Before the pandemic, IQBAR, a protein bar company, relied on traditional contract manufacturers to handle everything from ingredient sourcing to production. As global supply chains collapsed in 2020, this model suddenly became an existential threat to the entire business. Founder Will Nitze knew he faced a make-it-or-break-it decision.
âWe literally couldnât make the product,â Will recalls. âWe couldnât get certain inputs, we couldnât get cardboard.â The situation grew dire as logistics networks collapsed.
In response to these market forces, Will brought the entire supply chain in-house. This transformation saved the company, and set the foundation for IQBARâs explosive growth. After transitioning the supply chain, IQBAR grew to $60 million in annual revenue between 2020 and 2024, moving 50 million protein bars in 2024 alone.
For CPG founders facing similar supply chain issues, itâs possible to take control of your production destiny. Ahead, find Willâs process for ensuring a reliable supply chain.
Understanding the breaking point
IQBARâs initial business model mirrored most CPG startups. The brand used whatâs known as a âturn keyâ manufacturing approach, where contract manufacturers handle the entire production process. This included everything from sourcing ingredients, manufacturing finished goods, and billing the brand for completed products.
âItâs administratively not burdensome on you, the brand. Itâs good for cash flow cause you didnât have to outlay all the cash to get all those inputs,â Will explains. âItâs just quite seamless.â
The convenience of this manufacturing model hid serious vulnerabilities that came to light when COVID hit. Contract manufacturingâs hidden costs emerged in three critical areas: a lack of necessary ingredients, lower gross margins, and an inability to plan for long-term growth.
Also, when there were ingredient shortages, the contract manufacturers lacked motivation to find immediate solutions for IQBAR. âWhen you literally canât find inputs, the person at your co-packer whoâs managing your supply chain just isnât gonna go the extra mile when supplier X, Y, Z tells them, âSorry, we donât have any supply,ââ Will says.
Additionally, with this model, Will and his team had razor-thin margins, causing them to lose out on potential profits. âYour gross margin is somewhere between 3% to 5% lower than if you are actually sourcing all of your inputs,â he says. When you use this turn key model, manufacturers charge management fees and markup the raw ingredients to make even more of a profit.
Maybe most importantly, this middleman approach stunts long-term financial growth. âThe co-packer is not gonna go back to each one of your suppliers and negotiate to reduce prices as your volume goes up,â Will says. Even if you start buying in much larger quantities, this means your profit margins wonât improve over time. Thatâs something you have the power to do when youâre in charge of manufacturing.
These issues brought Will dangerously close to what he calls âcardinal sin number oneâ for a CPG brand: running out of product. âGoing out of stockâthat is the death nail of any CPG brand,â Will says. He knew he couldnât afford to let this happen.
Making the decision to take control
Facing potential business collapse, Will chose to bring the supply chain in-house.
When asked how he prepared for the shift to bring the entire supply chain in-house, his answer reveals the reality of entrepreneurial decision-making in crisis: âItâs like anything in startupsâthere is no preparation.â
Will dove headfirst into sourcing relationships previously handled by the middle man, in this case, manufacturers. IQBAR now operates under a âco-manufacturingâ model. The brand sources all raw materials from ingredient suppliers, manages those relationships, and coordinates deliveries to manufacturers who focus solely on production.
Mapping the supply network
The first step in taking control of a CPG supply chain is mapping out your suppliers. For IQBAR, this meant identifying every component that went into its barsânot only the primary ingredients, but the packaging materials, processing aids, and the ingredients to make the ingredients.
Deep understanding of what goes into your product is the key to effectively managing its supply chain.
Will approaches this methodically, building on the product development work heâd done years earlier, âI opened an Excel spreadsheet and I said âŚ, What are all the compounds that have been shown to be good for your brain in research? So, omega-3s, vitamin E, magnesium, etc.â
Building direct relationships
Knowing what the ingredients and supplies are, the next phase involved getting in touch with suppliers. For this, Will used a straightforward approach: He identified contacts, reached out, and began building relationships.
For founders undertaking this transition, persistence is important. Many suppliers are accustomed to working with larger companies or through manufacturing intermediaries. Building credibility takes time and consistent follow-through.
Creating clear systems for order projections
As Will deepens relationships with suppliers, heâs also created standardized procedures for ordering, tracking, and managing inventory. This supply chain infrastructure serves as the backbone of the in-house process, supporting its success.
âYou do things for a couple months and youâre like, OK, generally this is my flow for how I order all the inputs,â Will shares. âAnd then you do that for years to come.â
When bringing supply chain management in-house, start simple and iterate. Will is constantly tracking optimal order quantities, establishing lead times, developing quality control procedures, and creating systems to track inventory changes.
He suggests other CPGs who want to follow his example start with basic tracking systems, and says even spreadsheets can work initially. Afterward, a brand can develop more sophisticated tools as order quantities increase.
Taking control gradually
Taking control of the entire supply chain at once isnât possible. IQBAR took a slow approach over time, beginning with its most problematic and strategically important inputs.
You can map out a phased approach that makes the most sense for your business. Start with your highest-volume ingredients, where margin improvements will have a real impact. Next, look at the components that have caused you the most headaches, as far as issues with suppliers.
Leveraging volume for better terms
Will suggests identifying a critical threshold where economics fundamentally changes: âThat threshold is roughly, call it 30 million units a year. And so what happens when you hit 30 million units a year is ... now you can do a series of things to exploit that volume.â
IQBAR is now able to systematically negotiate better terms with suppliers, based on increasing volume. âYou go back to every one of your vendors and say, âHey, now that Iâm buying 10 times more product, I need you to ship in trucks instead of less than a truckload ... because thatâs gonna reduce my freight cost per bar.â
You can use the same approach with manufacturing partners: âYou go back to your manufacturer and you say, âHey, now that Iâm producing 10 times more product, I need you to reduce my labor cost per bar from X to Y.â
âYou systematically go through your entire value chain and just twist dials in every single spot. And then magically you wake up the next day and youâre like, âWhoa, OK. Weâre profitable,â Will says.
Bringing its supply chain in-house changed IQBARâs business trajectory. âWe go through the entire value chain and just twist dials in every single spot,â Will says, continuously growing profits.
With its supply chain predictable and under control, IQBAR entered a new phase focused on market dominance: âThe season weâre in now ... is, How do we climb the leaderboard and climb the ranks in different channels?â
Taking a supply chain in-house and co-manufacturing isnât right for every CPG company at every stage. Will identifies volume as the key indicator. He suggests using a turnkey manufacturing solution to keep things simple while youâre concentrating on selling and promoting your product.
For some brands, a hybrid approach may work best. First, take control of certain strategic ingredients, while allowing manufacturers to handle others.
This first small step can set up your brand for sustainable growth and profitability.
IQBAR didnât just weather the stormâit built a more resilient, profitable business positioned for efficient scaling. As Will succinctly puts it, âYou just do it. ... The alternative is death. So youâll do anything.â
Tune in to the full Shopify Masters episode to hear how Will managed the stress day-to-day and landed in major retailers.
