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New space to incubate food companies

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A recent tour of Factory LLC in South Bethlehem, offered by Commercial Real Estate Women Lehigh Valley, was one of the first public tours of the former Bethlehem Steel plant.
A recent tour of Factory LLC in South Bethlehem, offered by Commercial Real Estate Women Lehigh Valley, was one of the first public tours of the former Bethlehem Steel plant. - (Photo / )

Factory LLC opened in December on Columbia Street in South Bethlehem.

Its goal, said Rich Thompson, founder and CEO, is to offer young but established companies research, marketing and distribution services under one roof. The starting point for each prospective company is that it has to have at least $2 million in annual revenue and move its operations to the South Bethlehem site.

Factory LLC will buy equity in those companies and collaborate with them on every aspect of operations. Several entrepreneur leaders are behind the initiative, including executives who created more than $3 billion invalue for American Italian Pasta Co., The Meow Mix Co. and Freshpet. Besides Thompson, Factory’s executive team consists of Tim Pollak, partner and head of strategy; and Keith Caldwell, operating partner.

So far, two companies have come on board, including baked goods producer Mikey’s LLC, which moved its operations into the Factory when it opened in December.

EARLY ADOPTER

Michael Tierney, founder and CEO of Mikey’s, said he first met Thompson, the former CEO of Freshpet, about two years ago at a trade show in California. Thompson explained to Tierney his vision for Factory LLC.

Thompson wanted to create a space where small, established companies in the pet food and consumer food and beverage industry could find the resources they need in one place.

Tierney admitted feeling some uncertainty about the concept. In fact, when he first visited the Bethlehem site, the former steel-making plant seemed a bit destitute.

However, impressed by Thompson’s success with Freshpet and American Italian Pasta, Tierney’s was the first company to join.

He relocated from Scottsdale, Arizona, and bought a house in Salisbury Township, not far from Bethlehem.

Mikey’s makes baked goods with what Tierney describes as ‘real simple ingredients.’ His products, sold in about 8,000 stores nationwide, include muffins, pizza crusts and sliced bread.

Thompson said Mikey’s revenue has grown rapidly since it joined the Factory, doubling from $2 million in 2017 to $4 million in 2018.

For 2019, Tierney projected Mikey’s to post revenue of more than $10 million.

The growth comes, in part, from the ability of Mikey’s to use the team at the Factory in addition to the $5 million in capital that Factory LLC invested in the company, Tierney said.

“Their investment in human capital is what allows us to deploy those dollars efficiently,” Tierney said. “The plan is to quickly accelerate our growth and possibly look for a strategic partner to exit the business to.”

SHARED SPACE

The space in Bethlehem has shared services such as a commercial kitchen, food safety areas, consumer focus groups, social media labs and back-end services, such as accounting, human resources and administration.

“As a $2 million to $20 million business, you get the resources that a $200 million business would,” Tierney said.

Entrepreneurs can also call on Factory’s staff for advice and help. They include experts in sales, distribution, marketing, engineering, design, product development, food science, manufacturing, supply chain and other areas. Thompson employs about 35 people on staff, not counting the workforce of two companies.

Tierney said he felt fortunate to be part of the initiative at the beginning since he helped play a role in shaping what Factory has become.

Tierney also appreciated the investment the Factory made in his vision for Mikey’s, in addition to the confidence it gave him in pursuing that vision, largely because of the track record of the team behind Factory LLC.

“Being the first investment they made is a great place to be,” Tierney said.

DELAYED START

Thompson previously announced that the Factory would open in September with four companies. The wet summer – builders couldn’t pour concrete -- pushed the opening into December.

J.G. Petrucci Co. of Hanover Township, Northampton County completed the transformation of the 40,000-square-foot-building.

In addition to Mikey’s LLC, the Factory is home to Honey Stinger, a Colorado-based business that makes honey-based nutritional products geared toward athletes.

Honey Stinger remains based in Steamboat Springs, but it uses the Bethlehem site for its services.

Thompson said he has letters of intent from two additional companies, one called Pipcorn and one that he declined to disclose.

The facility could house about 20 companies altogether, Thompson said. He will consider only companies that have between $2 million and $20 million in revenue, which he considers the right size for a company seeking rapid growth.

“We can start understanding you at that level,” Thompson said. “We negotiate with a company and buy an amount. All these companies need more investment.”

Thompson plans to use the skills the leaders of these companies developed over the years to help them increase revenue, enhance their products and gain wider distribution.

“We do everything possible other than manufacturing,” Thompson said. We are operators, not private equity. We know how to operate and run businesses. When we invest in these companies, they move into Bethlehem and we have all the experts.”

With consumer insights from focus groups, the companies at the Factory can work with its staff to refine their products and improve distribution.

Thompson said he chose the building, which workers previously used to harden steel, because it is close to Lehigh University and Northampton Community College’s Fab Lab, as well as nearby retail stores.

“I love the location,” Thompson said. “I wanted to be in town and if we are dealing with the millennials, you want to be where they are.”

WELCOME TO ‘THE BLAST FURNACE’

A recent tour of Factory LLC in South Bethlehem, offered by Commercial Real Estate Women Lehigh Valley, was one of the first public tours of the former Bethlehem Steel plant. Factory LLC CEO Rich Thompson designed the building to attract companies in the pet and consumer food and beverage industry that are looking to expand

He also plans to use the recently transformed building to host community events.

They would include Factory’s version of the TV show “Shark Tank” called The Blast Furnace, an homage to the blast furnaces at another former Bethlehem Steel plant nearby.

He plans to host the first one this year, and hopefully, follow with a new episode each quarter.

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Brian Pedersen

Brian Pedersen

Reporter Brian Pedersen covers construction, development, warehousing and real estate and keeps you up to date on the changing landscape of our community. He can be reached at brianp@lvb.com or 610-807-9619, ext. 4108. Follow him on Twitter @BrianLehigh.

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