Small Companies, Big Dreams

In 1994 this article appeared in Food Business, a trade journal for the food industry with massive circulation. It discussed my approach and challenges to marketing foods made from tofu. It was published just months before I introduced my first hemp product, and got into my “virtual company” approach to business operations, namely, out-source all parts of the operation except my core competencies.

In my case, that was product development and branding/marketing. (Many think marketing = branding = marketing, but marketing is actually just a subset of branding, which I define as “the emotional connection people have to your product, service, company, or movement.” Some even think package design = branding, which misses the mark even further.)

So after years of doing production I outsourced it, plus lab analysis, logistics, warehousing, sales, distribution, even payroll. Consequently we had very high sales/employee for a food company. While today white label and co-packing branded business models are common, 34 years ago when I did it they were not. I sold “America’s most-hated food” (tofu) in the Reagan ’80s, so selling hemp foods in the ’90s was a breeze.

Rella Good Cheese Co. was run that way and got on the Inc. 500 list of fastest-growing small businesses in 1993 (950% growth in 5 years) solely because I could scale cheaply and quickly using co-packers. Scaling (growing fast) is hard to do with products, especially perishable products.

It’s also hard on cash flow, what with inventory and receivables. Selling in 10 days and paying in 30 fixed that; I started with $400 and had no bank debt or investors along the way, it was financed through positive cash flow. I later did a wide range of hempseed products that way as HempNut Inc. when I pivoted from soyfoods to hemp foods in 1994. Others were inspired by the business model, including one founder who hired my ex-CEO, after moving to my small town to pick my brain.

What I did was only possible due to the use of that modern communications tool, the fax machine. Kids, that was a machine you put a piece of paper in and it rang up another machine like it by telephone lines and printed out a bad resolution black and white copy on a special type of toxic paper. It was 1/2,083,333 as fast as today’s internet and all the rage. But without it, having a “virtual company” would be very difficult if not impossible. No one had email back then (1986), and translations for doing foreign business was quite hard. I even had a Telex number. Google it, you’ll laugh.

It mentions our use of kenaf paper in 1994, and corporate responsibility mission which was started in 1988. RR

Small Companies Big Dreams. Food Business, Feb 7 1994.

Virtual Tofu
Sharon’s Finest, Santa Rosa, Calif.

Question: What’s the difference between tofu and TofuRella? Answer: about $2.6 million.

             As an ingredient, tofu doesn’t exactly make marketers jump with glee. It doesn’t have the same punch as, say, aspartame. Bland, mildly exotic, misunderstood, tofu is too healthy for its own good.

             Of course, small companies are born because of their ability to turn disadvantages into benefits. Sharon’s Finest, Santa Rosa, Calif. sprang to life in 1987 by making and selling low-fat tofu called TofuRella. One year later, sales were $247,000. By 1992, sales reached $2.6 million for a growth rate of 950 percent.

             The company did it by positioning TofuRella as a healthy alternative to cheese. The product is a reduced-fat, cholesterol-free, cheese-like tofu that “tastes, melts and stretches just like regular cheese.” Originally sold regionally in health food stores, TofuRella now is distributed nation-wide, along with its sister brands TofuRella slices, Zero-FatRella, AlmondRella and VeganRella, an alternative to hard and cream cheese that was due out in January.

             The company and the products were the brainchild of Richard Rose. a member of the Institute of Food Technologists and a tofu devotee. Rose started a company called Brightsong Tofu, making products out of his kitchen during 16-hour days– and nights. Later, Brightsong evolved into Sharon’s Finest.

             Perseverance definitely paid off for Rose. He developed some 50 tofu products before hitting it big with TofuRella. “Essentially, Sharon’s Finest grew because we positioned TofuRella at a revolutionary time in consumer attitudes,” he explains. “A lot of people have a love-hate relationship with tofu. Then we came along with a product they could love.

             Developing the product was half the battle. Producing it was the other. Since Rose didn’t want the cost of production facilities, he designed Sharon’s Finest to be a virtual corporation.

             It can be said that a virtual corporation is a company born of necessity. Another definition is a company that’s linked to other companies to accomplish a task– in this case, producing and packaging TofuRella and Sharon’s other brands.

             But unlike conventional companies, there is no set hierarchy, no organizational chart and no central office. Rose coordinates production, but that’s as central as the company gets.

             “I knew I didn’t want the cost and liability of a production facility,” says Rose. “But on the other hand, people told me I’d lose control if I outsourced production. I discovered it’s a myth to even think you had control in the first place.”

             “The trick to a virtual corporation is to find people that share your vision,” says Rose. “Make your alliances with good companies that pull in the same direction.”

             Unencumbered with facilities, Rose had more time to devote to marketing. Sharon’s Finest did well north of the border, where tofu is more kindly received. “Canadians don’t seem to have the same prejudice against tofu that Americans do,” says Rose.

             But Canada, where Rose does most of his export business, has its own idiosyncracies. The province of Ontario, for instance, does not allow vegetable oils to be mixed with daily products. TofuRella was banned from sale.

             Philosophically, Sharon’s Finest typifies the new breed of small companies started in the waning half of the ‘80s. Corporate philosophy centers on personal and corporate responsibility, including the environment. Sharon’s Finest contributes to recycling efforts, right down to using stationary and envelopes made from Kenaf paper, a vegetable-based paper made without wood pulp. All printing is done with soy inks, of course.

             “Between the Kenaf paper and the soybean ink, our letterhead and envelopes are so safe, one could eat them,” says Rose.

             Rose predicts sales will continue climbing. He bases his estimate on several factors, including further development of the mass market in Los Angeles and the effect of NAFTA in Canada. “The trade agreement will help harmonize product regulations in the provinces,” he says.

             Which is, virtually, the best news possible for him.

Copyright Putnam Publishing 1994, all rights reserved.

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