted because of imperfections, such as over- or under-baking, incorrect sizing or other product issues. John Rotella, general manager of Rotella’s Italian Bakery, wasn’t happy with that kind of waste, so he found a way to put that out-of-spec product to better use.
His first idea was to repurpose the bakery byproduct into feed for cows and hogs — a viable, sustainable use for the product that was less wasteful than a landfill. He created the company Ag Alchemy to “create something better” — as the name “Alchemy” implies — turning the company’s bakery byproduct crumb into agricultural feed. The byproduct was milled and ground into pellets and sold to feedlots. However, that added value wasn’t enough to satisfy John; he knew the wasted bakery crumb could be used for so much more.
The brand’s pet treats are all baked in a tunnel oven.
|“Seeing our byproduct just going into animal feed made me wonder if there was something more we could do with the ingredient and all that nutrition,” John said. “So, we created a way to take something that was being thrown away — our bakery byproduct — and now we’re turning it into something better.”
After tinkering around in his kitchen to develop recipes for baked pet treats using the bakery crumb, John approached his father, Lou Rotella Jr., chief executive officer of Rotella’s Italian Bakery, and his brother, Lou Rotella III, chief operating officer of the bakery, about starting a pet treat pilot plant.
Always looking for ways to reduce the bakery’s waste streams alongside an ongoing quest to further diversify the family’s business, the Rotellas all agreed a new business was worth pursuing.
Thanks to an 80,000-square-foot building on the south end of the Rotella’s bakery campus, which contained 30,000 square feet of available space, John was able to take his upcycled business idea beyond the test kitchen phase to the next level. After some R&D and product testing, John knew he had a feasible product idea for an additional revenue stream and Ag-Alchemy Animal Nutrition was born.
“Rotella’s is an old company that’s been around for a long time,” John said. “But Ag-Alchemy is something new. We have a lot of opportunities with this new company.
“We didn’t want to be another ‘me too’ brand,” he added. “I think our upcycling mission shows we are something different.”
Brand development
Visitors to human food baking facilities and to pet treat plants will often notice similar pieces of equipment being used throughout the operations. And the techniques to mix, form and bake pet treats often mirror those used for human food. However, John knew baking treats for dogs wouldn’t be exactly the same as making bread for humans, which meant his transition to the companion animal side would require an obvious learning curve. But, his bakery background definitely helped.
As a manufacturer of branded and co-packed dog treats, some of Ag-Alchemy’s product is sent to customers in 10- and 20-lb bulk bags.
|“With our background in the baking industry, we felt we were in a good position to start creating baked pet treats,” he said. “I couldn’t have done it without our bakery’s support or my bakery knowledge. Starting something like this from scratch would have been very difficult. From regulatory to procurement to IT to engineering — all of these components in our new operation piggy-back off the bakery. We are separating it all out from the bakery’s business, but having that knowledge base from the bakery has been invaluable.”
As general manager of his family’s bakery operation, John’s responsibilities have always included capital improvement projects. He was instrumental in bringing the latest of the family’s five bakeries online, opening its 245,000-square-foot cold storage facility and helping design the 261,000-square-foot state-of-the-art bakery set to open in 2026.
His engineering and construction background provided the expertise to create Ag-Alchemy’s pilot plant and is contributing to his vision to expand the facility further.
After the decision to start serving the companion animal product business was made, there was still a lot of work to be done before there would be Ag-Alchemy Animal Nutrition dog treats on pet store shelves.
“First, we started buying equipment and working on R&D,” John said. “We slowly added capabilities to serve the companion animal side of our business. We created our formulas, developed different sizes and shapes of treats, and did a lot of product development. We started going to shows to test the waters with our capabilities and from there started to build our brand.”
Ag-Alchemy’s Pro Bakery Bites brand features a selection of dog treats in a mix of fun flavors with Pumpkin Cranberry and Bacon & Eggs being two of the most popular varieties.
|COVID hit right as the company was starting to create its product portfolio. Thankfully because the timing was during the early stages of the company’s product development, the pandemic didn’t really interfere with any plans of getting the treats to market.
“This just gave us more time to work on our R&D,” he said.
After many months of R&D, Ag-Alchemy Animal Nutrition unveiled its brand, Pro Bakery Bites. The portfolio now features soft and chewy, soft baked and crunchy dog treats all enrobed in a proprietary blend of probiotics to promote a healthy gut and microbiome in the animal. Ingredients are all sourced in the United States and the facility is USDA-Certified Organic.
“We’ve always used top ingredients. Whether it’s for Rotella’s Italian Bakery or Ag-Alchemy, our vendors know that we look for the best ingredients,” John said. “Any company can make something a little more affordable. But we don’t want to sacrifice quality by using ingredients that are inferior.”
Depending on the formulation, each product can contain up to 60% of Rotella’s bakery crumb byproduct, which is called “dried bakery product” on the label and is the primary ingredient in each treat. The byproduct comes solely from the bakery’s white bread and buns — no other product, such as bread with sesame seeds, sourdough or marble rye, are used. About 10% to 15% of Rotella’s bakery byproducts go into the dog treats — close to 500,000 lbs of bakery crumb every year.
The treats come in a range of fun flavors including Bacon & Eggs, Chicken & Waffles, PB&J Bites, Pumpkin Cranberry, Vanilla Birthday Cake, Red Velvet Cake, Banana Split, Blueberry Pancake, Sweet Potato Pie a la Mode and Double Bacon Cheeseburger.
“The flavors are very pleasant smelling for the treater, and very palatable for the dog,” said Heidi Gillman, director of business development.
“Within our campus you have the smell of fresh baked bread on one side and great smelling pet treats on the other,” said John Rotella of Ag-Alchemy Animal Nutrition.
Pumpkin Cranberry and Bacon & Eggs are the top two performing flavors.
“The one comment we get all the time about our treats is that they smell so good,” John said. “When customers smell that blueberry pancake or the PB&J flavor they always say, ‘This is amazing.’ And, the number one comment from anyone who comes into our facility is about the fantastic smell. Within our campus you have the smell of fresh baked bread on one side and great smelling pet treats on the other. It’s a great combination.”
Pilot operations
Although Ag-Alchemy is located on the Rotella’s Italian Bakery campus, the pet treat company is a separate entity. The company has its own staff, lab, food safety offices, production space, packaging and distribution.
Depending on the formulation, each recipe could contain up to 60% of upcycled bakery crumb.
|While John still serves as general manager for his family’s bakery business, he now also serves as president and CEO of his new business venture. His brother serves as COO, Paul Martinez is general manager, Cindy Martinez is office manager, Gillman is director of business development, Kerri McVay is director of food safety and quality assurance, and Alexa Martinez is project manager.
The Ag-Alchemy Animal Nutrition pilot plant currently utilizes 25,000 square feet of processing, 25,000 square feet of warehouse and 5,500 square feet of office space in the 80,000-square-foot building it’s housed in. The plant features a milling line, a blending line and a biscuit line. From the biscuit line, the plant currently produces approximately 150 SKUs in more than 35 flavors and in 30 different shapes. Twenty-five percent of the product is sold under its Pro Bakery Bites brand, the rest is for co-pack and private label customers.
Currently, 35 employees work across two 8-hour shifts, seven days a week. Depending on the products, each shift can produce between 10,000 and 15,000 lbs of upcycled pet treats daily. Anticipated increased capacity from a new production line will add 25,000 square feet of space and will require more employees, possibly an extra shift.
For each batch, the bakery byproduct and additional ingredients are blended in commercial batch mixers before being transferred into the rotary moulder. The product then moves through the moulder die — depending on the size and shape of the product, which can include hearts, bones, chicken legs, party hats, stars and circles — and onto a conveyor before moving into the 50-foot Reading Bakery System tunnel oven to be baked. After around 3 ½ minutes of baking, the treats are conveyed into the 50-foot dryer for around 25 minutes of drying time to remove additional moisture.
Since the Ag-Alchemy Animal Nutrition pet treat facility is still considered a pilot plant, a lot of the work is done manually; that will change as the operation expands.
|The processes at the current Ag-Alchemy facility are mostly manual since it’s still considered a pilot plant. More automation will be added as the facility expands.
“Now that we know how things work in production, we can figure out what will work best for a larger, more automated plant,” John said.
After drying, treats go into bulk bag-in-box packaging for some co-packing or retail customers or into totes for the packaging department. The plant’s vertical form-fill-seal machine packages 2-oz and 6-oz bags. Product is also shipped out in 10-lb and 20-lb bulk bags.
Current and future customers
As a pet treat manufacturer who produces branded and co-manufactured products, Ag-Alchemy must consider the end consumers — the pet parents and their canine companions — and pet treat brands they are producing products for, both as its customers.
“Dogs and their owners really love our product,” Gillman said. “It’s such a great product — once the consumer tries it, the feedback that we get about the product is great.”
Pro Bakery Bites are sold online through the brand’s website and through pet specialty retailers.
“We decided we wanted this brand to be sold through independent retailers, not mass merchandisers,” Gillman said. “In the future, we’ll consider developing another brand to take to mass merchandisers and mass e-commerce — a brand that’s from Ag-Alchemy, but that’s different from Pro Bakery Bites.”
With 75% of its business being private label and co-packing, Ag-Alchemy has a wide range of product offerings and capabilities. The company’s wheelhouse is baked treats — soft baked, soft and chewy, and crunchy — but it doesn’t limit its current and potential customers to a pre-existing portfolio of recipes.
“If a new customer comes to us and doesn’t have their own product formula, we are more than willing to work with them on that,” John said.
“It’s fun when people come in and want to collaborate. Our goal is to partner with our customers,” said Heidi Gillman of Ag-Alchemy Animal Nutrition.
“We do a lot of collaboration with our customers,” Gillman added. “We welcome our customers in and get into the lab together to co-create what they’re looking for. Some come in with a formula and they know exactly what they want and they’re really specific. And then some ask us what we think. It’s fun when people come in and want to collaborate. Our goal is to partner with our customers.”
Using the Rotella’s bakery byproduct as an ingredient is not a requirement for products made in the Ag-Alchemy facility, but it’s always an option.
“We like when people want to use the crumb in their recipes, but they don’t have to,” John said. “But when customers hear about our sustainability mission, what we’re trying to do with all our bakery byproduct, and why we started Ag-Alchemy in the first place, they usually want to try it.”
Ag-Alchemy’s current R&D team consists of three people. As the company and the plant grow, so will the R&D team. There are already discussions about entering the pet food side of the companion animal nutrition market, possibly with a premium air-dried kibble product. Additional capacity to increase the company’s treat manufacturing capabilities, as well as additional kibble production, are expected to be up and running by summer 2026.
“We are already working on formulations for a pet food product,” John said. “We are planning to continue putting capital into this company so we can grow it to the next level — we want to offer our customers more capabilities in the future.
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