Powered by Pipsnacks, SPINS and More, Factory Moves into High Gear

In picking up petite popcorn brand Pipsnacks last month, Factory, an innovation center for food, drink and pet brands, has now fueled itself with five brand investments.

Located in a former steel mill in Pennsylvania’s Lehigh Valley, Factory is an incubator and accelerator with a 40,000 square-foot innovation center, including areas for packaging, design, engineering, marketing, podcasting and recipe testing. Founder Richard Thompson has also thrown in a mock grocery store, fitness center, cafe and more, and he’s got about $250 million available to invest in food, drink, and pet brands to help them grow quickly and efficiently. Thompson wants to do more than just invest, though; because he wants to help them with every step of the process, brands are encouraged to relocate to Bethlehem to work out of Factory.

“Plenty of people will say ‘I’m more than happy to go wherever I can to get capital and strategic help that will help me move along,’” Thompson said.

Pipsnacks LLC announced a $6 million investment from Factory last month. Its founders, Jeff Martin, his wife Teresa Tsou, and his sister, Jen Martin, first met Thompson at Expo West in 2017 and finalized the partnership in October 2018.

After running their business in Brooklyn for seven years, the Pipsnacks team felt joining Factory was their best shot to boost the brand and achieve their goal of creating a “family of heirloom snacks,” Tsou said. Its new cheese balls, made from heirloom grains and organic cheese and seasoned with paprika instead of artificial coloring, will be available in August at Whole Foods. Chips are also in the works.

“We always wanted a bigger business and felt aligned [with Factory] in terms of our mentality and approach to growing. It’s nice to have someone challenge you,” Tsou said. With Factory’s support, the team hopes to double its sales this year, she said. Mikey’s, which sells a line of better-for-you breads, baked goods and meal pockets in over 5,000 stores, was the first brand to join Factory in 2018, before the space was even open. Since then, founder Michael Tierney has launched another brand, Stuffed Puffs, including building a $15 million production facility in Wisconsin to produce stuffed marshmallows.

Honey Stinger, a $20 million dollar sports bar company, is developing a line of energy shots after its Factory investment. Sampler, a product samples solution company, has also received investment from Factory and will help the other brands as well.

From Freshpet to Factory

Formerly CEO of both Meow Mix and Freshpet, Thompson sees the Lehigh Valley as the next hub of innovation, similar to Boulder, Colo., or Austin, Texas.

Factory invests anywhere from $5 to $15 million per brand in exchange for at least a 50% stake, Thompson said. Companies that currently generate $5 to $10 million in sales are the “sweet spot” for Factory, with room to flex up or down, he said. The plan is to have 20 to 25 brands in-house at any one time, he added, noting that he expects them to stay at Factory for anywhere from six months to four years.

Thompson’s career as an entrepreneur began when he founded American Italian Pasta Company in 1986, the current largest producer and marketer of dried pasta in the U.S. He went on to serve as CEO of MeowMix and Freshpet until 2016. In January 2017, he started searching the East Coast for a building that could become Factory.

“The idea was ‘could we have a Boulder or Austin or Portland on the East Coast now that Brooklyn has become too costly and congested?’” Thompson said.

The Lehigh Valley seemed ideal: with low taxes, close proximity to universities like Penn State and Lehigh University, and quick access to other urban hubs.

Factory’s leadership team also includes former Dentsu Network chairman Tim Pollak as partner and head of strategy and former Fortress Investment Group portfolio manager Keith Caldwell as operating partner, along with a staff of 40.

There’s also outside assistance. Through a paid partnership with SPINS, Factory will leverage the research firm’s new Investment Insights Suite to help find, analyze, and invest in winning brands, Hochman said, and an on-site SPINS expert will assist brands. Other partners include Allen Flavors, which has an on-site product developer assisting brands, as well as Sprouts Farmers Market, Factory’s co-sponsor for an innovation summit in August.

Life in the Lehigh Valley

Since starting to use Factory in October, the Pipsnacks team has already seen positive results.

“It changed the way we work,” Martin said. “It starts to show how fast you can grow when you’re not doing things like spending three hours making a little design change versus having an expert do it.”

Honey Stinger, on the other hand, has 45 employees and is based in Steamboat Springs, Colo. Only a few of its team members have moved to Bethlehem, Thompson said, noting that the brand is seeking assistance mostly with management, packaging and retail.

It’s still early days, but if his model works well, Thompson hopes to build more facilities in the Midwest and on the West Coast, he said.

For brands like Pipsnacks the future at Factory appears bright.

“The energy is incredible and you can really see,” Martin added. “We can do all these things we wanted to do for years.”