Why David Michael & Co.'s quest for the next big idea is hitting the road

It all starts in the minds of the David Michael & Co. team, but now the quest for the next big idea is hitting the road.

By Samantha Drake
Photography by Mitro Hood

David Michael & Co. runs on its employees’ light-bulb moments. And for a global food flavor company, success is quite literally a matter of taste, so it’s inevitable that some ideas won’t make the cut.

Even president and COO William Benjamin “Skip” Rosskam III has experienced this rejection. The no-go product idea? Licorice gelatin.

The idea came from Rosskam’s young sons years ago when he quizzed them about new flavors they’d like to see. Rosskam liked the idea and sent it through David Michael & Co.’s rigorous innovation assessment process to gauge its viability. The idea for licorice-flavored gelatin dessert made it all the way to a presentation for the makers of a nationally branded gelation who is also a David Michael & Co. customer. But they turned the idea down flat. “The flavor is way too polarizing,” Rosskam explains.

But failed concepts never discourage Rosskam from his quest for the next great idea. “The important thing is to keep swinging,” he says.

Winning the flavor game

Flavor manufacturers provide added taste to virtually every food in a “box, bottle or can” in the grocery store, says John H. Cox, the executive director of the Flavor and Extract Manufacturers Association (FEMA) in Washington, DC. Rosskam served as president of FEMA from 2003 to 2004.

With more than 1,000 customers in the food and beverage industry, Rosskam estimates his 250-employee, privately held company ranks in the top 25 of the 300 flavor manufacturers worldwide and brings in $50 million to $100 million in revenue a year.

But success in the crowded and competitive global flavor manufacturing industry involves more than just creating the latest taste sensation. It’s also about finding untapped markets and improving processes. David Michael & Co. has spent more than a century in the Philadelphia area coming up with new ways to meet customer needs and exceed expectations.

One of Rosskam’s strengths is developing unique ways to communicate with and market to customers. In 2013, the company hosted its 10th annual Innovation Roadshow event and launched the Great Escape to Innovate, an RV-powered road trip. The Roadshow and the Great Escape are designed to introduce customers to the score of new products and concepts the company creates each year.

Cox agrees, noting, “David Michael strikes me as one of the most innovative companies when it comes to marketing.”

A partnership forms

Will it work?

What it takes to bring an idea to market

At David Michael & Co., every employee has the opportunity to bring a new idea to fruition. But not all ideas are good ideas. To weed out the harebrained schemes from the ones with potential to be the next big thing, the Product Introduction Group (PIG) meets on an as-needed basis to evaluate ideas for new products and concepts.

The cross-functional team, with members from flavor chemistry, manufacturing, marketing and global business development, evaluates new ideas by asking a series of questions:

• Is it a flavor, color or texture concept that fits in the company’s product line?
• What form should the product take?
• Is the potential market large enough to
support it?
• What capital expenses are involved?
• How does it differ from the competition?
• How much will it cost to manufacture and market?

Making the evaluation criteria widely known results in an educated workforce when it comes to product development.“People come with more mature ideas because they know what you’re going to ask,” says Skip Rosskam, president and COO.

Customers who bring an idea to David Michael & Co. have already done their homework by addressing these questions and drafting a detailed business plan. But the company doesn’t move forward with an idea unless it’s viable and worth the effort. “We jealously protect our research and development time,” he notes.

David Michael & Co. is known for its myriad flavors these days, but its origins are in a simple staple: it all started with vanilla.

In 1919, Rosskam’s grandfather, Walter M. Rosskam, formed the R&R Chemical Co. with brothers Eli and Robert Rosenbaum, after Rosskam and Eli Rosenbaum met in a chemistry class at the University of Pennsylvania. R&R dealt in items such as cigar wrappers and cigar binding fluids. The following year, they went to David Michael, who had been doing business in the Philadelphia area since 1896, to purchase materials for their cigar wrappings.

Michael took the opportunity to talk up the new vanilla powder product that he developed called Michael’s Mixevan. A partnership was born when Michael invited the R&R trio to join the management team of his company, David Michael & Co. When Michael died in 1935, Rosskam and the Rosenbaums became sole owners of the company.

Over the years, David Michael & Co. evolved from a flavor supplier to a food and beverage product development partner. Today, David Michael & Co. offers more than 40,000 flavors, stabilizers and natural colors that can be customized for its food manufacturer customers. With global headquarters in Northeast Philadelphia, David Michael & Co. has facilities in Illinois, California, Mexico, France and China, each of which Rosskam visits at least once a year. The company employs more than 250 people.

The third generation of Rosskams and Rosenbaums now runs the privately held organization in an equal partnership, each concentrating on different areas of the business. Rosskam’s brother Steve is executive vice president of sales and marketing, his cousin George Rosskam is executive vice president of operations, and cousin Stuart W. Rosenbaum is executive vice president of purchasing and management information systems as well as CIO.

Rosskam, 67, didn’t grow up in the business; he joined the company in 1978 after his father took ill.

“It occurred to me it would be a good idea to come in [to the company] after 10 years of experience,” he recalls.

Rosskam grew up in Chicago, where his father, William, worked in sales for David Michael & Co. With no nearby plant to visit to see the inner workings of the business firsthand, Rosskam admits he had little interest in the family’s company.

“I wasn’t attracted to the industrial nature of the business because I was a marketing guy,” he adds.

Upon graduating from Southern Illinois University with a degree in communications, he first worked in sales and marketing positions for Gillette and The Lincoln Mint and then as treasurer of the Institute of Food Technologists Foundation.

Even after joining David Michael & Co., Rosskam commuted from Chicago to Philadelphia for a year to make sure he had made the right decision. He and his wife Marilyn live in Huntington Valley, PA, and Stowe, VT, and have two sons, Andrew and Jules.

Formula for innovation

Rosskam’s marketing background has helped him promote the spirit of constant innovation at David Michael & Co. “You can’t just turn a switch on and put a sign up that says, ‘We’re innovators,’” Rosskam points out.

Innovation should involve everyone at every level, he says. David Michael & Co.’s efforts to promote innovation reach so many employees on a regular basis that they feel comfortable coming up with ideas of their own, Rosskam explains.

“It’s encouraged, and we celebrate it,” he says. “But it didn’t happen overnight. This has been developing for decades.”

The company’s formal innovation process is led by the Product Introduction Group (PIG), composed of employees from a variety of function areas, including flavor chemistry, manufacturing, marketing and global business development, who evaluate ideas for new products or technology. In addition, any David Michael & Co. employee or an individual who works for one of its customers that brings a new idea to the PIG becomes an ad hoc member of the team. It’s a unique opportunity for employees and customers to be involved in the innovation process at an early stage.

New ideas can come from anyone, anytime. The PIG and/or the Innovation Roadshow committee evaluate between 100 and 150 ideas a year and green-light only about 25 for development and eventual presentation at the Innovation Roadshow. “We don’t want to have all cereal ideas or all dairy ideas; we have to have a diversity of ideas,” Rosskam says. “Otherwise, we wouldn’t be able to attract as wide a net of clients coming to visit us.”

A recent employee-generated idea is “Some Like it Hot,” an ice cream-caramel sauce combination that can be microwaved and turned into crème brulee. Heating the product changes the whole texture, notes Rosskam.

Another was a solution to an age-old ice cream flavor limitation. Ever had citrus-flavored ice cream? It doesn’t usually come in citrus flavors because the acid in the citrus, “de-natures the protein that’s in the milk fat, causing it to curdle so it can’t be produced,” Rosskam explains. An employee changed that notion with the invention of “sherbato,” a blend of sherbet and gelato that gives citrus flavors, like lemon, tangerine and pink grapefruit, a creamy texture, he says.

The roadshow and the RV

Facts behind the flavors

3 things you never knew about
the flavor business

1. Extreme weather in remote parts of the world can seriously affect business. In 2000, Cyclone Hudah hit Madagascar, the world’s largest producer of vanilla beans. The destruction of the vanilla bean crop caused prices to skyrocket over the next three years — from $20 per kilogram to $600 per kilogram, recalls Skip Rosskam. To fulfill its contracts with customers, the company had to change the way it borrowed money.

2. Flavor formulas are not patented. A formula might contain 150 raw materials, but every formula has a personalized signature for each customer and is considered a trade secret. Rosskam explains that patenting the formulas would require disclosing the ingredients. “Our world is becoming much more transparent, and that’s good, but it’s also a challenge for us because we don’t want transparency to dilute our intellectual property,” he says.

3. Becoming a flavor chemist at David Michael & Co. requires seven years of training. The company has its own curriculum and tries to always have a few trainees in the pipeline. Currently, the company has 12 flavor chemists and two trainees.

New products like “Some Like it Hot” and sherbato make their debut at the annual Innovation Roadshow and on the Great Escape to Innovate.

In 2013, David Michael & Co. hosted its 10th annual Innovation Roadshow, an industry event that draws customers from around the world to learn about the company’s new products. The daylong event, usually held in Philadelphia, is an opportunity for customers to interact with David Michael & Co. sales and technical people, learn about current flavor trends and sample dishes made with the company’s latest products.

The 2013 Roadshow featured a keynote speech by Hala Moddelmog, president of Arby’s Restaurant Group, Inc., on creating innovative products that support a company’s brand. David Michael & Co. managers presented sessions on the sensory tools used in product development and the science of vanilla beans. Visitors to the exhibit hall could sample new flavors and discuss potential applications with the employees who created them.

Products unveiled last year represent strategic decisions to focus on specific cuisine and markets. For example, a series of dairy flavors replicate the distinctive tastes of goat, camel and water buffalo milk often used as an ingredient in Arab cuisine. New rhubarb and elderflower flavorings were inspired by culinary trends in the Brittany region of France and can be used in yogurt, desserts, syrups and beverages.
“It’s our fashion show,” Rosskam says. “You have to show a lot of value today to get peoples’ time.”

A high point for David Michael & Co. employees is interacting with customers and seeing the reactions to their work. Attendance is capped at about 300 people. Any more attendees and the Roadshow would lose its effectiveness, says Rosskam.

At the same time that David Michael & Co. celebrated a decade of Roadshows, it also began traveling to customer locations on the Great Escape to Innovate. Touring around the country in an RV that features a full kitchen and business office, salespeople visit with customers to talk about new ideas and taste new products. They also take the opportunity to survey customers about their business needs. Every customer gets its own customized program, says Rosskam.

As of early 2014, the Great Escape to Innovate hit 24 states, put 20,000 miles on the RV and visited 120 customers. “It’s the best advertising around,” he says.

The Great Escape to Innovate is also an educational tool, Steve Rosskam points out. In addition to customer locations, the RV’s travel itinerary includes college food science departments so David Michael & Co. can educate students about the flavor industry.

But the non-stop cycle of coming up with new concepts year after year can take its toll on an organization, Rosskam acknowledges.

“There’s pressure to continually generate new ideas,” he says. “I think there’s a sense of, ‘How am I going to do better than I did last year?’”

David Michael & Co. recognizes that having an idea turned down can be discouraging. So when pitching a potential idea, employees first consult with their supervisor, who helps them understand what will work, what won’t and why. Usually, the employee will conclude on his or her own that an idea isn’t viable before the PIG has to give them the bad news, Rosskam says.

Inspiration everywhere

Rosskam understands that keeping the culture of innovation going strong at David Michael & Co. starts with his own enthusiasm for the work.

“You have to be smitten, and they have to see it in your eyes,” he says.

Rosskam is always on the alert for something novel. While on the Great Escape to Innovate last summer in Maine and Vermont, Rosskam noticed the barrel-aging process, commonly used in the production of whiskey and red wine, was being applied in unexpected ways. In particular, he saw barrel aging used for maple syrup, olive oil and alcoholic cider. Rosskam took the idea and ran with it. David Michael & Co. is now poised to create different barrel-aged flavors, such as “aged in old oak,” “aged in new oak,” etc.

“Skip is always pushing the envelope when it comes to new ideas,” says Victoria Vaynburger, the company’s marketing and consumer insights manager. “It’s kind of cool to see how involved he gets.”

Innovation is one of the best ways a company can set itself apart, says Rosskam. He encourages employees to be as knowledgeable as possible about the industry. David Michael & Co. doesn’t simply watch for trends; it takes an active role in learning about them. To address the popular gluten-free food trend, for example, David Michael & Co. has partnered with Rutgers University to research the gluten-free market to see who’s eating gluten-free products and why, Rosskam says.

The company also monitors tradeshows, changing government regulations and announcements from other food industry players. Whole Foods Market LP, for example, recently stated that all its products will be free of genetically modified organisms or clearly labeled as containing GMOs by 2018, which will present a challenge for flavor manufacturers, Rosskam says.

Informally, Rosskam’s mind is never far from the business. Friends might catch Rosskam snooping around their kitchens — checking out the spice cabinet and refrigerator to see what they’re eating. He also confesses his wife hates grocery shopping with him because he’s constantly stopping to read labels.

For Rosskam, it’s all part of doing what he loves. “If you’re watching the market and looking for changes,” he says, “they’re pretty easy to see as long as you’ve got your eyes open.” CEO

Samantha Drake is a freelance writer based in Philadelphia. Contact us at editorial@smartceo.com.
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