A sea salt company's total meltdown offers 2 teachings to save any business

Even the best-laid plans leave people and infrastructure vulnerable to all sorts of external dangers that can hurt a business... like a simultaneous mega-storm and a global pandemic.

This is something Björn Jónsson, founder of Iceland-based sea salt maker Saltverk, learned firsthand. The company had suspected something was wrong with its production facility but didn’t analyze it closely. But when a bad storm hit, it led to an equipment breakdown that ceased production. All the while, the company was dealing with the effects of Covid-19.

Jónsson tells Inverse how Saltverk got through this trying time in the Q&A below, including two lessons he learned that can be applied to any business operation:

1. Believe the data.
2. Have a backup plan.

Scaled Up is an occasional interview series by Inverse with entrepreneurs. They share how almost everything went wrong while growing their business — and how they fixed it.

Tell me what your company does.

Saltverk produces flaky sea salt in the Westfjords of Iceland using 100 percent geothermal energy. We use a sustainable production method to distill pure Arctic seawater and hand-harvest every salt flake. During the natural process of salt making, nothing is added and nothing is taken away. We produce the sea salt for food consumption in pure flaky sea salt and five other flavor combinations, all of which reflect Icelandic traditions in some way.

At what point did you scale up, and what did that growth look like?

We officially started the business in 2011 and just built on the idea of using geothermal energy to distill seawater and make sea salt in a sustainable way. Early on, we started exporting salt to Denmark for retail sales and for wholesale in the restaurant and food-production industries. This helped create a solid foundation for the business. Since Iceland is a rather small home market, we knew that export would always need to be a solid part of the business.

The thing about our salt-making process is that the technology didn’t exist, so the whole process of scaling had to be figured out by experimenting on a one-to-one scale. Once we found out what produced good results, we focused on scaling up. In a production like this, where we hand-harvest all of our salt and everything is done with care, there has always been a certain dance between sales and production, as we have almost always been able to sell everything we produce.

In mid-2018, we started focusing on exporting to the U.S., which drove us to scale up our production and the production team. Around that time, we were producing and selling at an all-time high, and although we had developed a complex system, we had seen a big success on that path of scaling.

What went wrong when you scaled up?

In pursuing increased sales in the U.S., we invested a lot to increase production by about 40 percent. This had been brewing for some time -- to buy machinery such as pumps, heat exchangers and blowers to increase evaporation -- but, at the same time, we didn’t see the rise we had expected. In our production, we use a big concrete tank for the pre-distillation process and to store high-salinity brine. It seemed to be straight-out leaking, but we had no viable proof, so we continued on.

In late 2019, we had severe winter storms in Iceland that seriously affected our production facilities. Many days of electrical outages led to the concrete tank to crack open due to temperature fluctuations, which led to outright massive leakage of all of our brine to the ground. The problem not so much was caused by scaling up, but indicated the lack of redundancy in our system along with the need for prevention of effects like this on our entire production.

How bad did things get?

The damages on our production facilities were quite extreme, which led to almost 80 percent contraction of our production capabilities. At the same time, orders kept piling up, which made the situation harder to deal with. Order lead time just grew as we had to almost pick and choose which customers to serve and which to let wait.

As soon as the weather allowed, we realized that we had to go for a massive reconstruction of our production site. During this time, we were also hit by the effects of Covid-19 that inhibited all travels to Iceland, which were the backbone of our business. Even though at this time we were only able to produce so little, our revenue was in line with our production capabilities. These have been the greatest challenges that we’ve faced as a company from the beginning.

How did you fix the issue? Where did you get the idea for the fix?

We realized that we had to do an all-over reconstruction of our distillation tank, which should hold up to 350 metric tons of seawater. We had two choices: either to rebuild the current one by making a new layer of concrete on the inside of the current tank, or to build a new tank. We went with the former option of rebuilding and refurbishing most of our hot-water radiators and blowers at the same time.

The process was complicated and required a lot of time and energy to rebuild our facilities. We had the storm in January and operated at minimal production until June, when we had mostly finished our reconstruction. Fortunately, when the production came back on track, we saw better results than ever before, which taught us that we had in fact been underperforming in our production for quite some time.

What do things look like now that you’ve corrected the problem?

Today, things are going great for both sales and production, and we’ve had record months of production since June. In August, our products were featured in Business Insider shows, which boosted awareness of our brand and sales on channels including our online shop and Amazon. For the first time in a long time, we have a bit of wiggle room to actively seek out sales and plan ahead, as our production has increased due to our much-needed fixes.

What did you learn from this experience that other business leaders need to know?

Sometimes you need to follow the breadcrumbs to the source of the problem and believe the data that you are presented with. We do measurements every day of our systems, and very vaguely we were seeing unexplained drops in quantity, which we didn’t pay close enough attention to. We also learned that it is so important to always have redundancy in your system that can prepare for pitfalls for a short time.

These lessons can be applied to any type of business. Every business should have this type of emergency set-up and a plan on how to steer through rough patches. But the greatest lesson is that positivity and optimism move mountains in a situation like this. As long as you keep your spirits up, sooner rather than later the problem will be solved.