#54: Eric Diamond (Central Kitchen)

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Eric Diamond (Central Kitchen) [00:00:00]:
When we started our incubator in 2013, there was about a 180 of these kitchens throughout the country. Now there's over 400 of them and continuing to grow. Craft food has just kind of exploded. I think the movement is people realize they wanna know where their food comes from. They understand the importance of eating, eating local. And, you know, we talked to Nestle's and Nestle's in a great comment by one of their guys. They said, look, Nestle's has a bunch of warships, but we don't have any speedboats. And like your guys can come up with an idea of a product and literally within 6 months can have it on the shelves of grocery stores.

Eric Diamond (Central Kitchen) [00:00:37]:
You know, that process for us takes 3 years and we just can't be as innovative as these companies can.

Jeffrey Stern [00:00:45]:
Let's discover the Cleveland entrepreneurial ecosystem. We are telling the stories of its entrepreneurs and those supporting them. Welcome to the lay of the land podcast, where we are exploring what people are building in Cleveland. I'm your host, Jeffrey Stern. And today we're hearing the story of Central Kitchen, the origin actually of many of our favorite food and culinary brands here in Cleveland. Eric Diamond, who who is our guest, is the co founder and CEO of Central Kitchen, which truly has a massive physical presence here in Cleveland with hundreds of thousands of square feet out of their main food hub headquartered on 7501 Carnegie Ave off East 77th Street where former lay of the land guest Cleveland Kraut, now Cleveland Kitchen operates out of in addition to 2 other fan favorites like Cleveland Bagel. From incubating startups to co packing for successful brands like Randy's Pickles, to supporting ghost kitchens, to educating aspiring food entrepreneurs, to exploring trends like fermenting and veganism. Central Kitchen is the driving force behind the local craft food scene here in Cleveland.

Jeffrey Stern [00:02:00]:
And it's clear from Eric's passion and vision that they're really just getting started. Previously, Eric spent over 20 years in banking, lending and community development. And throughout his career, Eric has developed a passion for helping small businesses and entrepreneurs start and expand their own businesses, realizing their their aspirations and and seeing them through. I love learning the story of of Central Kitchen and the outsized impact it's had on Cleveland's food scene and some of my own favorite local brands. So please enjoy my conversation with Eric Diamond. I think the the best place to start might actually just be with a a high level overview here of Central Kitchen and and what the the organization does, and we'll we'll kinda go from there.

Eric Diamond (Central Kitchen) [00:02:48]:
Yeah. Definitely. So Central Kitchen companies, we basically have several different companies. The first is a nonprofit incubator located in Midtown 28100 Euclid Avenue. There, we basically help companies start and scale their business. So you it's a 24 hour a day, 7 days a week. You come in, you produce your product, we help you get licensed, regulated, etcetera. And then the Central Kitchen Food Hub is a larger facility.

Eric Diamond (Central Kitchen) [00:03:13]:
It's about 137,000 square feet. And that's where you go. Once you are beyond startup phase, you're in scale of phase. You need production space. You need your own space. And that's our for profit entity. And then obviously, we own the real estate.

Jeffrey Stern [00:03:27]:
Nice. And what was your path to this whole project? Like, how did you get here?

Eric Diamond (Central Kitchen) [00:03:34]:
Yeah. It is kind of crazy. So, you know, I went to school to be an English major and and kind of always pictured myself in college, like moving to Vermont and living in a cabin and, you know, writing the next great American novel. But when I was in college at Baldwin Wallace, I started working for Star Bank. And when I graduated, they offered me a job, and I didn't really see myself in banking, but it was a good job and I had so I ended up taking it in stayed in banking for 20 years and always kind of had the entrepreneurial itch even back in college, thinking about, like, what do I wanna do? Do I wanna be my own boss? I mean, I I did well in banking, but I I would also think if you asked any of my former managers, I wasn't the greatest employee. But what I really understood when I got into banking was this is the piece that I never would have learned, kind of the finance side, the structuring of deals. It was a really good learning opportunity. And then the great recession hit.

Eric Diamond (Central Kitchen) [00:04:30]:
And instead of making loans, we were doing nothing but putting people out of business and calling their loans, and it just became really horrible. I mean, the banking industry in 2008, 9, was really, really rough. And so I had said, okay, what do I want to do with my life? I know I want to be an entrepreneur, but I don't know what. And I went to work for an organization called ECDI. So they're an organization that does micro loans to entrepreneurs who couldn't get bank funding. And I was able to kind of use that banking background. I ended up coming aboard to open up their Cleveland office, and it was just fun being around all these entrepreneurs and helping them scale and and helping them get funding. And a lot of the people coming through were businesses that were somehow food based.

Eric Diamond (Central Kitchen) [00:05:11]:
I ended up renting space at 28100 and Gordon Premer, the building owner, he and I just became friends. Just he liked what we were doing. I liked what he was doing. And he had a commercial kitchen on the first floor of that building that Cleveland State was renting out. They were using that as a commissary kitchen, and they had moved out. They had built a new kitchen on their campus. And Gordon came to me and he's like, well, what what would you do with this space? And his daughter, Carolyn, had just moved back from LA, and she's like, you know, these incubator kitchens are really, really popular on the West Coast. Gordon and I and Carolyn spent about 3, 4 or 5 months researching incubator models, and we ended up getting ECDI to invest.

Eric Diamond (Central Kitchen) [00:05:52]:
And so I was managing the investment for ECDI and we opened up our doors May of 2013. Our model was wrong. We thought that the model would be everybody coming through the front door. Would it be an existing business just looking for a place to scale?

Jeffrey Stern [00:06:08]:
And what we found pretty quickly was

Eric Diamond (Central Kitchen) [00:06:08]:
everybody walking through the door was just had an idea. They had never been in business before. They hadn't sold their food anywhere. And so we created an incubator program that, we actually tomorrow will graduate our 47th cohort of that class. Yeah. So we've put over 600 people through that program, and it was it was a success. And so it just kind of continued to grow, grow, grow. And then in 2015, Gordon and I were having a conversation about what we really thought this could be.

Eric Diamond (Central Kitchen) [00:06:37]:
You know, it was fun. It was not making any money, but it was putting a lot of people in business. We love the fact that about at that time, roughly 65 percent of the people in the kitchen were minorities and or women. And so it was really kind of a low barrier entry to start a food based business. And And so we kind of like, hey, what does it look like? How do you how do we grow this? And our partners, we had a couple of partners in it at the time, just didn't share our vision. And so at the end of 2015, Gordon and I met and said, hey, let's just buy everybody out and kind of run this the way we think it could be run, which was awesome, except for the fact that, again, it wasn't making any money I had. At that time, I had 2 kids in college and 2 younger kids. You know, I couldn't work for free, but it couldn't afford to pay me.

Eric Diamond (Central Kitchen) [00:07:24]:
So I actually went to work for my wife who has a consulting company, which I don't recommend doing. She's it was it was a lot of fun, but she is a very hard boss. And then about 2016, Gordon and I started to have this vision of, like, what a food hub concept would look like. And we ended up buying a building in 2018, and I left working for my wife and started this full time. And it's just really if you look, everyone's like, gosh. You guys have been doing this since 2013. Yeah. On the incubator side, but all the stuff that we've created really has been in the last two and a half years.

Jeffrey Stern [00:08:00]:
When you had that conversation about how you wanted to run it differently and and what you kind of had in in the vision, what what were those things you were thinking about?

Eric Diamond (Central Kitchen) [00:08:09]:
Yeah. So what we were thinking about, that's actually kind of cool. Our concept was like, okay, we see after 18 months, something happens with these entrepreneurs. They either move out into their own space or they go the co packing route where somebody makes their product for them or they go out of business. And And so we were looking at like, how do we help those first two categories? Because what we were hearing was, oh my god, I moved out in my own space and it's gonna be a half a $1,000,000 build out and you guys would handle all the licensing for me and you guys would clean the kitchen. And now that's on me, and the ODA is up my butt because I'm not doing things exactly right. And it's just because I don't know. Or if they went the co packing route, it was like, look, these co packers want a 1,000 case minimum run.

Eric Diamond (Central Kitchen) [00:08:51]:
I only need, like, 200 cases. So Gordon and I had this concept of like, hey, could we put together a shared use concept for scale up? Right? And so in our mind, we have these like individual kitchen pods in the building. We would have shared use cooler freezer dock storage, and maybe we'd start co packing. And we started co packing our operation in 2018 out of our space at 28100. And what we found was, a, there's a lot of demand, but, b, it was really inefficient into doing in such a small space. So we needed this larger facility. And so it's as, you know, as we sit here today, one of the things we didn't anticipate was renting out to larger tenants. So one of the very first tenants that came through back then, we called it the Cleveland Culinary Lunch and Kitchen.

Eric Diamond (Central Kitchen) [00:09:34]:
We rebranded in 2016, the Central Kitchen, was Cleveland, formerly Cleveland Kraut, now Cleveland Kitchen. They were one of the very first people to ever take the incubator course. And they came to us and they said, hey, we need like 20,000 square feet. And for Gordon and I, they just took down 137,000 square foot building. We're like, Thank you. You know, at least we'll have a tenant in there, but they have expanded into about 30,000 square feet. And we had a conversation with them, you know, as they continue to grow, what does their next 5 years look like? And when they hit a 100,000,000 and they sell, which I know will be someday, you know, we probably wouldn't put as big of a tenant in there. We probably would do these smaller tenants because there's such a need for them.

Eric Diamond (Central Kitchen) [00:10:14]:
But the cool thing was, you know, we've been talking about kitchen pods and what do they look like for since 2016 and this week they actually got built. And so it's like when I when I walked down that hallway and the walls were up and they're putting in the flooring, it was like, I'm not going to lie. I kind of teared up. It was like, damn, this this has been on paper for so many years. And now here it is Finally here, and it's just been cool.

Jeffrey Stern [00:10:39]:
Yeah. Tell us about kitchen pods and, like like, how does the model work? Yeah. And maybe kinda take us through because you kinda lay it out in stages from everything from ideas and and learning and inception to incubation to scaling. Like, how does this transpire for someone going through? Right.

Eric Diamond (Central Kitchen) [00:10:58]:
So typically what happens is someone reaches out and says, hey. I have an idea for x product. I have an idea to make a hot sauce, and we typically have them take the course. So when we first started doing those courses back in 2,000 15, 16, no, I take that back with it in 2014 when we started. We offered them for free. You know, now we charge $450 for them. We have scholarships through Gunn Foundation and PNC Bank that allows individuals who can afford that to take the class. And basically, you learn, you take 6 weeks and you learn everything you need to know about starting a food based business from regulations to financing to numbers to creating a life plan over a business plan to marketing, to getting your labels correct.

Eric Diamond (Central Kitchen) [00:11:39]:
And then they come in the kitchen and they start making their product. And typically what happens is they'll spend the 1st year at farmers markets really kind of testing their concept. Are people going to buy this? Do they like it? And if they do, then we do pitch days. So 4 times a year, we bring in Heinen's Whole Foods, Market District, Cisco, Gordon Foods, and they do pitches to get into retail. And then once they get into a first of these couple retailers, then it's like, how big do I wanna grow this? Do I wanna be Cleveland crowd that just got into 1500 Walmarts and is in most Costco's now? Or do I just want a kind of a regional brand? And then at some point, they're producing, they're doing well, they need to take the next step, and that's where they leave the incubator and they go down to 70 5 01 Carnegie, and they get their own kitchen pod. So the shared use kitchen in 2,800, it's hard to get certified kosher or certified organic because you don't know who's producing next to you when you come in that day. There could be 8 other companies in there where the kitchen pod that your own individual four walls, your own kitchen. And so we have 6 of those that have been built out.

Eric Diamond (Central Kitchen) [00:12:44]:
We've leased 4 already. And then you have flex space, which is just space where a Cleveland crowd can set up 30,000 square feet and run their production. And then in addition to that, we've got cooler freezer and dry storage that we run out by the pallet. So the benefit to the entrepreneur is they don't have the upkeep of that type of facility. They don't have to build out coolers, freezer and dry storage. They have access to it. They don't need to find a building with docks. We've got 8 docks at the building.

Eric Diamond (Central Kitchen) [00:13:13]:
So for them, it's really like, hey, I'm going to pay these guys to come in and all I got to do is make my product and sell. So that's kind of been, that's the benefit there. And then we started doing co packing where we make products for people, and that's actually also very exciting because of the pandemic. We ordered new equipment, like, 8 months ago, and it Mhmm. I finally got an email this morning that it shipped today, so we should have it Friday. We're very, very excited about that. That'll allow us to take on some new clients. So, basically, we we always look at it like we created this ecosystem food in Cleveland, and we're kind of your one stop shop if you wanna start or scale your food business.

Jeffrey Stern [00:13:48]:
And how does the the business itself work from from your perspective, not from the entrepreneur's perspective?

Eric Diamond (Central Kitchen) [00:13:56]:
Yeah. So for us, you know, we the incubator, we run that as a nonprofit. So we have a wonderful board that helps us there. And we do grant grant funding every year for that. We just received some big grants from PNC Bank. Shout out to PNC. And then from the day to day operations, you know, my job is kind of like vision and where we're going. We have a gentleman in our staff, Zach Reinberger, whose sole job is to make sure we're in food we're in compliance with food safety laws and that the companies that are inside the hub and the incubator in compliance.

Eric Diamond (Central Kitchen) [00:14:28]:
And then we have a kitchen manager, Olivia, who just recently started with us. Wonderful addition to our team. But her whole job is to handhold these entrepreneurs that go into the incubator, get them through the Ohio Department of Agriculture process, help them get their labels, help them get the nutritional paneling. And then a big part portion of what we do is just real estate. You know, we're a landlord. We're a landlord to lots of tenants, whether it be pods or whether it be retail space. Cleveland Bagel has a spot at our location, and so does supermarket. Actually, Cleveland Bagel was one of the very first tenants that ever came into the incubator.

Eric Diamond (Central Kitchen) [00:15:01]:
So it's been cool to watch them grow, and I have a spot in our hub. So from a day to day standpoint, it's, you know, we're basically running a real estate company. We're running an incubator. We're running an accelerator.

Jeffrey Stern [00:15:11]:
And from the kind of macro level, you mentioned when you were starting out, you'd heard the kind of proliferation of these out on the West Coast. I've kind of seen them on the the East Coast from my own perspective. Like, what what is the state of these kinds of incubators today? And and, you know, what did food entrepreneurs do before the the advent or is the is the model even new?

Eric Diamond (Central Kitchen) [00:15:36]:
Yeah. So it's interesting. When we started our incubator in 2,013, there was about a 180 of these kitchens throughout the country. Now there's over 400 of them and continuing to grow. Craft food has just kind of exploded. I think the movement is people realize they want to know where their food comes from. They understand the importance of eating, eating local. And, you know, we talked to Nestle's and Nestle in a great comment by one of their guys.

Eric Diamond (Central Kitchen) [00:16:03]:
They said, look, Nestle's has a bunch of warships, but we don't have any speedboats. And like your guys can come up with an idea of a product and literally within 6 months can have it on the shelves of grocery stores. You know, that process for us takes 3 years and we just can't be as innovative as these companies can. So what you're seeing is less and less companies wanting to be these national or global brands, the Cleveland crowds of the world and instead focus on a region. I just want to be a reasonable regional food company. You know, if I can hit 50,000,000 in a region, I'm going to be awesome, but they all need a place to start, right? And so as we look at our model, kind of the food hub model, you know, we're the 3rd largest one in the country right now with our infrastructure, what we built, the amount of volume of food that comes out of it. The issue is, as you look at the state of the industry, there's very few of these these incubator kitchens that are profitable. They all depend on grant funding.

Eric Diamond (Central Kitchen) [00:17:03]:
They all depend on having a much smaller footprint than we do. It's tough. I think we'll break even next year in the on the nonprofit side. But up until 3 years ago or 2 years ago when we started doing grant writing, Gordon and I funded the loss every year. It was important to us, though, because this was a feeder system to everything else that that we do. So and it's and it's very much mission driven. So you kinda have to have a passion for it. A lot of times what you find is a husband or a husband and wife are running an incubator kitchen.

Eric Diamond (Central Kitchen) [00:17:33]:
They also have their own company that they're using the kitchen for, whether it be catering or creating of a product. And this is just kind of a way to for them to offset their costs.

Jeffrey Stern [00:17:41]:
How do you envision still at this kind of macro level, the state of incubators kind of changing going forward? Because it sounds like, you know, coming in, I wasn't sure if it was competitive. It doesn't seem really that that's the case at all.

Eric Diamond (Central Kitchen) [00:17:55]:
No. Not at all. I mean, we're constantly asked, you know, would you set up one of these in Austin or Nashville or some bigger city? And we just we don't have the capacity right now. I mean, we're still we're we're basically in startup mode ourselves. But I think what you'll see is the incubator model. I I think you'll start to see some contraction in it where some of them you just can't get funding anymore grant support, so they're just going to go under. What we're really seeing though is a need for craft manufacturers on the co packing side. So people would rather have somebody else make their product for them than to hire staff, deal with HR issues, you know, deal with all the legality that comes from it.

Eric Diamond (Central Kitchen) [00:18:34]:
It's just easier to give somebody a recipe and have them make it for you. In this region though, there was no small co packers. So it was that I need a 1,000 case minimum run to produce for you, where us will do a 100 gallon run. Now there's a premium for that. There's a cost to that, but it's still much more feasible and manageable for these companies as they're growing. So I think you'll start seeing more co packers like us pop up and do away with the incubator kitchens.

Jeffrey Stern [00:19:02]:
And then I want to circle back to this other question, which is, you know, how do people do this before? Yeah. Did did they have to go through a conduit of a larger company? Like, how did they do it?

Eric Diamond (Central Kitchen) [00:19:14]:
I mean, a lot of them are doing it illegally out of their house. A lot of them were using church kitchens or they were renting space from restaurants at odd hours. So like the restaurant would close at 10 and somebody would come in and produce their product or they were going directly to co packing and either getting an inferior product or going out of business because they really couldn't afford the costs. So it was it was challenging. I mean, a lot of a lot of churches church kitchens were used to start products in Cleveland before we came around.

Jeffrey Stern [00:19:44]:
Got it. And and so have you seen people just kind of flowing to the offering that you have in its absence before and this kind of relief that there's kind of an official outlet for it now?

Eric Diamond (Central Kitchen) [00:19:56]:
Yeah. I mean, we didn't realize the pent up demand that was there when we opened our doors in 2013. You know, we were what's our marketing strategy look like? We never did any marketing. I mean, at some point, we would actually close down applications because we just couldn't have any more people in the kitchen. I think other people too, you know, they would find commercial kitchens. There was one that's been around forever, ACE Net in Athens, Ohio, and people would drive there on the weekends, make their products and drive them back up. So it was a deterrent. I think a lot of people had great ideas.

Eric Diamond (Central Kitchen) [00:20:28]:
You know, I always wonder, Cleveland crowd would have found a way to make their product. But if somebody like a Clark Pope or Randy's Pickles or Ethan Holmes Applesauce, they may not have started their company just because there was no convenient location for them to do that. And so we look back and it's like we always love looking at the best of Cleveland list. And when it comes to food, it's like 95% of those products have started out of our kitchen in the last, you know, 8 years.

Jeffrey Stern [00:20:53]:
That that's pretty incredible.

Eric Diamond (Central Kitchen) [00:20:55]:
Yeah, it's it's, you know, it's been fun. And, you know, there has been competitors that have popped up, but I think we had that 1st mover advantage. We were well funded. You know, Gordon, who's my business partner, you know, he's been in commercial real estate for 40 years and he's like, look at my age, you know, he's almost 80. He said, you know, real estate guys sell off their portfolio and start putting their names on buildings around town and doing charity fundraisers. He's like, I want my legacy to be all the businesses that my money helped create. And so we were very fortunate to have someone like Gordon in this market that was willing to do that and put up the money to fund this, this endeavor that we've done. But it's obviously paid back dividends and the amount of jobs that have been created and the amount of money that's flowing back into the market.

Eric Diamond (Central Kitchen) [00:21:41]:
I mean, Cleveland crowd, you know, they'll do 20,000,000 this year. All that money is coming back to Cleveland, right? It's like and if they get purchased, they're not going to be, you know, pick up and move to the West Coast, right? It's like they're probably still have their product produced here because Cleveland is a great place to have a food company. We can ship anywhere in the country within 2 days, and it's just super convenient. Cost of labor is is is reasonable and housing and living is affordable. So it's just been a wonderful we just hit the market at the right time. You know, we'd like to say, We'd love to say that we were geniuses and we had this awesome idea, but we just kind of followed followed where the market went and fill the gap every single time.

Jeffrey Stern [00:22:21]:
Yeah. And now Mac was actually on the the show recently, one of the founders of of Cleveland Kraut. I think it would be maybe just a great segue actually to talk about some of the stories of some of the brands and companies that have that have gone through the incubator and how you've thought about the impact that those companies have had in you. At a high level, you kinda just mentioned some of the things I'd love to

Eric Diamond (Central Kitchen) [00:22:44]:
Yeah.

Jeffrey Stern [00:22:44]:
Hear about just like Sure. How many companies have gone through? How much investment has been, what are the products, who who are the entrepreneurs.

Eric Diamond (Central Kitchen) [00:22:52]:
Right. Right. Right. Right. So I think if you look at some you know, the very first client that ever came through was Mason's Creamery.

Jeffrey Stern [00:22:57]:
Oh, wow.

Eric Diamond (Central Kitchen) [00:22:58]:
Yeah. So that they were Jesse was the very first person in the kitchen. He's got card number 1, and he started making ice cream and it's ice cream is phenomenal. He started selling it at farmer's markets and people fell in love with it. And then, you know, they opened up Mason's Creamery, which has been awesome, and I love that they do ramen in the winter now. That is, to me, super cool. And they've they're just good human beings, him and his wife. And then you look at, like, Clark Pope.

Eric Diamond (Central Kitchen) [00:23:19]:
He was the 3rd person ever to come in. So Clark has a line of Bloody Mary mixes and cocktail syrups. And he just started this cocktail in a pouch, which has been very popular in my neighborhood this past summer where you could get a, you know, a, blueberry lemonade vodka in a in a looks like a kids sippy pouch And but it's alcoholic. Cleveland crowd, obviously, now Cleveland Kitchen. They were they were. They've done phenomenally well. Cleveland Bagels started off in our location. Great, great guys.

Eric Diamond (Central Kitchen) [00:23:46]:
They're killing it at their location at our hub right now. Mike Killick's hot sauce was a newer product. He had this fermented hot sauce that I thought was an amazing, amazing product. And I just before I got out, I got a text that he just got into all Giant Eagles, and so he ordered we make this product

Jeffrey Stern [00:24:05]:
for him now. So we just ordered 1800 cases

Eric Diamond (Central Kitchen) [00:24:06]:
from us. This is a guy that literally came in the class 2019. He took our class. He's a funny, funny guy and, he just was tenacious and was like, I'm gonna do this. Health Junkie, I love talking about Health Junkie, they do an elderberry syrup. I'll never forget, she took our, Nicole took our class, and at the end of it, she's like, alright, put me in contact with Heinen's. And we're like, well, no, that's not how it works. Like, you need to sell it to a farmer's market.

Eric Diamond (Central Kitchen) [00:24:31]:
Like, you haven't sold a bottle yet. And she's like, okay. So she goes to a farmer market. She comes back, and she's like, alright. Now put me in contact with Heinen's. We're like, well, how many bottles did you sell? And she said, I sold 300. We're like, that's not enough. And so she's like, damn it.

Eric Diamond (Central Kitchen) [00:24:44]:
Either give me the name, or I'll just find it myself. So we're like, alright. Here's the name. She got in first try. She's now the number one selling health product at Heinen's. She's just killing it with her elderberry syrup. Randy's pickles came through ours. Our incubator loved their pickles.

Eric Diamond (Central Kitchen) [00:25:00]:
He's still selling out today. There's just been I mean, the list just goes on and on as we begin thinking about the squeeze and easy. They do a cannoli. Actually, a very cool product that came to our kitchen was Dooze Pots. So it's a hemp based ice cream. The woman, Kirsten, that started the company worked for Ben and Jerry's for 11 years developing ice cream flavors for them, lived in London, decided she was going to open up a food, start this ice cream company and she moved to Cleveland. She was like, look, looking around kind of the country. You guys had all the resources I needed.

Eric Diamond (Central Kitchen) [00:25:34]:
She came in and started making her ice cream. She got into Heinen's, she's in sprouts. Another cool company, dairy free. They do vegan cheese spreads and cashew nut spreads and things like that. They just got into 300 sprouts as well. So it's been it's been fun. As we looked at it, we've probably over 500 companies have started.

Jeffrey Stern [00:25:52]:
Wow. We

Eric Diamond (Central Kitchen) [00:25:52]:
look at probably just in northeastern Ohio on the shelves of grocery stores. They're carrying about 300 different lines that have all either been produced at our kitchen, is currently being produced at our kitchen over 600 jobs. When we talk about investment, you know, it's been that's a a lot of these individuals start with their own money, boot scrapping it, and then they'll move on to somebody like a Honeycomb Credit to raise cash or ECDI or Hebrew free loan, and then they'll start looking at taking investment. But a lot of it is bank debt. Right. So not very many companies went the route of Cleveland crowd that took investment capital early on.

Jeffrey Stern [00:26:28]:
Yeah.

Eric Diamond (Central Kitchen) [00:26:28]:
But they had a dream of how they wanted to scale. But I mean, Gordon and I have put 4 and a half 1000000 into the project. You know, someone that's been our own money, someone that's been debt, but it's it's a significant amount.

Jeffrey Stern [00:26:39]:
Yeah. That's that's incredible. What are the patterns that you've kind of picked up on from the companies that have come through? Like, what what are the indicators that that they're onto something?

Eric Diamond (Central Kitchen) [00:26:54]:
Yeah. A lot of them have they they know they're they know their market. Right? So they know exactly where they picture their product being on a shelf in retail, and they know why their product is better, and they can talk about that very, very well. The other big issue is they nail their marketing right up front. When I talk about marketing, I mean more of branding, like what's my packaging gonna look like? All too often, we'll see people come in and they'll be like, I don't know if this is going to work. I'm going to get my friend to draw me a logo and then they get traction and now it's like, oh, I have to do a big you know, rebrand because my logo is horrible. And sometimes, you know, we'll put people in front of Heinen's or market district that we know it's a great product, but we know the packaging is horrible. And they'll tell them that.

Eric Diamond (Central Kitchen) [00:27:35]:
They'll be like, hey, guys. I love your product. Change your packaging and then come pitch us again. It just looks cartoonish, or it looks like it would sell to farmers market market and not in a retail store. So they know that. And then the other thing, and I was just talking to Drew from Cleveland Kitchen about this. There is these people that come in and, you know, they're just gonna run through a wall. And when they hit the next one, they're gonna run through that.

Eric Diamond (Central Kitchen) [00:27:57]:
Nicole from Health Junkie was that way. The people that just aren't afraid, they're just never going to stop. They know they've got a good product and they're coachable, right? So they'll take advice and they'll really take that advice to heart, and they'll seek out others that have done this so that they can kind of pave that way for them. Those are the ones that you look at and you're like, Yeah, that's going to be awesome. This product is going to take off and we do that. We we kind of rank the members in the kitchen every quarter to see, like, what product do we think is going to be the next big one that we should be putting in front of retailers.

Jeffrey Stern [00:28:29]:
So I'm curious how so at this point, you have you have these education and and training components. You have the incubator. You have the food hubs, the kitchen pods, the co packing retail space. What what what is coming next? What what are you thinking about?

Eric Diamond (Central Kitchen) [00:28:44]:
Yeah. So my next big dream that we're gonna pull off here, in 2019, Gordon and I had this idea of, like, what would an all plant based accelerator look like where we raise a fund and we bring in 10 companies a year to come in and work in this incredible innovation kitchen, all products that are some sort of alternative source of protein And there was many reasons why we were interested in this. You know, we both just kind of feel like a more plant based diet is what's going to happen in the future. I mean, you see more and more people being flexitarians, but just from a standpoint, as the population continues to grow, we can't produce enough food the way we currently have. Right? We need to start being more environmentally conscious about how we're processing and producing food. So we wanna Cleveland to be this destination for plant based products. And we were fortunate enough to get a grant through Fund for Economic Future to do a feasibility study around it. And Magna did this study and it came back incredibly positive.

Eric Diamond (Central Kitchen) [00:29:42]:
And so we pitched everybody on this concept the last week in February 2020. And then we all know what happened in March. And so we put it on we put it on the table. But right now, with all of the build back better dollars that are coming into the city of Cleveland and Cuyahoga County, I mean, between the 2 of them, look at $1,000,000,000 in stimulus money. We really feel like this is a project that it's the right time in the right place. And so we're currently working with 20 different organizations. We're under. Right now, we're in architectural drawings of what a 20,000 square foot facility would look like right next to ours.

Eric Diamond (Central Kitchen) [00:30:17]:
And in that we would have more cooler and freezer storage because we're out of it. We need more. And then we'd also have this really big innovation lab and we'd work with, you know, big names in the industry to come in and do R and D basically for these companies. And then our thought is if we come up with a great product, these companies come up with a great product. We can co pack it for them and help them get into retail. So we are right now raising a fund that would invest in these types of companies. And, you know, we're hoping that, you know, knock on wood, everything goes well by next summer, we'll be breaking ground to put up the facility. So that's kind of our next big vision.

Jeffrey Stern [00:30:55]:
Yeah. That's that's quite an exciting vision.

Eric Diamond (Central Kitchen) [00:30:57]:
Yes. Yes.

Jeffrey Stern [00:30:58]:
You mentioned you kind of had to table that idea maybe initially over the course of the pandemic. Like, how how did the the businesses that have gone through the program kind of fare overall through the last year and a half? How did the incubator itself kind of manage that period?

Eric Diamond (Central Kitchen) [00:31:15]:
You know, at the beginning of the pandemic, companies like Cleveland Crowd, Clark, actually, most of the companies that were in retail did incredibly well because people were going into grocery store in droves and they didn't want to go back out. So they were just buying everything, right? And to the point where I know Garden, the flavor, they do cold pressed juice. They were getting calls from customers being like they're sold out and they're calling this grocery store is being like, Hey, I know I sent you product and they're like, Look, we're just trying to keep up with toilet paper right now and and making sure the staples are on. You know, we'll get to the juice eventually. So they had this really wild run where they like sold out of everything. And then for months, sales just dipped because retailers weren't getting their products on the shelves. And then once they did, they this massive wild swing. For us, it was a little eerie.

Eric Diamond (Central Kitchen) [00:32:04]:
I mean, April is typically our busiest time in the kitchen. April, May, June through the summer. Well, that April, there there was nobody in the kitchen. I mean, there literally nobody was producing. But it was cool to watch these companies come together and say, okay, how are we gonna figure this out? This isn't just a 2 month thing. This is going to be ongoing. And so you saw a lot of people switch to delivery services. Right? So we had 10 companies that banded together, and they're like, let's offer our products online and we'll take turns dropping them off to people's houses.

Eric Diamond (Central Kitchen) [00:32:36]:
And it worked. It was just like, cool. Let's see how they innovated and switched their their what they were doing. You had a lot of companies move towards kind of the ghost kitchen concept and utilizing Uber Eats and things like that. So they figured it out. I will say all of them will tell you the same thing. The stimulus money was what kept them aboard. If they if it was not for that, we would have had a lot a lot of businesses go out of business.

Eric Diamond (Central Kitchen) [00:32:59]:
But a lot of these individuals were able to access dollars to keep them afloat until, you know, things went back to relatively normal. So it's it's changed some people's models, but they fared well. They they really did. By summer, they had figured out what their model was gonna be. They'd gotten some stimulus money, and they started taking a breath again.

Jeffrey Stern [00:33:18]:
What is your perspective on ghost kitchens? And and maybe just for those listening, like, what what are they Yep. And how they may be related or or don't with with your model and and how you think about the space?

Eric Diamond (Central Kitchen) [00:33:30]:
Yeah. So a ghost kitchen is basically a restaurant or a company that is producing food, delivering it direct to consumer, and they don't have a traditional brick and mortar. Right? So a lot of them, we've got a wonderful ghost kitchen right now, concept out of our kitchen called Black Crab Catering. They do seafood boils. You know, nobody knows that they don't have a restaurant. It's, you know, they're making these seafood boils in our kitchen, And they are using the delivery apps to to sell them and get them delivered to their their customers. I just I think it's a really tough model if you're kind of an independent, right? So it's it's the delivery apps are making most the money when you look at them taking 30% off the sale. Well, typical margins are 30% on a food product or less than that, quite frankly.

Eric Diamond (Central Kitchen) [00:34:17]:
So these guys are doing it for cash flow, right? They get cash coming in every day, but they're really not saving anything because it's just enough to get by. And they're hoping at some point things go back to normal or somebody figures out delivery that they a lot of people are looking at maybe starting their own delivery service. It's a cool concept. It's just I think it's a hard bottle. And for us, we've decided that at the incubator, we're not going to allow ghost kitchens in after November. The problem is when you have a ghost kitchen, you're dominating those hours. Right? So you're basically coming in at noon and you're working till midnight. Great revenue for us, but you're tying up space where 4 other companies could have produced during that time.

Eric Diamond (Central Kitchen) [00:34:57]:
And, you know, it's it's really caused a backlog for us. Plus, when you're running a restaurant out of our kitchen, it's hard on our kitchen. It's hard on the equipment. It's hard on things like towels. You know, we go through so many more towels than we did before it goes. Kitchens were there. Now I do think if somebody wants to do a ghost kitchen and we do have one, they'll probably run a pod from us down the street where it's their own individual kitchen. And I also tell people like, Hey, Cloud Kitchen is right down the street.

Eric Diamond (Central Kitchen) [00:35:24]:
You know, the the travel gentleman from Uber, I can't remember his name that left.

Jeffrey Stern [00:35:29]:
Travis.

Eric Diamond (Central Kitchen) [00:35:30]:
Travis. Yeah. So he has started a Cloud Kitchen, and they're opening in Midtown right down the street from us. But the model wasn't meant for mom and pops. It was meant for, like, Taco Bell. Right? Where Taco Bell can have a commissary, a small commissary kitchen and pump out food for a radius instead of tying up the local store down the street. They can afford to pay that that that amount of rent. Actually, we've gotten so many phone calls of people that have toured that spot and been like, no, we want to come to your kitchen.

Eric Diamond (Central Kitchen) [00:35:57]:
It's so much cheaper. And we're like, I do think you'll see kind of the concept either either they have to figure out how to start making money or the concept is just going to go away in the next, you know, 24 months.

Jeffrey Stern [00:36:08]:
Do you guys have sufficient, like, supply for the amount of entrepreneurs with ideas and trying to build companies? Or is there is there excess demand for this kind of space?

Eric Diamond (Central Kitchen) [00:36:20]:
I would love to say no. We could take on a 1,000 more people, but I think my staff would scream, you know, they're they hit the point this summer where they're like, hey, Eric, turn off the spigot. We can't take on any more co packing clients. You just sold 20 more pallets in a freezer where we don't have 20 spaces for it. Like, we got to figure, like, stop for a second. Let us take a breath. There is other kitchens that have popped up. I think the reason we've been successful and I always tell people, like when they called me and they say, Hey, should I start one of these in Akron? It's like, maybe it's gonna take a lot of funding upfront, so you gotta figure out where that's gonna come from.

Eric Diamond (Central Kitchen) [00:36:55]:
You're not gonna make money right off the bat, and you really have to have experts on staff that can help these companies scale and grow if if you want them to scale and grow. Otherwise, you're just going to provide a kitchen for them to cook out of and hope that they become successful. And that that's usually a model that doesn't work that well. We always talk, though, Gordon, my business partner is always asking, what's the depth of the market? Like, we've built this and we filled it. Could we fill 5 more of these or, you know, we're not losing population anymore in kind of the Cleveland area, but we're not gaining a lot either. And so at what point are we saturated the market and there there isn't a need for us, which is why we've diversified so much so that if incubation turns down, co packing is probably kicking back up. I do think you'll see more and more craft food brands, right, competing directly with the major brands. You know, people want to know what they're eating, especially during the pandemic.

Eric Diamond (Central Kitchen) [00:37:52]:
They learn how to cook and they learned that I was getting calls all the time from friends of mine being like, Did you go to Giant Eagle? There's no meat. And I'm like, Okay, I can call the farmer that lives in Oberland. And how much meat do you want? And they're like, woah. I'm like, Yeah, there's all this food in our own backyard that we don't utilize. And now it also force people to pay for ingredients, right? Like, hey, good ingredients that I'm going to use cost more than the stuff that I'm getting at Walmart.

Jeffrey Stern [00:38:22]:
Does the trajectory of the craft food market kind of emulate the craft beer industry in any way where Yeah.

Eric Diamond (Central Kitchen) [00:38:30]:
That's a great quote. Yeah. I do. I think, you know, as as more and more and I always wonder, like, when is it going to stop? Right. Like, when is the craft beer thing going to stop? But it doesn't seem like there's a saturation point. I just think people really like beer and they really like good quality beer. And I mean, Christmas ale is out right now, and I went to buy some the very first day and it was like an hour long line to get into the gift shop. It's like, yeah, people love their craft gear and people seek out craft food products, right? So it's like people love getting Cleveland kraut.

Eric Diamond (Central Kitchen) [00:39:01]:
My son who lives in Chicago sent me a picture. He's like, dad, I'm at this little bodega in my neighborhood buying groceries and look what they're selling now. And it was Cleveland crowd. I'm like, how the hell did that get there? He's like, I don't know, but I love it. It's the best crowd around and people will seek that out. I mean, I'm fortunate that I get to try all these products and my friends and family get to try all these products, but it's like I've got a list of what people want for Christmas. Like, I'm gonna need a case of Mike Gillick's hot sauce, and I'm gonna need some wake Robin kimchi pickles, and people will seek it out and will pay for it.

Jeffrey Stern [00:39:33]:
I wanna kinda tie it back to Cleveland for a moment. You know, ultimately, the nature of this business, it it feels very local, very, like, important where you choose to do it. And I'm curious in as you reflect on on the past few years building this company, like, what has been the impact of of doing it here in Cleveland?

Eric Diamond (Central Kitchen) [00:39:56]:
Well, I think, you know, for us, the amount of jobs where they've like I said, I think over 600 jobs, the amount of products that have been created. But Cleveland, when you talk to grocers like Heinen's and market district, the Giant Eagle, they look at Cleveland as what they call a halo city. So basically, if you go into Giant Eagle and you look at the pickle aisle and Randy's pickles are there and people know that that person produced that in Cleveland, they're gonna buy that over Velasix as long as the taste is somewhat comparable for the price. Right. If the product is horrible to buy it once and they won't buy it again, but they'll continue to come back and buy Randy's Pickles if it's a good product just because it's from Cleveland. And, you know, they say they looked around the country like Saint Louis is a lot like that. Milwaukee is a lot like that. Detroit's a lot like that.

Eric Diamond (Central Kitchen) [00:40:40]:
So it's a cool place to start a business from a standpoint of, you know, you're going to have a following of people that are going to support you just because you came from Cleveland. And for us, as from a bigger picture, We always look and we say, sure, you could create this in Austin, not for $4,000,000 like we did, right? Like we there's just a an abundance of these big old warehouses that can be converted very inexpensively compared to other parts of the country. I mean, to buy land, the amount of land that we have would be $10,000,000 in Austin, right? So it's like you can't make those numbers work. Not for us anyway. And so I think starting a business here in Cleveland where you've got access to quality labor, you've got access to quality labor, you've got a cost of living that's lower than most of the country and you just do have this industrial buildings that, you know, can be converted into something like this. This made it the perfect place for us.

Jeffrey Stern [00:41:32]:
Yeah. I I like that idea of the the halo city. I haven't heard of that before. Yeah. But it kind of matches the the pride of the city in a commercial way.

Eric Diamond (Central Kitchen) [00:41:41]:
I mean, that's why Cleveland crowd will tell you that they named themselves Cleveland crowd. They wanted people to know that they were from Cleveland. And then as they started expanding out through the nation, they thought, well, how is that going to play? But they started doing market research and people from outside of Cleveland looked at it as like, that's probably an artisanal product that's, you know, hardworking Cleveland, you know, blue collar roots. They probably really know how to make sauerkraut well. And I'm going to give it a try. And then the flavor speaks for itself after that.

Jeffrey Stern [00:42:07]:
That it does. I I guess I wanted to ask just what have been some of your learnings over the last few years building this organization?

Eric Diamond (Central Kitchen) [00:42:18]:
Yeah. Wow. You always need more storage than you think you do. That's one. But from a personal standpoint, it's like as we grew this business, it took me a while to realize what type of CEO I wanted to be. And, you know, I think we went through this period of time where kind of like in my other roles where I was a manager working for organizations like in banking, I always had this philosophy of like you hire the best people, you pay them well, and then you stay the hell out of their way and let them do their what they want to do. It's a little different when you're building your own company because they're all looking at you of like, Okay, well, this is your vision. Please tell me what to do, right? Like, I buy into what you're doing.

Eric Diamond (Central Kitchen) [00:43:01]:
And I think I had some issues early on where I didn't give enough direction and people kind of felt a lost at first, like, what the hell does this guy want me to do? And then B) they started doing their own thing and thinking like, well, this is my piece of the pie that I'll work on and I'll show Eric how great I did on it. But it hurt the rest of the other teams because information wasn't being shared. So I went through some soul searching of myself. I got myself some mentorship on that. And then I started a whole culture campaign. Like, what do we want our culture to be? And how do we define it? And that was been transformational for our company. We hire based on on our culture now. And so unfortunately, in the rare occasion that we have to let somebody go, it's based on our culture believes of why that person is going.

Eric Diamond (Central Kitchen) [00:43:49]:
And it's been much better for the staff because it's like, okay, You've provided the vision, and there's actional steps behind that vision. And let's all work towards that vision. And they love being a part of it. I mean, the woman that we just hired for to be our kitchen manager, Olivia, you know, her background was she went to OU and studied entrepreneurship, and then she was in urban farming for a few years, literally like working on an urban farm in the Detroit metro area and found us by organic Google search and was like, oh, I want to come work for that company. And that's it, right? That's the passion. That's the type of people we want to have. But there is no guidebook on really how to I guess there are. I mean, I do read a lot of books, but that was for me of I really needed to change and figure out what type of CEO I wanted to be.

Eric Diamond (Central Kitchen) [00:44:36]:
Yeah.

Jeffrey Stern [00:44:36]:
No. I think the the intentionality of of how you think about culture that seems to me to be this real pattern of the most successful organizations are intentional about it.

Eric Diamond (Central Kitchen) [00:44:47]:
Yeah. You don't know. It's funny because Gordon who's been there built companies. You know, he I looked at him at one point, and I said, I'm just kind of falling short. And he's like, oh, yeah, I know you have been for months. And I'm like, why didn't you say something? And he's like, because you had to figure that out, right? It's like you had to figure that out. You had to figure out what type of CEO you want it to be. I'm I'm, you know, here to support you and provide mentorship and and grow this with you.

Eric Diamond (Central Kitchen) [00:45:12]:
But look, at some point, I'd like to go home, right? I'm 80 and I'd like to do other things. So I wanna make sure it's in good hands, and I I put the guardrails on, but you've tripped over them several times, and I just didn't wanna say it to you. And I'm glad you figured it out for yourself.

Jeffrey Stern [00:45:26]:
Yeah. Well, it's it's been very cool to hear how you've obviously come into your own and and all the all the amazing organizations that have come through. I did not realize the like, how many of the the places that I eat from have have gone through.

Eric Diamond (Central Kitchen) [00:45:42]:
Brunettes was another fruit very first one. Brunettes, I love those guys. They were one of the first ones that came through. It's been cool to watch all these brands come through and and be a part of their success.

Jeffrey Stern [00:45:52]:
Yeah. I I think it's it's a good segue actually to our our closing question, which we ask everyone who's come on the podcast, and it's essentially for not necessarily your favorite thing in Cleveland Yep. But for something that other people may not know about. So hidden gems. Yeah.

Eric Diamond (Central Kitchen) [00:46:08]:
For me, it's always food. Right? It's like my my

Jeffrey Stern [00:46:10]:
Yeah.

Eric Diamond (Central Kitchen) [00:46:11]:
And so it's like I'm excited to hear them.

Jeffrey Stern [00:46:12]:
Yeah. Like, one

Eric Diamond (Central Kitchen) [00:46:14]:
of my favorite Italian restaurants is this little place in Avon Lake called Fortellos. I mean, they've been around forever. I don't think they've updated the place in 30 years, but the food is unbelievable. My wife and I think the best burger in town is Becky's over by Cleveland State. They it's a little bar. They make some damn good burgers. We also love Johnny's Little Bar, but they used to make based to make these meatballs, the spaghetti and meatballs, and they would make it the meatballs from all of the shavings of the steaks that they, you know, cut down the steaks and then grind it up and make it into these awesome meatballs. But during the pandemic, they they got away from that.

Eric Diamond (Central Kitchen) [00:46:47]:
That's a cool and then I just found this pizza place in a a Bay Village, actually, called Chaddy's Pizza. It's unbelievable. My favorite pizza is still probably sweet basil's in Westlake. They they do a wonderful job. And, actually, I went to school with with the Joyce family, and it's good to see that they've been able to keep that business going for so long. They make an outstanding pizza. So for us, it's like we always like to try to see, like, little penny off the wall places. We went for dim sum the one day at Liwa.

Eric Diamond (Central Kitchen) [00:47:16]:
We're just like, let's order everything and try it. Everything was good. Although we had chicken feet, my wife's like, I don't think I could do the chicken feet, but everything else was awesome. So for us, it's just finding a little off the wall places that we always eat local. We love redid a chain. It's always important to little guys. But if you really want a nice Italian meal for tells us that

Jeffrey Stern [00:47:35]:
those are those sound like wonderful additions to the hidden gem collage. Well, Eric, thank you so much for Thank you.

Eric Diamond (Central Kitchen) [00:47:43]:
This has been so much fun.

Jeffrey Stern [00:47:44]:
Coming on.

Eric Diamond (Central Kitchen) [00:47:45]:
Congratulations on the podcast. It's I love it. Keep up the good work.

Jeffrey Stern [00:47:48]:
Oh, thank you. I appreciate that. If folks have anything they would like to follow-up with you about, where is the best place for them to reach you?

Eric Diamond (Central Kitchen) [00:47:54]:
So they can they can email me at eric@thecentral dot kitchen. There's no dot com. It's dot kitchen. Or our website is www.thecentral.kitchen as well. List everything that we do up there. And and please questions, you know, kicking around an idea. I love talking to food entrepreneurs and seeing how we can help. Feel free to reach out.

Eric Diamond (Central Kitchen) [00:48:15]:
Awesome.

Jeffrey Stern [00:48:16]:
Well, thank you again, Eric.

Eric Diamond (Central Kitchen) [00:48:17]:
Thank you. Take care.

Jeffrey Stern [00:48:20]:
That's all for this week. Thank you for listening. We'd love to hear your thoughts on today's show, so if you have any feedback, please send over an email to jeffrey@layoftheland.fm, or find us on Twitter at podlayoftheland or @sternjefe, jefe. If you or someone you know would make a good guess for our show, please reach out as well and let us us know. And if you enjoy the podcast, please subscribe and leave a review on iTunes or on your preferred podcast player. Your support goes a long way to help us spread the word and continue to bring the Cleveland founders and builders we love having on the show.