What on earth do the Mast Brothers have planned next?

Clay Gordon
@clay
04/15/16 03:43:52PM
1,680 posts

The Bros announced that they're leasing 65,000 square feet inside the Brooklyn Navy Yard’s $68 million Green Manufacturing Center. [ Gothamist got it wrong, saying that the Bros had signed a 68 million dollar lease. ]

Anyone have thoughts on what this means for the craft bean-to-bar chocolate community? 

The 6,000SF DTLA factory is not quite ready to rock, as apparently they don't have all the permits necessary to start production. I did a back-of-the-napkin calculation based on the number of grinders I could see in the photos posted on the Instagram account for their launch party, estimated salaries for the number of employees reported (about 15), and a reasonable ground rent based on comparables in the Arts District , and it looks like they need to generate a gross profit (not gross sales) of north of $100k/mo to break even.

The investors have deep pockets and a corresponding appetite for risk. I wonder if they realize that they no longer qualify for the FDA small business nutrition labeling exemption and will act accordingly. I know it doesn't match their design aesthetic, but that's not an argument/excuse.




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clay - http://www.thechocolatelife.com/clay/
Powell and Jones
@powell-and-jones
04/19/16 07:28:43PM
30 posts

That's a lot of chocolate bars, estimating they will need to shift at least 35,000 bars a month to generate that sort of gross profit, let alone get a return on investment.  The FDA annual sales cut off  for labeling exemption is $500k total, I believe.  Clearly, as you mention the turn over is going to be way above.  Actually, the MB aren't the only US based craft maker ramping up sales volume.  Resultantly, I'd predict that all craft makers can increasingly expect FDA enforcement action on misbranded / deficiently labelled product, particularly if any food borne illness or undeclared allergy issues occur.  

The 2016 introduction of the FDA's FSMA act brings us all further into their viewfinder, even small firms will need to take steps to implement the required sourcing controls in 2017 - 18. The FSMA was in part a response to salmonella outbreaks (all be it salad and peanut related) but given that raw cacao is an imported item that can be be a source of salmonella sp.,  we will need to deal with the requirements of the FSMA.   

Interestingly, MB  also now make / sell bars in my old home town, London UK.  The existing EU labeling rules would apply to them in the UK I assume?   Don't craft makers in the UK have to label per EU rules?   Anyone bought a MB UK bar recently, does it have the required nutritional / allergy and best by info I wonder?  

For point of reference, I'm looking at some Willie's Cacao bars my wife brought me home from a recent UK trip, full ingredient and nutritional panel / allergy warning and production lot date and best by date.    Isn't this minimum required?   

Thoughts / comments

Powell and Jones
@powell-and-jones
04/19/16 07:58:52PM
30 posts

Interestingly, the Mast Bros have an FDA exemption filed which expires 11/05/2016.

The current FDA guidance pasted below, as I thought it might be interesting to some, actually raises some other questions.... Retailer exemption,  versus small wholesaler and product type.

Upon reading the rule it appears that sales of more than 100,000 units per year triggers a requirement for the mandated labeling.   A lawyer specializing in FDA regs could perhaps argue that each type of bar warrants an exemption as a different item, but personally I think knocking out several hundred thousand bars a year under the same brand name is probably the point at which you will need to start nutritional labeling.

Section 403(q) of the Federal Food, Drug, and Cosmetic Act requires that packaged foods and dietary supplements bear nutrition labeling unless they qualify for an exemption.

Title 21 of the Code of Federal Regulations (21 CFR) 101.9(j)(1) and 21 CFR 101.9(j)(18) outline the requirements for a small business nutrition labeling exemption for foods. The small business nutrition labeling exemption requirements for dietary supplements are outlined in 21 CFR 101.36(h)(1) and 21 CFR 101.36(h)(2).

The nutrition labeling exemptions found in 21 CFR 101.9(j)(1) and 21 CFR 101.36(h)(1) apply to retailers with annual gross sales of not more than $500,000, or with annual gross sales of foods or dietary supplements to consumers of not more than $50,000. For these exemptions, a notice does not need to be filed with the Food and Drug Administration (FDA).

The nutrition labeling exemptions for low-volume products found in 21 CFR 101.9(j)(18) and 21 CFR 101.36(h)(2) apply if the person claiming the exemption employs fewer than an average of 100 full-time equivalent employees and fewer than 100,000 units of that product are sold in the United States in a 12-month period. For these exemptions, a notice must be filed annually with FDA.

If a person is not an importer, and has fewer than 10 full-time equivalent employees, that person does not have to file a notice for any food product with annual sales of fewer than 10,000 total units.

A "product" is a food or dietary supplement in any size package; which is manufactured by a single manufacturer or which bears the same brand name; which bears the same statement of identity, and which has similar preparation methods.

A "unit" is a package, or if unpackaged, the form in which the product is offered for sale to consumers.

A "firm" includes all domestic and international affiliates.


updated by @powell-and-jones: 04/19/16 07:59:33PM
Clay Gordon
@clay
04/21/16 12:26:02PM
1,680 posts

Powell and Jones:

Upon reading the rule it appears that sales of more than 100,000 units per year triggers a requirement for the mandated labeling.   A lawyer specializing in FDA regs could perhaps argue that each type of bar warrants an exemption as a different item, but personally I think knocking out several hundred thousand bars a year under the same brand name is probably the point at which you will need to start nutritional labeling.

{snip}

A "product" is a food or dietary supplement in any size package; which is manufactured by a single manufacturer or which bears the same brand name; which bears the same statement of identity, and which has similar preparation methods.

A "unit" is a package, or if unpackaged, the form in which the product is offered for sale to consumers.

A "firm" includes all domestic and international affiliates.

Mark -

The way the rules have been read to me is that a product can be equated to a recipe. a 70% Dominican is one product, a 70% PNG another, and an 85% Dominican a third.

With respect to units, a 200gr bar counts as 5, 40gr bars. So 100, 200gr bars counts as 500 units because of the 40gr unit's availability. With 25+ grinders in NYC alone making as much as 80MT of chocolate/year, that's over 2,000,000 units/year. Assuming fewer than 20 recipes/products, then many if not all of them should be sporting nutrition labels - from the NY factory alone. Add in London (as is required by law) then pretty much everything should be.

Any way you look at it, it seems obvious that the MB should no longer eligible for the small business exemption. And it seems likely that they should not have been eligible to apply for the exemption that expires in 2016, but did so, anyway.

To me, this seems to be a continuation of the same arrogant, "The rules don't apply to us. Because, Mast Brothers." attitude that led them to be less-than-forthcoming about melting Valrhona early on. There is no reason why they cannot (and should not) be in compliance with the labeling laws today because they clearly have the financial resources to do so; compliance would not unduly burden them. Whatever their attitude towards openness and transparency (right?) it does not appear to extend to proper labeling. They could lead by example - do the right thing just because it's the right thing to do. But they still choose not to. 

One theory? The nutrition labels "ruin" the aesthetic.

What's up with that, anyway? 




--
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
clay - http://www.thechocolatelife.com/clay/
Powell and Jones
@powell-and-jones
04/21/16 02:13:51PM
30 posts

Perhaps they will now develop new packaging and labels to go with the new factory?

Clearly, flying 'close to the Sun' is their business model?  Not a good idea if your a chocolate maker or any kind of food company,  but actually MB aren't the only ones,  just apparently one that's blatant in terms of dodging some of the requirements?  

All fun and games, until someone suffers a serious allergy issue or there's a State / Federal recall issued as part of investigation of a food borne illness /allergy complaint. 

If I was a potential investor in this business or any other craft maker, I'd have required FDA label compliance as part of the due diligence before funding an operation that is designed to produce millions of bars and place them in interstate commerce.  In particular, as I know having purchased a very expensive policy that liability / recall insurance doesn't cover a claim if selling misbranded / mislabeled goods and most knowledgeable retailers wouldn't be prepared to stock the products either.

More generally, I'd question how many craft chocolate makers making and selling in the USA are fully FDA compliant?    I suspect there are a few that aren't and probably don't even know they are required to register with FDA etc?   The lack of funds for Federal agencies like the FDA means they don't do proactive enforcement, their model for food related issues is to come in after the problem and tackle GMP and other issues that relate to food safety.   Not likely to change anytime soon, so many firms just carry on as usual,  knowing the risk of action is rather low absent a consumer or public health complaint.


updated by @powell-and-jones: 04/21/16 03:04:24PM

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