Achieving Direct-to-Consumer Success at Stonewall Kitchen

[00:00:00.000] Well, then Charlie Baker, it’s the end of the week, and welcome to the podcast.

[00:00:06.960] What’s Charles? Thanks for having me.

[00:00:08.610] It’s so much fun. We’ve had other guests before, but we’ve never, yet, to my mind, had an operator on the podcast to give us some of the insights you’ve gained over your long and storied career. So let’s start with introducing who is Charlie Baker.

[00:00:31.900] Well, I am a Senior Operations Analyst at Stonewall Kitchen. I’ve been here 23 years. So I’ve watched our skewer Sort me grow from 47 wholesale skews to 1500 plus wholesale skews in those 23 years.

[00:00:45.800] I’m really grateful.

[00:00:48.310] Certainly, yes. The growth of the company has been amazing. The opportunities and the things that we’ve seen and done over those 23 years has been amazing. So it’s fun to be able to start from scratch and get to where we are. We obviously had a lot of mistakes getting here, but that’s part of the journey.

[00:01:07.510] That’s part of it. Well, let’s do a thumbnail sketch of Stonewall Kitchen, and then we’ll go back to exactly what you do for them. Tell me about Stonewall Kitchen.

[00:01:19.880] We’re a specialty food manufacturer. When I started with the company 23 years ago, we were strictly Stonewall Kitchen. Over the past 23 years, we’ve acquired multiple brands, and we’re sitting at seven brands now. We call them the Stonewall Kitchen family of brands. It includes Village Candle, Michelle Designwerks, Vermont Coffee Company, Monte Bella Pasta, Urban Accents, and Napa Valley Naturals. We self-manufacture a large portion of that inventory right here in York, Maine, and the candles are produced right up the street in Wells, Maine, actually.

[00:01:54.240] I just want to point out I have a wide range of your products in my pantry or fridge running low on the country ketchup, which is my number one favorite of all the things that you guys make. But I think it’s really interesting for the folks who listen in to understand how absolutely complicated your supply chain is. Let’s start with this. You manufacture.

[00:02:22.800] Yes. The self-manufacturing adds a component that a lot of distributors don’t have to deal with, which is the We have to know the first person we ship that item to, even a direct to consumer customer. From a recall perspective and traceability, we’ve got to know all the lots that went into that Blueberry Jam, everywhere where that Blueberry Jam went in gifts and other components that we used it in. And then when I ship Charles that single jar of jam as a present for Christmas, I have to know that he got that. For most manufacturers, that traceability stops when that big retailer, like a Publix or a Whole Foods or a Costco it’s that order. From there, it’s their responsibility. For Stonewall Kitchen, we’ve got to go end-to-end on that traceability. So that adds a level of complexity to our distribution for sure.

[00:03:10.220] Absolutely. So again, so you’re manufacturing a whole wide range of products, you, of course, are complementing that with the appropriate merchandise. And you’re importing some of the food like the pastas, I believe, as well. And all of the Stonewall Kitchen products are running through, well, basically every retail channel you can imagine. You have your own stores. You have a very healthy wholesale business. And I think for a lot of people, especially in the northeast, you’re a very, very famously a direct consumer company who’s doing catalog business before the Internet took over from those catalogs Yeah.

[00:04:01.420] And as that has evolved over time, now we’re involved in all the marketplaces that’s there, whether it’s the Walmart marketplace, whether it’s an Amazon marketplace, FBM, direct fulfillment, and even the 1P business. So the direct to consumer business just isn’t what we’re shipping out of our distribution center anymore. It’s spread to a lot of other marketplaces.

[00:04:23.250] That is a really terrific point. And the nature of the orders in direct to consumer are so different than the nature of the orders in retail and in wholesale. You’ve got an incredibly complicated distribution center where you’ve got to manage all those order profiles, some much more labor intensive than others. With different turnaround times, with different service level requirements. And that’s something that you, going back to who Charlie Baker is, that’s the thing you’re thinking about constantly.

[00:05:01.000] Yeah. And to add to another layer of complexity to what you listed, there’s shelf life requirements for different guests. So somebody who’s receiving something across the pond might want 75 % of the shelf life, whereas a domestic customer may expect 50 % of the shelf life on the product. And then from a fill rate perspective, they all have different ones. You don’t want to send the container across the pond half full. Those customers are looking for 100 % fill rate, whereas domestically, they might be looking for 50 or 75 % fill So all of these are factors that obviously weigh on the WMS and the allocation process within the WMS.

[00:05:36.630] That’s very cool. So your day to day job then is really to keep a constant eye over the entire supply chain and look for those opportunities, well, places where you have to fix some problems sometimes and then look for opportunities to make it better.

[00:05:55.570] Absolutely. I consider my role as somebody that looks to save money across the board. Whether it’s ways that we can save money in shipping, whether it’s ways that we can save money in what we put in those boxes and pack those boxes, to even opportunities to whether we look to move product closer to the customer. All of those are things that I’m looking for opportunities on.

[00:06:17.550] And how are you thinking about that problem today? One of the things I think it would help for people to understand is the seasonality, particularly your direct consumer business, although there’s seasonality, of course, to all of your business.

[00:06:33.370] Yeah, that’s a great point. Like many direct to consumer businesses, there’s a certain part of the year where people are going to buy our product. And for Stonewall Kitchen, that’s the Black Friday through Christmas is the biggest time. It’s the gifting time of the year. So all of our planning and our thought and our layout and our design is for those four or five weeks out of the year because the rest of the year, you can handle the volume. It obviously means we have to fine tune the staffing the plans for the off peak. But really all of the decision making and everything we do is how do we make sure that we can meet those customer goals at Christmas? Because if you don’t ship it before the deadline, the customer doesn’t get it before Christmas and they’re not happy. And that impacts a reorder. You make those decisions on, did I get it on time? Was it a good product? And did I like it? And if you can’t check those boxes, you might not order again.

[00:07:22.610] No. If you spoil Christmas, you’re not getting another chance. So that people could picture it, the that house that is Thanksgiving to Christmas. An average week there is what multiple over a typical week in August or September?

[00:07:42.590] It runs about 10 S. A third of our budget is for the end of the year. We bring on about 70 employees for that four-week part of the year. And so that means you got to bring them on in the beginning of November. You get them all trained, and then you have them ready to go for when December hits. And it typically is a little bit of a waiting game. This year we had that once in seven-year phenomenon where you have one less week between Thanksgiving and Christmas, and that drives different buying habits than the other times of the year we have that extra week.

[00:08:16.780] I didn’t even think of it as a Canadian. But that’s really interesting. So every seven years, there’s one less shipping week, which might make it 11X because people are still buying the gifts. They’ve just got a much shorter window.

[00:08:35.950] Yes, absolutely. And I’ve been throwing this term around forever is the Amazon effect, right? Customers are expecting to order it today and have it tomorrow. And although that’s changed a little bit with Amazon, I think that as a consumer, we’re making our buying decisions based on how quick can I get that because we’re doing everything at the last minute nowadays.

[00:08:57.400] So what are the challenges you’d I mean, I know it may seem obvious, but what are the challenges that this 10X multiple, this peak season, this show time period, what does it create in the DC? But really, I’d love to hear your thoughts about freight.

[00:09:17.330] Well, from a shipping perspective, UPS and FedEx both come at the shippers during that time of the year with their peak surcharges and their demand surcharges. And that can double your shipping cost cost right out of the gate. But customers’ expectations don’t change on what the shipping is going to cost. And a lot of times they expect it to be free. So we do a lot of planning and a lot of analytics around what’s the right free shipping threshold and how do we manage that? How do we manage it with the vendors? We use a lot of SurePost to help drive down some of our shipping costs. For those of you that are not familiar with that, SurePost is UPS’s program that works with the post office. And what it essentially does or did prior to January first of this year was induct those packages into the postal network. They would save you the residential delivery fee, and customers would typically get the packages within a day of what UPS I promise. Ups and USPS are an impasse right now. They’re trying to figure out how to continue that program. And so we’re still working through what 2025 will look like for Stonewall Kitchen with SurePost and how that will But I suspect that with our partnership with UPS, that we’ve had for 25 years, they’re going to help us get through that challenge in itself.

[00:10:39.150] I mean, and that actually what you just said is really interesting in the sense that it is mid January, all right? And the season’s just ended. You’d think you’d take six weeks off, take a break, recover, but you’re already thinking and planning for next season right right now.

[00:11:01.060] Yeah. As you mentioned earlier, our business is across multiple different channels. What we’re starting to plan for right now, obviously, is always the peak season because that’s a big driver for what we do need to see. But our eyes are right now we’re turning to our wholesale peak, which we’ll pick up sometime mid-June or so, and we’ll go right through the end of October. With September and October being our biggest wholesale month of the year as retailers, ramp up all those gifts and those items in the stores. So, yes, you’re absolutely right. We don’t stop planning. We turn the corner of a new year. We’re working on projects for this year, but we’re also earmarking IT projects for 2026, because as many of you guys know, you can’t put in a new WMS or a voice pick operation or any of those things this year for this year’s peak. It’s really got to be a planned out process here.

[00:11:52.530] Yeah. I mean, if you do do that, you’re heading for a disaster and not a wise move. Okay, so So now, as you’re thinking about, like you said, you’ve been there for 23 years. You started probably at a time when you put it in a box, make it look real pretty, ship it. You didn’t really care. You know what I mean? And then at some point, there was some volume breaking point where you started to care. Do you remember that point?

[00:12:26.050] I feel like it was probably somewhere Where in the late 2000s where that happened. We moved from our 20,000 square foot warehouse manufacturing facility. We left manufacturing in that building and we moved to our first distribution center. And that’s where it really started to get real for us. We had a thousand plus pick locations at that point. Up until that point, we maybe had 500. Our wholesale business had doubled the SKU count to well over 100 SKUs we were making in-house, where only a few years prior to that, there were 50 of them. So that’s where it really started getting, what I would say, real for us. And then the momentum picked up. The Internet became more and more of a thing. Smartphones became a thing. Purchasing from your phone became a thing, and the velocity of orders came a lot faster because people’s access to the internet was a lot greater. Prior to that, and we still do today, you get the check with the back of the catalog, mailed in, and somebody in guest services is going to handkey that order in and it’s going to come down. But it doesn’t happen very often.

[00:13:34.760] Yeah. What I was going to say, what percentage of orders would that be for? And where are these people ordering with a check and a form filled out from the back of your catalog.

[00:13:45.860] Very, very small amount, but I think it’s demographic-driven, right? People that are used to that process.

[00:13:51.490] My grandmother.

[00:13:52.690] Yeah, there you go.

[00:13:53.970] Yeah. And hey, more power to her as long as I get my country catch up. But Okay, so now here you are. What are you thinking about in terms of plans for the coming years to keep yourself ahead of the ever-growing challenge? You said York, Maine, Your DC is not too far away from there. We’re not talking about a place with hundreds of thousands of employees available. You got to struggle with all that. You are really, logistically, at the very edge of the continent, the United States the continental United States. So just what strategies are you contemplating?

[00:14:36.630] So for us, it’s starting to look at, is there opportunities to get closer to the customer? Going back to what we talked about a little bit earlier with D2C, the customer Customers are expecting that stuff to be there within a day, and they’re expecting the shipping to be free. The only way you get that, you get that service and that cost is you get closer to the customer. Amazon does it with hundreds of distribution centers. To your point, one distribution center sitting way up in the right-hand corner of the United States, is it going to get you there? So exploring those opportunities that are out there, are there partnerships available where we can do some shipping from other parts of the country? Are there opportunities where if the product is being produced in upstate Washington or somewhere on the West Coast to keep it on the West Coast and distribute to some of those customers? So really looking to, how do we make the supply chain more efficient, I guess to say, and reduce the amount of miles that you’re putting under the product as it goes back forth.

[00:15:31.670] So if I’m only thinking about transportation and warehouse operations, I’ll have one set of thinking. The inventory question is interesting, too. So Are you getting pushback when you start thinking about multiple locations from the planners saying, please don’t give me this headache to deal with?

[00:15:55.190] They haven’t been part of those discussions. For me, it’s been I look at every five years as a, where are we? Where are we going? Does it make much sense? If it gets more and more traction, we’ll start to bring that group in. You and I have had those discussions. What’s the right number? Is it 15? Is it 25 % more inventory? How are you going to manage that inventory within that supply chain? Is it easiest to ship, closest to ship, cheapest to ship? What’s the OMS methodology for distributing those orders once we catch them? There’s a lot of thought that has to into that because I think it comes down to strategy. What are you trying to solve? You try to get there faster, or you try to get it there cheaper. You probably can’t do both. You got to pick one. Exactly right.

[00:16:39.980] Different answers. Definitely. But what… Okay, so But let me throw it at you. From your perspective, what’s more important, faster or cheaper?

[00:16:53.820] This is a terrible answering. You’re going to hate me, but I think you have to find a balance between the both of them. Are you running I think for office? I think I am. At the end of the day, if I can gain two or three shipping days between what UPS has for a cutoff and when they will stop delivering, I think there’s some benefit to that because I don’t know what the number is. Probably people smarter than me can tell me that there’s sales to be had in those days that you’re not shipping. So if I tell a customer, hey, after the 15th, you can’t have anything guaranteed before Christmas. How many customers did I turn away with that statement that just aren’t going to make those clips? Versus if I tell them all the way up to two days before Christmas, they guarantee they’re going to get this before Christmas. Did I just create more revenue? And if I did, how much revenue did I create by offering that? And that’s the crux of this, really.

[00:17:48.160] It’s the 64 million dollar question. I mean, it’s a great question because that’s exactly it. Do you ever have conversations around the boardroom thinking about what maybe that number is? I think it’s quite significant. I don’t think it’s game-changing necessarily, but it’s certainly, wow, it’s that extra shutdown that makes you win the game for sure in the closing days. Because, from personal experience, just going through Christmas, and I was very busy. I was on the road every day for the entire Thanksgiving to Christmas period. And Once I finally settled down, I realized how far behind I was. And I can’t go to you because, like you said, I’ve missed the cutoff. There are thousands, if not millions of people like me doing that. And if there was a gift basket and I could have caught it and then made my mom happy, that would have made all the difference. Because the alternative is I go into an enormous lineup at some store with all the other bozos like me who couldn’t organize themselves properly.

[00:19:07.080] Or you find those companies out there or those distributors out there that can get it to you before Christmas. And we all do the same thing. All right, I’m going to Amazon. Let me see if they can get it to me or I’m going to go to the Walmart or Target marketplaces and let’s see if they can get it to me. And that’s what we end up doing as a consumer, right?

[00:19:25.830] Yeah, 100 %. So how How urgent would you say? Because, again, everyone, if you think that those few weeks are 10X the volume of every other week in the year, to me, every day, there should be a corporate urgency around this question. Fair or not fair?

[00:19:50.300] It depends on your distribution center. For us, we’re a pretty mature distribution operation. We have the process down, we have the peak down. It’s not surprising to us. This year we came in staffed 100 %. It didn’t even feel like peak, to be honest with you. It felt really smooth because we were trained and we were ready. Experience and luck, right? It’s a little bit of both of them. But I think if you don’t have that in place and you don’t have that maturity, it’s probably a discussion that’s had a lot more often. For us, we can do it cheaper than any third party can do it for us. We haven’t found anyone. I haven’t found anyone that could do it for us. And it goes with the experience that we have. And that’s the tough part. So how do you make it cheaper or how do you make it look affordable to use a third party? We got to figure out what those sales are. What are we missing out on sales by not being that close to a customer?

[00:20:48.310] And unfortunately, for operations guys like us, we’re not… That’s a different department. There are a lot of people who are better to answer that question. We just want that data because it can make all the difference in doing, going one way or another strategically.

[00:21:10.430] Oh, absolutely. I mean.

[00:21:12.870] I was just going to say, I remember the days, though, back when I first met you, Charlie, and for everyone, Charlie’s Charlie, I’m Charles. That’s how we’ve always kept it clear when we’re in the room together who we’re talking to, when the President of Stonewall Kitchen would be in peak season on the warehouse floor, slapping labels onto boxes. And you’re telling me that that isn’t necessary anymore.

[00:21:40.970] No. I mean, as a company, we’ve grown so large with multiple different sites now. Back in the day, everybody was in one building. And so it was very easy to have it all. Everyone come down, we need some help. We still do offer volunteer days during Christmas to help with those ship-along gifts exactly as you’re describing. We still get the CEO down and CFO and all of the… Everyone comes down to help because it’s the, hey, I can still be involved in the process. We’ve done all the planning, let’s help.

[00:22:12.390] There actually is something very seasonally appropriate about everybody being down on the floor and just trying to get Christmas gifts out to people. It’s very sweet. Any closing thoughts, Charlie? I can see that the sun’s going to set. It is technically the end of the weekend in a way. I know you want to get on to see your kids. What closing thoughts would you have? What wisdom would you share with people who are at the very beginning of that journey and trying to solve a bunch of problems? Where would you line them up if you could?

[00:22:50.540] I think the most important thing for people to understand is their cost to run the operation. If you don’t know your cost right down to packing it in the box and shipping it out, it’s very hard to go out and ask somebody else to do it for you or to give you ideas on how to do it better because you don’t even know where you are at that point. So I really think having solid metrics and a benchmark in your operation and a firm understanding of what every cost per order is, is the key to being successful in anything else you’re going to do in the future. Because any time a consultant comes in, they’re going to want to know that information. And if you don’t have it, they’re going to have to recreate it for you.

[00:23:29.790] It It’s so interesting because, I mean, look, you are preaching the oldest mantra in the world, right? You can’t manage what you don’t measure. But it’s something that you’ve learned through a lot of sweat and tears and, like you said, mistakes, but a lot of wins along the way, too. So that’s really cool. Anyway, I really appreciate that you came on and shared a bit of your story with us. Hopefully, you’ll come to the Rendezvous this fall and do more sharing because you’re always a lot of fun and very open to helping people with their operations as far as you can. So I’m really grateful for this time, Charlie.

[00:24:18.580] Oh, thanks for having me, Charles. Always great to have a call with you and chat about supply chain stuff.

[00:24:23.400] And just for the audience, to me, he scares me with a beard. I Big beard. You know what? I think I’m going to take a few weeks off and I’m going to try and grow one and see how close to you I can get.

[00:24:41.270] I think maybe you and David should both do it.

[00:24:43.910] That would be funny.

[00:24:48.960] I would say it would be a play off beard, but we know Montreal is not going to be there.

[00:24:52.700] Have you not been paying attention the last few weeks? They are on a chair.

[00:24:58.190] They are.

[00:24:59.490] I don’t think Boston is all that strong this year.

[00:25:04.180] We are not. No, we are absolutely struggling down the stretch or down the past few weeks here.

[00:25:09.670] So sad.

[00:25:11.000] Anyway, you should come up for a game.

[00:25:15.180] That’s what you should do.

[00:25:16.940] There we go.

[00:25:17.370] Sounds great. Okay. I wish you a great weekend. Thank you for this and take care.

[00:25:24.330] Thanks, Charles. Have a great day.