Chris Nemeth of Hopeful Harvest

Romy interviews Chris Nemeth of social enterprise Hopeful Harvest on Season 2 episode.  Chris gives an important look inside his operation and openly discusses the challenges of launching this type of endeavor and the challenges that arrive when growth happens quickly. Learn about his grand plans, the broader partnership with Forgotten Harvest, and how he has overcome by serving the food entrepreneurs in Detroit.

Full transcript:

Romy: Hey, thanks for tuning in. This is Romy. I’ll be your host for this episode of the Bonfires of Social Enterprise. Today, I’m interviewing Chris Nemeth in Oak Park, Michigan, which is just outside the border of Detroit. Hopeful Harvest is a food manufacturing company that helps food entrepreneurs with some of the “bottlenecks” to production when you’re just starting out. You’ll learn how Chris came up with the idea to begin to use the facility and how he grew so quickly and what some of the barriers are he’s facing today. It’s a very interesting story. Before we meet our future guest, we have a little something called the Fun Facts Fuel.

Jentzen: Hey, everyone. This is Jentzen. I have some fun fuel to spark this episode. Chris from Hopeful Harvest inspired me to check out some history on some of the first types of food manufacturing. Before I tell you what I found, I have a little fun fact about chickens.

Did you know wild chickens naturally produce roughly 15 eggs per year? However, farmers have bred chickens to lay 200 to 300 eggs per year. Wow, fascinating.

Now, back to my fun fuel. Today, I would like to share with you the top 10 most significant inventions in food and drink according to Megan Garber in the September 14, 2012, article in the Atlantic magazine. Okay. Here we go with the top 10. Number 10, the plow. Number 9, grinding and milling. Number 8, selective breeding. Number 7, the process of baking. Number 6, the threshing machine. Number 5, irrigation. Number 4, the oven. Number 3, the process of canning. Number 2, the process of pasteurization and sterilization. The number 1 food and drink invention was the refrigerator. All right. That’s all, folks. Hope you enjoy the show.

Romy: Thank you, Jentzen. I want to give a shout out now to all of our patrons that are supporting us on Patreon. We appreciate you. If you’d like to support us on Patreon, please go to our website for the link to great supplemental content and connections.

All right. Let’s listen in to my interview with Chris Nemeth of Hopeful Harvest.

Welcome, Chris. Would you begin by telling us about Hopeful Harvest?

Chris: Thank you very much. Hopeful Harvest is a for-profit social enterprise that is an outgrowth from Forgotten Harvest, our non-profit. Forgotten Harvest is 1 of the largest fresh food rescue operations in the United States. We have 35 trucks that go out every day, six days a week, rescue fresh, healthy food from over 800 retail outlets. Then, we turn around and deliver that food to over 283 agencies throughout the metropolitan Detroit area.

Where social enterprise got it start was that there was a sense of building on the mission that we had with Forgotten Harvest: How can we go beyond what we were currently doing and not only address the problem on a daily basis but begin putting some things in place to fix the problem long term. The idea with social enterprise was to focus on three areas. We were going to focus something with food, something with workforce development and something with product development. My goal was to go basically out and get into the community and find out where the opportunities were and what was needed in the metro Detroit area. I grew up in Detroit so for me; this is also a labor of love because there was an opportunity to get back in and make a difference.

As I talk to a lot of small food manufacturers, businesses, entrepreneurs, government officials, non-profits, for-profit businesses, what I came to understand was that one of the huge differences in Detroit was that when I was growing up, it was all auto industry. Our economy was built on the auto industry, and careers were built on the auto industry. It’s just what you did. Obviously, Detroit has gone through major changes. The reality now is the auto industry is never going to be what it was before. What Detroit has embraced is the entrepreneurial mindset and the idea of we’ve got to create new opportunities, new ventures. Food is one of the areas that’s taking off in metro Detroit.

Being that Forgotten Harvest was a fresh food oriented-type of business, I automatically was drawn to talking to people that were within the food industry. What I found was there wasn’t a lot of support out there for small food manufacturers. They were using church kitchens. They were using basically whatever they could find. A lot of these places were less than desirable. They had to work around the schedules of the facilities. What was available to them was limited. They had to haul their equipment back and forth. It just seemed to me that there was a tremendous opportunity and need there where we could make an impact. We had a warehouse. We had refrigerated storage. We had freezer storage. We had a very rudimentary processing area where volunteers come in and repack fresh food.

As I began to explore it, I got into some conversations with some great local entrepreneurs. One thing led to another. We got into discussions. I started talking to more businesses. Where we decided to go was focused initially on food processing and storage. Basically, what we were looking at when I say processing was very basic, take the fruits and vegetables that they use to make their products and wash it for them, clean it, package it, store it, refrigerate it, freeze it, whatever they needed so that they could then take it and make their product.

One of the small businesses they said you should talk to a friend of ours, Jess McClary of McClary Bros Vinegars. She’s in a situation where she’s growing her product, and she’s running out of space to do it and is looking for somebody to do processing for and maybe more. I got into a discussion with Jess. We decided we would start off with processing. Within a month, we realized that we could do more than just process for her. To make a long story short, over a period of 2 months, we went from just processing to manufacturing her product for.

What’s exciting about it was the phones started ringing. Word got out that we were looking at doing those kinds of things. I joined a lot of local organizations, talked to a lot of people. The interest started to develop to do more and more of this. The other thing that became very apparent to me was that there was a real need for a top-level commercial kitchen in the area. From a Forgotten Harvest and Hope standpoint, we went back; we talked about it, and we said, “Yes, we could build on the facility we have right now. Forgotten Harvest would make the initial investment in the facility, and then we would need a separate entity that would run it and then pay back Forgotten Harvest for the investment that they make.”

We had some discussions and decided that it was probably best to set up a separate operation or for-profit operation. I was also beginning to get some pushback from local processors who were concerned that we had found a niche that we were getting into that could potentially take business away from them. The idea was separate it from the non-profit, make it a legitimate for-profit, run it as a for-profit but always run it with the idea being that it was going to be a social enterprise. We threw around some names, and that’s where Hopeful Harvest came up. After doing some research, we decided that we would set it up as a C corp. The stock would be 100% owned initially by Forgotten Harvest, but we would run it as a separate company.

Along with being the senior director of social enterprise for Forgotten Harvest, I became the president of Hopeful Harvest. Then quite frankly, the sales background and marketing background I have kicked in. We started talking about different businesses. We started growing the business. Before you knew it, we had over 30 clients of all different types of products. While that sounds like a dream, it also can create some challenges because we found out that when you have many different products, there’s a lot of complexities that go along with that. When you’re dealing with start-up businesses or small businesses that are going from cottage to incubator stage and something beyond that, there we have a lot of ups and downs, too.

We were going to do business plans. We were going to do website development. We were going to offer them everything. After helping build a couple of business plans and develop a couple of websites, we realize we were getting spread way too thin, and we had to get focused, and we had to focus on core aspects of the business. The way we addressed that is with partners. The idea was we didn’t have the payroll to take out all this expertise, but there were a lot of people out there, a lot of small businesses out there that had this expertise that was looking for referrals and partnerships. When somebody comes to us, and he says, “Look, I have no idea how to build a business plan. I can set them up with this company, this person. They’ll work with them.” That is a value-added service that we offer, but it does not cost us anything, but it’s helping our client. We’re taking that approach and growing it that way.

Romy: That was a great history and catch-up. What are your products today? Then I know you’ve gotten some clarity. I know from talking to you and many other social entrepreneurs, sometimes clarity comes from space restrictions and things like that, things that you want to do a lot of products and services. What are the few products that you know for sure you’re doing today before we move onto some other things?

Chris: Sure. People didn’t know me [inaudible [00:10:34] because there’s 2 words they say I don’t know, one is no and one is can’t. What I learned early on was that I tried to bring in as much business as I could. If somebody came to us, I said, “Figure out a way to do.” What happened was our initial product line was very extensive. Everything from cakes to cannolis to drinking vinegars, to salad dressings and everything in between.

As I was getting my education, because I really don’t have a food background, what I learned was you have to really narrow your scope and find that sweet spot, those areas where you have like types of products that complement your skill sets and your equipment and that you feel comfortable you can meet the needs of your clients. We went and really began to trim down our commercial kitchen. We have all different types of businesses in there. They come in, they have a license, they use the kitchen. That’s the service we provide, but obviously, that doesn’t put a real strain on our personnel from a skill set standpoint.

What we did from a product standpoint is we’ve decided to focus on a couple of key areas. We focused our salad dressings. We focused our mustards, drinking vinegar, which is a unique product that I can talk about down the road. We do some hot sources right now. Those are pretty much the types of products that we’re co-packing or co-manufacturing at this time. We’ve learned to narrow that down. That helps us from an equipment standpoint; that helps us from a personnel standpoint. Again, it’s just that cold reality that hits you that you can’t be everything to everybody as much as you want to be, particularly as a social enterprise because you’ve always got that in the back of your mind, “How can I help this business, how can I help the community,” but you’ve also got to be realistic in what you can and can’t do. Those are the types of products we’re focused on right now.

Romy: Smart to laser in on a couple and do those real, real well and expand. Chris, you said some commercial businesses will come in and use the facility. Now, are they paying you per time? Or did they pay a monthly rent or membership? Will you just tell us a little bit more about that part of your revenue model?

Chris: Sure, I’m a big fan for my marketing pick, and I’m a big fan of bundling. I like to take like services or someone’s services and package them together. One of the things that I know is that if these individuals are running small businesses if they know every month what something is going to cost them, if it’s a fixed versus a variable cost, it helps them tremendously from a budgeting and planning standpoint. What we do with the commercial kitchen, we have everything in here from raw juices to popcorn. We have someone in here from France that makes lava cakes and everything in between. What we do is we determine how much kitchen time they think they’re going to need and what additional storage they may need. We have the ability here to offer refrigerated storage, freezer storage and secure dry storage.

For example, if a client says, “Look, we’re going to need the kitchen for 10 hours a week, and we’re going to need x amount of storage and we’re going to need this support,” typically it can either be broken down by an hourly rate, so we may say it’s going to be $20 an hour. Or what I like to do is say, “Okay, you’re going to be in here approximately 40 hours. You want storage. Typically, it would cost this amount if it was done ala carte. If we do the whole thing as a bundle, I can give it to you this rate on a monthly basis.” They know, and we’re trying to help these businesses.

If they’re scheduled for 40 hours, and it turns out they need 42 hours or 44 hours, we’re good with that because goodwill is a part of this, too. They know that they were going to pay x amount of dollars for that every month. We get that agreement upfront. They’re good with it. If their business grows and expands, then we can revisit whether we need to raise that rate or change the structure. Or if their business downsizes, we work with them on that.

Another thing that we do that’s unique is what we recognize was when we furnished our kitchen and our space, we tried to focus on equipment that we purchase that is universal to a number of different types of clients. What we found was because of the food background, a lot of these businesses have very specialized equipment. They have certain electrical requirements or water requirements or air requirements. We also work with them from that standpoint, too. That’s unique. There’s not a lot of people that do that. They can bring their specialized equipment in. Our people, when they know their schedule to come in, will make that equipment available to them in a designated room that has everything that they need, they can produce their product and then we’ll take that equipment when they’re done, put it back in storage for them, so they don’t have to haul it back and forth. They don’t have to worry about it from a safety and security standpoint. They love that service. That’s something we’ve learned and customized as we went along.

Romy: It seems like you’ve almost added on this almost concierge level of services that you’re paying attention to these customers. That’s really exciting. Now, that makes sense to me why you’ve picked and mastered the drinking vinegars and some of those elements because those are probably the equipment that you have right now, which is really smart. Is it too early to talk about the branding potential?

Chris: No, not at all.

Romy: Because I know you’re now going to add on another service line. Perhaps you could share some of that, what you’re able to share right now.

Chris: Sure. Yeah, absolutely. This will be part of Forgotten Harvest, but it has Hopeful Harvest tied into this as well. Basically, the idea is along the lines of Newman’s Own. Our concept is Forgotten Harvest is a very well-known name in the metro Detroit area, actually state of Michigan. We deal in fresh food, healthy food and obviously make that available in a lot of food deserts to folks who don’t have that opportunity necessarily to get at that food. What we determine was that, that why couldn’t we take that brand, that Forgotten Harvest brand, identify some partners, co-brand or brand those products, and then talk to local retailers who were very involved with at our boards, so on and so forth popular, about putting those products on their shelves.

What we do basically is we have 14 partners right now. They have certain products that they’re partnering with Forgotten Harvest. It could be a full branding. For example, a company called Mucky Duck is our salad dressing. We have four flavors of Forgotten Harvest salad dressing. They produce [sandwich [00:17:19] now, we’re going to produce, which I’ll talk about in a minute. Then we also have partners that are going to do everything from cookies to salad dressings to [gems [00:17:29] and jellies, so on and so forth. We’re building that right now. We have our partners. They have their special labels that are made that feature Forgotten Harvest item.

The way we work that agreement is that Forgotten Harvest gets 7.5% of net product sales. For that 7.5%, what the client gets is, obviously, the boost in recognition partnering with Forgotten Harvest. They certainly get the philanthropic opportunity to donate back, but also, we’ve agreed to help from a marketing standpoints. We have a whole marketing plan we put in place that we’re going to support and help these products as well. We’re starting off with 14. We’re going to have anywhere from 90 to 150 SKUs, depending on the number of products we have. We’re very excited about this.

I did want to add the other unique part of this is some of these products will actually be made by Hopeful Harvest. We’re making them with our social enterprise, and then any profits will go to...