By Mika Manninen, CEO of Hälsa Foods
Icy rain beats against the windshield as I drive down Linden Boulevard in Brooklyn in late March. The only other cars on the street are ambulances rushing people to the ER at Brookdale Hospital, and the sound of multiple sirens on top of each other never stops. Feels like a scene of an end-of-the-world movie, except this is frighteningly real.
No, I’m not a healthcare worker trying to get to the hospital. I’m not a first responder, either. I’m the founder and CEO of a health food company, and I’m on the road because I have to fulfill our orders.
For food to end up on the store shelves, somebody has to touch, lift and drive ingredients to the plant, make the products, build the pallets and drive them to the warehouse. No amount of zooming will get it done. I couldn’t ask anybody else at our company to risk their health, so that somebody was me.
What happened to my company mirrors what hundreds of other small businesses have gone through during Covid. After an exhausting year, many small businesses have folded, and many others are hanging by a thread. This is our story.
An infomercial from hell
From the moment Covid started, our life became an infomercial nightmare. Just when you thought things couldn’t get any worse, you’d hear: “But wait, there’s more!”
My brand is called Hälsa, which is Swedish for health. My wife and business partner, Helena, spent four years developing a new way to make plant-based foods, unprocessed, without chemicals. Our oatmilk yogurt has unique immunity-boosting properties, which is why people need our product now more than ever. That’s another reason why I won’t give up the fight, not even during a time when so many similar startups have collapsed.
Making our organic oatmilk yogurt.
In early March, we were supposed to attend Expo West in Anaheim, California, the world’s largest natural food event where new brands are given a chance to showcase their products. I had flown in a day before from London, straight from the R&D site of our new product line. We had produced several pallets of our probiotic yogurt and shipped them to Anaheim along with all of our newly minted trade show materials. As I prepared for our big launch the next day, I got a message that the expo was cancelled. Our pallets got stuck in the convention center and the yogurts went bad before they could be sold or donated.
Our ingredients warehouse got ravaged by Covid. Twenty of 22 workers fell ill. Some were out for a few weeks; some were sick for a couple of months; one died. No trucks or drivers were available to move the ingredients, so I rented a truck and drove to the warehouse where the one person still working pulled pallets of our ingredients to the loading dock, closed the rolling door, and allowed me to hand-load my truck.
After I had managed to get the ingredients and the yogurts made on time and drove the pallets to the warehouse, our distributor refused to pick them up. After an intense conversation, I was first told that they had suddenly changed us to “vendor delivery,” meaning we were expected to deliver the pallets ourselves. So I rented a cold truck and drove the pallets overnight to distributor’s warehouse. After that, the distributor refused to do their job, which is to distribute. So the pallets went nowhere. “We are overwhelmed,” they explained.
Somehow the same distributor was able to deliver large company pallets to the stores just fine, and in greater volumes than ever before. What happened was that our distributors handed the shelves we had fought tooth and nail for to big-name, additive-filled yogurt brands, and blamed it on Covid.
Before Covid, our products had been available at all NYC airports. Now all airport shops were closed.
Next, our online grocery delivery client, the largest in New York, decided to drop us “for the time being.” That was a tough pill to swallow. We manufacture our yogurts in an artisan way using expensive all-organic ingredients. Having to produce several pallets of organic yogurt and then not being able to deliver meant tens of thousands of dollars in losses. Donating to food banks wasn’t that easy either because many food banks did not have a way to store products that require refrigerating.
To attract new stores, we came up with a new promotion: “Buy one and we’ll donate two.” If the store would buy one 8-pack of Hälsa oatgurt, we would donate one case to store employees who risked their health every day by coming to work. In addition, we would donate a second case to the local food bank. After calling dozens of stores in New York, New Jersey, and Connecticut, the stores said no. “We have no way of arranging donations to our employees,” they said.
Grocery store workers received a thank you card and free yogurt.
How America handed the business to big players
In order to get my product made and sold during Covid, I visited dozens of small towns, driving down ghost-town streets, sleeping in hotels, and traveling through empty airports. I witnessed first-hand what was happening to America and to small businesses like my own.
The only guest at Hilton.
Our warehouse is in the industrial part of town. The main road is filled with small to medium–size businesses selling patio furniture, pavers and paint. There’s a nursery and a place to buy small sheds and playhouses for the yard. All these businesses were forced to close in March.
Except for the Home Depot at the end of the road. People staying at home had time on their hands for sprucing up their homes and yards. While the small businesses along the strip lost all their spring sales, Home Depot was packed all day.
Help me understand this: Home improvement was deemed essential business, but only if you happen to be a large chain, not a mom-and-pop store? Free enterprise means that the same rules apply to everyone, but this was no longer the case as government decided which businesses were allowed to stay open.
The same happened in the grocery aisles. The big companies, the only ones with an established distribution, went for the kill. Seizing the opportunity the pandemic presented, they took over all of the dairy and yogurt shelf space from smaller companies. Once we were able to deliver again, we couldn’t get in. We were told there would be no resets this year, meaning grocery stores would not accept any new items. So the path for new companies to increase their sales was blocked. As a result, consumers have fewer healthier choices precisely when they need them the most.
But wait, there’s more!
At the end of March, the plant where we make our yogurts told us we could not produce there any longer. They were too busy filling their own orders. We had produced there for two years and invested in our own customized equipment. Finding a new co-packer quickly would be almost impossible during normal times, not to mention during Covid.
I told the plant manager that this was a clear breach of our contract, and that this would kill us. “I know,” he replied and walked away. We had all the contracts in place, but the plant owner was betting on the fact that we couldn’t do anything because the courts were closed. Even if we started a fight, it wouldn’t go anywhere for months.
In grocery retail, for a new product to get on the shelves, somebody else has to be thrown out. Stores are not building more shelves. But if you cannot fill your shelves regularly with fresh product, you’ll be replaced immediately. There’s absolutely no mercy, even in a pandemic. If we were to keep what was left of our hard-won shelf space and save our business, we had to move quickly.
Starting back at zero, and running against time
We started a frantic search for a new plant. We found one that was in the middle of a remodel and not quite ready for production yet. The new plant did not have a bottling line so we could no longer make our drinkable yogurts. They had filling equipment for cup yogurts, so we begged them to let us start testing at the plant immediately.
The new plant had completely different equipment and machinery, so we needed to reconfigure just about everything about our process. We also had to design and print all-new yogurt cups, lids, and store cases, because their filling line required different packaging.
I asked the old plant whether I could keep producing there until we had everything ready to go with the new plant. Nope. I had one more production scheduled, and that was it. The countdown began. We had exactly 47 days to get our new production running.
Every test run costs money and wastes ingredients, so the pressure to get everything to work right away was enormous. During the test runs, I did not leave the plant for 72 hours straight. At night, I slept in my car in the parking lot for two hours at a time, keeping production going around the clock.
As we waited for our new labels to be printed in the Netherlands, our organic certifier notified us that they would halt all their certification processes because they did not feel safe sending out any of their inspectors. So we had to find a new organic certifier in a hurry. However, because we had already printed our new labels with the other certifier’s name on them, they insisted we had to complete their certification as well, so we ended up certifying our yogurt twice. I guess our yogurt is now 200% organic!
By working nonstop, we on-boarded the new plant after only two test runs. Normally this process takes months, but we did not have that luxury.
Then came the riots, looting and curfews. As New York closed down, 90% of our sales vanished. Stores closed and boarded up their windows. Demonstrators blocked roads and bridges, making it hard for deliveries to get through. By the end of June, we had lost most of our shelf space.
A day at the oat farm
Before Covid started, we had begun to build a sustainable local supply chain for our organic oats. Because the U.S. doesn’t have a tradition of growing premium organic oats for human consumption, we had decided to teach U.S. farmers how to grow premium organic oats the Scandinavian way, with zero water footprint. Because milk consumption is down and dairy farmers are going through tough times, we had engaged an organic dairy farm that wanted to diversify into growing organic oats.
In early May, our first organic oat farm in upstate NY was ready to plant its first seeds. I traveled there to oversee the planting and to shoot photos for a handbook that we were putting together for our future contract farmers.
That day at the farm was the only day when I felt like a human being in months, if only for a few minutes. Out in the field with the wind on my face, far from cell-phone reception and from more bad news…for a brief moment I felt that perhaps, in the end, everything was going to work out.
By August, my wife and I were both exhausted beyond belief. By working night and day to rebuild our business almost from the ground up, and had managed to solve most of our problems. We had perfected the recipe at the new plant, had all new packaging, and our product was better than ever. We were ready to start selling again.
Store buyers refused to take any sales calls or zoom meetings. Most stores announced they wouldn’t look at any new products for the rest of 2020. With all conventional sales channels and methods blocked, our only option was to approach the smaller independent stores.
So I hit the pavement and started visiting our New York stores along with our sales team, mask-to-mask, and socially distancing. We left free samples and filled shelves for free.
Because all in-store samplings had been banned, we had to find ways to get consumers to taste our product. There were no gatherings or events where we could get people to taste how delicious our yogurt was. We would need to find a way to get a cup of yogurt into our customer hands, but without getting too close.
We called a few dozen stores in Brooklyn and Manhattan and asked if we could give out free samples outside their store. Most agreed. So we filled our cooler and set up our Hälsa stand in front of the store, feeling like kids with a lemonade stand, and handed free yogurts to people going in and out. At times we had people lining up for their free sample, and the samples were gone in record time. We had a crowd of Black Lives Matter demonstrators stop by to grab an oat yogurt, which made us feel part of the local fabric.
Within a month, we had gained back about 80 independent stores in Brooklyn, Queens and Manhattan. Consumers seemed genuinely interested to see a new brand on the shelves as most stores had eliminated new products since Covid had started.
CNBC and Inside Edition document my crazy travel schedule
Because I had to travel extensively, I developed a strict—some may say extreme—travel regime, making sure I wouldn’t get sick or infect anybody else. I had three Covid-tests during six months and was negative each time. A CNBC journalist got interested in my travel tips and wrote an online story. It was the most read story on CNBC global that week and spread quickly. In September, both CNBC and Inside Edition aired a two-minute story about my travel regimen.
Between March 1 and July 31, I spent 160 nights in hotels and was home for a total of nine nights. I took 33 separate flights and quarantined myself for 14 days at a time after flying to the U.S. from Europe.
I did not want to risk my wife’s health, so when I went home for those nine days, we slept in separate rooms. Not being able to hug your loved ones has probably been one of the hardest parts of Covid.
The light at the end of the tunnel might not be an oncoming train
In October I flew to Chicago, rented a car, and hit the road to travel to all the independent stores in the area. I met a lot of hardworking storeowners who loved the taste of our yogurt and wanted to place an order. We opened a distributor warehouse in Bloomington, Indiana, and opened about 110 new stores in the Midwest.
We hired a new sales team and added 60 new stores in Seattle and 45 in New England.
By the end of 2020 we’ll be in 600 stores, tracking to be in 1,500 stores by spring. A far cry from the planned 4,000 at the start of the year, but we’re alive and kicking, and we’re hiring more people. And the New York online grocery delivery company is back as they promised.
Slowly but surely, we’re getting back to normal, although the word “normal” will not be the same for a long time. So many things have changed, and will keep changing.
I know that there are thousands of small businesses that did not make it, no matter how hard their founders worked and how much they risked. Too much has been lost, and our nation will be correcting the imbalance and injustice done to small businesses for a long time.
Small businesses are the resilient, beating hearts and souls of our communities. Next time we encounter a similar challenge, let’s not rush to crush the small ones and hand everything to the big players on a silver platter. Let’s support our hardworking warriors across America and make sure that their stories will end up like mine, still standing.
Mika Manninen, Co-founder & Chairman of the Board, Hälsa Foods