To Market, to Market
So you want to sell your food product?
By MM Pack, Fri., Aug. 28, 2009
Cooking is your passion, and you've created a fabulous recipe. It's become your signature, and your family and friends rave about it. Perhaps it's even placed in a competition. Everyone says, "This is so good you ought to sell it!" And sometimes you think: "Maybe I should go into business. I'd be doing what I love and making money, too."
Romantic dream? Maybe. Is it possible to take a great recipe and turn it into a profitable business enterprise? Yes, lots of people have done exactly that. But far many more have tried to launch a food product with dismal and financially devastating results.
So what's the difference? Why do some producers of specialty food products succeed and others – with equally delicious recipes – fail miserably? While there's no magic formula, it's a given that having a great recipe is only the first step in taking a specialty food product to market. Following the recipe/good idea but before making any investment, a prospective food entrepreneur needs to do a great deal of research, soul-searching, and decision-making regarding personal commitment, the product's competition, pricing, production options, packaging and labeling, financing, marketing, and selling strategies.
This preliminary planning phase is crucial. The good news is that there are some great resources available to help you work through the various aspects (see "Some Resources for Aspiring Specialty Food Developers").
Commitment
How much time and energy are you willing to commit to producing and selling your product? The Food Entrepreneur Resource Center at Cornell University says that 60-70 hours a week is normal. "It's no armchair business," says Jill Lewis, co-owner of Austin Slow Burn Gourmet Fiery Foods.
Tracy Claros of Austin's Sticky Toffee Pudding Co. started her business in 2003 and is now distributed in seven states and online. She believes a successful food entrepreneur must be completely focused, totally driven to succeed. "You need to be determined, have a strong work ethic, and believe in your product wholeheartedly."
Miles Compton, proprietor of Austin-based Miles of Chocolate, agrees. "If you aren't completely committed, it isn't going to work. I don't get much sleep. I spend half my time making the chocolate and the rest on the road, delivering to stores around the state, talking to buyers, doing demos, and getting chocolate into the mouths of new customers. You can't ever rest on your laurels."
Competition
What's the competition for your food product? What's its price? How is your product different from or better than similar ones on the market?
Linda Sikorski, product manager for Market Hall Foods in Oakland, Calif., presents at seminars about food product start-ups for the National Association for the Specialty Food Trade. As a retail buyer of specialty food products, she emphasizes that any prospective entrepreneur really must know the market competitors – how their products taste and how they're priced, packaged, and labeled.
Lewis concurs. "Look at products and figure out who you want to compete with, what price bracket they're in. Can you sell your product in that price range based on what it costs to make – including ingredients, label, container, labor, overhead? And why should someone choose your product over what's already out there?"
What does a retail specialty food buyer look for in a product? "Taste, of course, and a product that's wholesome, all natural, free of preservatives and coloring. Lack of trans fats and high-fructose corn syrup," Sikorski says. "A unique history or provenance – is it a family recipe, for example? Having an interesting story to tell about the product is an important part of our marketing."
Containers and Labeling
We know we eat first with our eyes, and that certainly applies to how a specialty food is packaged and labeled. As well as customer-attracting aesthetics, however, there are federal regulations governing what must be included on food labels regarding ingredients, storage, and health claims. The Food and Drug Administration website (www.fda.gov/food) provides comprehensive information about labeling requirements.
Lewis points out the integral relationship between the label and the container. "It seems basic, but the label has to fit the container, and the print can't be too small. And proofread! When we first try a new product at a trade show or demo, I actually make color copies of the labels before I print a large run. I get great feedback from tasters, and they'll find any mistakes."
About containers, she continues: "It's cool to have a cute jar, but remember that the more unusual, the more it will cost you. And it's important to use something the manufacturer won't discontinue. There's a reason that you see a lot of the same containers out there."
Production
An initial step in commercializing a food product is determining the market form – shelf-stable, refrigerated, canned, baked, etc. Next is formulating the recipe – scaling it up for production with ingredients and processes that meet your quality standards and are safe, cost-effective, and available in the quantities you need. You may need to use the services of a process professional or food scientist to achieve the desired result.
In actually producing a food item, you can do it yourself (although not in your home kitchen) or you can hire someone else to do it, called a co-packer. Short for contract packaging, co-packers are food producers already set up to manufacture their own products who use their own facilities to process similar products for others. Because they have equipment and processes in place, they're able to offer lower production costs. The closer your product is to a co-packer's, the less it costs. If you work with a co-packer, it's critical to have a mutually beneficial relationship with appropriate contracts, nondisclosure agreements, and clear understandings about payment terms and what's provided.
If you produce your food item yourself, you must do so in a commercial kitchen certified by the local health department, whether it's your own facility or one in which you rent space. There are several commercial kitchen-space options in Austin; do your homework, get recommendations, and look for a good fit with storage, equipment, and facilities.
Permits and Certification
In addition to the contracts and liability insurance needed for any enterprise, food businesses are strictly regulated, from federal down to the county and city levels. Every state enforces federal standards (U.S. Department of Agriculture for meat, poultry, and eggs; FDA for everything else). For a food business in Austin, for example, you need a city permit to operate a food enterprise, a food manager certificate, and a food handler certificate. Depending on the type of food processing, you may need to attend Better Process Control School to get FDA-certified. Fees for certifications and permits can add up, and most must be renewed regularly. Lewis estimates that start-up fees can easily reach $1,000 or more.
Selling and Marketing
So you have your product's recipe formula, packaging, and production worked out. You're permitted, certified, and ready to go. What's left? Compton calls it "the hardest part – selling and marketing."
How to find customers for your specialty food product? Almost universally, producers and consultants say it's all about building relationships, dealing directly with buyers and potential customers, and providing a human face and a story to go with the product. Farmers' markets, fairs, trade shows, fundraisers, and store demonstrations are all useful venues to get your product out there. Successful food entrepreneurs tirelessly promote their products, and there's no substitute for tasting samples.
Food buyer Sikorski advises making appointments with local specialty food buyers. "Arrive on time with lots of samples. Bring an information sheet with all ingredients, size, case pack, price, minimums, sampling allowance, costs, shipping costs, delivery day, lead time, contact person, etc. And if you're accepted, follow through! Deliver what you say you will, on the date and with the price agreed upon."
Claros has thought a lot about marketing strategy. "Be prepared to spend on marketing your product to present an attractive product and build sales through demos, promotions such as discounts, and samples," she says. "The faster you can build sales, the faster you can start making money. If you don't grow sales quickly, you'll deplete your financial resources and limit your earning potential."
Compton is more succinct. "I've adopted Dr. Scholl's motto," he says. "Early to bed, early to rise, work like hell, and advertise!"
