She Owns It
Portraits of women entrepreneurs.
When I first wrote about Fran Free in 2010, she was whipping up organic baby food in a leased kitchen and trying to lower her production costs. Her products were sustainable, but her business, Oh Baby Foods, was not.
“It was a struggle back then,” she said. Ms. Free – then known as Fran Gunsaulis – faced a classic start-up dilemma: She needed to ramp up production to realize the economies of scale that would reduce her costs, but she lacked the large contracts that would allow her to raise the capital required to manufacture more of her product.
The company, founded in 2009 and based in Fayetteville, Ark., did not become profitable until this year. In 2013, annual sales were $200,000. But now, because of packaging changes and rapid expansion, Oh Baby is on track to hit $1 million in 2014 sales. The company, which has three full-time employees, four part-time employees and 40 field representatives, will soon hire more staff.
Its products, which have evolved considerably since the company began, are sold in about 600 stores across the country, including Whole Foods, which accounts for 40 percent of Oh Baby’s sales. The rest come from smaller chains and independent retailers. Most of Oh Baby’s ingredients are grown on the West Coast, and the company now uses a contract manufacturer in California.
In the beginning, Oh Baby offered only a line of frozen foods, which never became profitable. Customers weren’t used to searching for baby food in the freezer section. “I wasn’t selling baby food,” Ms. Free said, “I was selling the idea of frozen food and where to find it.” She said she chose to sell frozen baby food because, back then, jars were the only shelf-stable packaging option and frozen food retains more nutrients than food in jars. Additionally, she could produce small volumes of frozen food in her leased kitchen, without the need for a contract manufacturer.
But by 2011, there was a new packaging option, the shelf-stable pouch. It addressed Ms. Free’s concerns about nutrients. And, with a $100,000 loan from two Oh Baby customers, she was able to contract with a manufacturer, solving her chicken-egg dilemma and allowing her to increase production. As I wrote in 2011, Oh Baby made plans to introduce a line of shelf-stable foods and scrap its frozen offerings. After that, Oh Baby got its products into Whole Foods in Little Rock, Ark., and Tulsa, Okla.
And bigger changes were coming. In 2012, thanks to promising sales, Oh Baby secured a five-year, $25,000 loan at 5 percent interest through Whole Foods’ Local Producer Loan Program. The loan, which helped with cash flow and enabled Ms. Free to pay for ingredients and packaging, comes with access to Whole Foods’ network of national buyers and business mentors.
In September 2013, Oh Baby changed its packaging again, switching to a squeeze pouch that customers find more convenient. As a result, month-over-month sales within Whole Foods increased more than 1,200 percent from September 2013, when Oh Baby sold 407 units a week, to September 2014, when it sold 5,311 a week. And this fall, Whole Foods classified Oh Baby as a national brand, a designation that opened up additional Whole Foods regions for Oh Baby. Ms. Free said brands that are approved in at least six of Whole Foods’ 11 United States regions are classified as “national.” Oh Baby is sold in eight.
This fall, Oh Baby was also certified as a woman-owned business by the Women’s Business Enterprise Council. Ms. Free hired a grant writer to handle the process and recommended that business owners apply for certification as early as possible in the life of their business. The paperwork required is extensive, she said, but if you wait, it just gets worse.
And getting certified has already paid off. Oh Baby recently signed a deal with a major grocery chain that she cannot name to produce baby food for its private label. The retailer told Ms. Free that it found Oh Baby’s pending status as a woman-owned business attractive. Beginning in March, Oh Baby will be sold in 2,400 of the retailer’s stores. In addition to increasing the company’s sales volume, the deal will make it possible for Oh Baby to realize manufacturing savings on both its private and Oh Baby lines. For example, Oh Baby will save money because it will purchase four times the amount of cardboard packing boxes from its supplier.
To help support this growth and allow her to hire a chief operating officer, Oh Baby sought more funding. Ms. Free said she hoped to close on a deal for $2 million from angel investors by the end of the year. This spring, Oh Baby, which has been selling only food for infants, expects to offer food for older children.
Ms. Free says her biggest challenge is managing logistics. Oh Baby relies on 10 distribution centers, two warehouses, and numerous farms and processing plants. She said a C.O.O. would be able to help ensure seamless deliveries among these locations.
Looking back on Oh Baby’s early days, Ms. Free says she wishes she had been more assertive. Today, she said she is proud to be known as a “velvet hammer.”
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