Food business/entrepreneurship startup guide

[Scot]

So, you want to make a food product?



I've got my INSIDERS progress thread here,
https://www.thefastlaneforum.com/co...cialty-food-products-for-medical-diets.73591/
but wanted to put together a general "how-to" guide on the outside for everyone else.


First step: What's your product?


This is the obvious beginning. What are you making? Do you have a killer recipe for a drink you make home? Or a family recipe for cookies? What about a special sauce you put on everything?

You need to have a solid concept or flavor profile before you start production.

Some things to consider. What makes you special?

Right now, more than ever, you need to stand out in the crowded food market. We are in a food startup boom right now. With the ability to market online and be scrappy and larger grocery stories exploring specialty foods, you're going to be swimming up stream. These are thing you need to have down because a buyer from Whole Foods is going to want an answer.

Are you creating a healthier version of an old product (kale chips)? Are you utilizing an ingredient that's new to your country (all the new super food products)? Do you have a special process to make your food (cold brew coffee)?

What if you don't have a recipe? This was me, skip to step 1.5.


Step 1.5. Get your recipe (or have one created)


My situation was unique, I didn't have a product first, I had a market. So I needed a recipe.

You'll need either a food scientist or a research and development group.

Finding a food science consulting firm is expensive and hard. But no worries, most good copackers have a chef or food scientist on staff. This is the route I went. Often times, if it's the copacker you plan on manufacturing with, you can bundle pricing. Well go over copackers in a later step.

Things you need to have down solid during this phase:

-- Recipe measured out in weights. Things like pinch of salt cannot be used. This is a recipe that needs to be 100% reproducible and scalable.

-- A step by step process to cook/manufacture your product that matches the capabilities of your facility. Again, think consistency and scalability.

-- Food safety signoffs. Depending on the type of food, they will have different regulations on food safety. Things like acidified food, canned food, and most shelf stable foods require specific conditions. These are all things your food scientist should handle for you. You do not want to screw this up.

-- Next, you'll need your nutritional panel, serving size, known allergens, ingredients list, net weight statement, and any lab tests required by your category. Again, a good food scientist should have this bundled into their services and pricing. For most foods, your nutritional panel will be based on the FDA's food database and not an actual lab test. If the food label is extremely sensitive for any reason, you can always opt into doing a lab test, but it will cost more money.



Who's going to make your food?



Let's start first with, probably not you. Cottage food laws vary by state, so check yours first. I know in my state if you plan on making more than $10,000 per year, cottage food laws say nope. Also, where you plan on selling makes a difference too. If you only plan on selling at farmers markets, then you may get away with cottage food laws.

You'll either need one if two options.

Copacker or Commercial Kitchen.

If this is a product you believe you can reasonably make consistently yourself, a commercial kitchen mat be an affordable way to start.

Things like snack bars, granola, baked goods can all be made yourself in a kitchen. However, always check your local and state regulations on this. There specific licenses and certifications your facility will need to be able to create and distribute food. Check with your local Dept of Agriculture to find out more. Most kitchens require you get food safety certified. This is pretty easy to get. It's usually $100 ish and most restaurant managers get this, so they're easy to find and get.

A lot of food products however will need a commercial packers or copacker to create your product. This website is a great directory to find copackers. The Directory

I recommend starting with copackers local to you. Being able to show up in person means you can get quicker turn around times on tasks and benchmarks and ensure quality.


Things to consider with a copacker.


Did they have you sign an NDA or confidentiality agreement? If not, red flag. Make sure the NDA covers both your and them, not just them. Also, beware if they offer a private label. I have heard horror stories of copackers using proprietary equipment and processes for other clients they did not have permission to use.

Find out how they charge for production. Do they do a percentage or do they charge an hourly rate? Find out at which level they offer price breaks. Do they sourced ingredients for you? Do they charge a sourcing fee? When you have actually get your pricing sheet, you want them to be transparent about every single charge and where it comes from. Because when you get to scale and you are selling into retail, $0.10 multiplied by 100,000 units adds up.

What is their timeline? Do they have a two week lead time? This is important if you are dealing with retailers that are notorious for short notice purchase order. You want to make sure your copacker can handle a rush order without charging an arm and a leg for it. Seasonality is important here too. Ask them if their lead time changes throughout the year.

Other things to consider are, do they have a logistics department? This is important because trying to coordinate shipment to distributors, warehouses, and vendors is a lot to handle when you're a start up. It's a plus if they can coordinate this for you.

Communication is key. This is one thing that's burned me already. In the early phases, make sure they are punctual with getting back to you. For example, one error in communication has already cost me one month of my time. If they throw up warning signs of being difficult to get a hold of or slow to respond, it may be time to find a different copacker.

Shop around. Don't fit on the first copacker you find. Visit as many as you can.

If you are developing a recipe in conjunction with the copacker, make sure that you own the formula. Any formulations you create, make sure you have copies in your possession and make sure you have in writing that you own all rights to the formula. They should own nothing of yours


How to sell my food?


I'm not gonna teach you how to market your food, that's on you. But I will tell you what you need in order to be able to sell.

Most states require that you have a food distribution permit which is typically a change to your local department of agriculture. You may also need additional licenses and permits depending on your state. It's a good idea to call your local department at a culture, department of business relations, and the FDA. Typically, To obtain a few distribution permit you need it to have a physical location. In some states this can be as simple as having a storage unit in a commercial storage facility. Again, check the local regulations.

Obviously, hustle your a$$ off to sell your product. Find a list of all your local flea markets and farmers markets. Be out there every day you can and sell. Build a local following. Build an online following.

Also, there may be a point when you are looking to get in the grocery stores. If you're going to local independently owned stores, typically you can going to the store, ask to speak to a manager or ask for the buyer.

This is a simple sales pitch where you'll need to sell your product to them. If you are brand new, they may offer you a consignment deal. The best deal is to actually sell bulk of your product to the store. Keep in mind, re-orders are where you make your money. So don't assume you can just sell them a case of your product wash her hands and walk away. You need to market and get people in the store to buy your product. If it's not moving on their shelves, they will not keep you on the shelf.

You may also want to consider targeting larger chains. This could be done in a number of different ways. You can attend food tradeshows and attempt to connect with buyers there. Also, you can attempt to get in front of buyer for larger change. When it comes to places like whole foods, they typically have regional buyers at local stores that you can get in touch with to pitch your product.

You may also look into working with a food broker. A broker is essentially a salesman who has connections with buyers. Typically for a commission they will facilitate deals. The problem is, many brokers are very picky. There is in an abundance of the new food start ups, and they can afford to choose who they want to work with. So, you'll have to sell them on the idea before they sell it for you.

There is a lot more that goes into distribution and sales of food products. I can't give you too much of ice here, because I am not that deep into this stage yet.


--

There aren't many food guys here on the forum, but I hope people who are interested in a food start up can get some use out of this guide.

 

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[G-Man]

Great info!

Only thing you left out: Sell your company to Pepsi Frito then spend the rest of your life lounging on a private island with lady singers.

 

[G-Man]

Obviously, hustle your a$$ off to sell your product. Find a list of all your local flea markets and farmers markets. Be out there every day you can and sell. Build a local following. Build an online following.

Also - think about the "moment" people consume your product in. It might lead you to outlets you've never thought of. We stumbled onto a channel that has tons of potential and almost no barriers to entry (which is why I'm not saying what it is) and made it into a $10k/mo channel in the last 8 weeks. It has the potential to do $1m/year with only 10% penetration. All because we saw an instagram of where one of our customers was consuming the product. Be creative.

This is a simple sales pitch where you'll need to sell your product to them. If you are brand new, they may offer you a consignment deal.

If someone tries to go this route, offer an alternative. Offer a guaranteed "Spoils Allowance" that they can take no questions asked. If they really push, offer a markdown program. Consignment is bad and buyback is worse. With food products you're dealing with something that has a very finite life, so you have to learn to manage channel risk early.

This is a simple sales pitch where you'll need to sell your product to them. If you are brand new, they may offer you a consignment deal. The best deal is to actually sell bulk of your product to the store. Keep in mind, re-orders are where you make your money. So don't assume you can just sell them a case of your product wash her hands and walk away. You need to market and get people in the store to buy your product. If it's not moving on their shelves, they will not keep you on the shelf.

If you're new, regional chains are a great ROI. They're easier/cheaper to get on shelf than a national chain, and often buyers at the larger chains use smaller ones to validate products. For example, say you get on the shelf at Shaw's or Wegman's in the NE and stay there for 2 cycles. I know for certain that Ahold Delhaize buyers walk the aisles at those chains. They'll see that you're still there, and think it's not so risky to place you.

You may also look into working with a food broker. A broker is essentially a salesman who has connections with buyers. Typically for a commission they will facilitate deals. The problem is, many brokers are very picky. There is in an abundance of the new food start ups, and they can afford to choose who they want to work with. So, you'll have to sell them on the idea before they sell it for you.

Broker only if necessary. They're usually pretty lazy. No one will sell your product as hard as you. No one will watch down channel to minimize risk like you. No one cares about the person that actually buys your product and feeds it to their kids as much as you. Give the broker his 5 points if you have to pay to get the meeting, but don't put your faith in them.

 

[G-Man]

One question I was wondering while I was sleeping ( it might be a silly one) which are the common mistakes one can make when launching a food product? and also how do you minimize costs until the launch of it? I would not like to over spend before I do the launching.

There are literally a million mistakes you can and will make - just like anything else. Those mistakes are part of what will give your business value when you go to sell. Food (fortunately or unfortunately) also has a lot of barriers that aren't there with other businesses (e-commerce)
I'm sure I'll think of others later, but here's some things we've run into in the last month or so. We're launching a new product line, so it's actually a timely question.

Product:

• Ingredients - If you use a copacker in one state, make sure your ingredients meet labeling requirements in all states. The benchmark state is CA. We design all our products to be CA law compliant for two reasons: One, the laws in CA will be the laws everywhere in 5 years. Two, CA is a country sized market unto itself. You don't want to exclude yourself from it. You also likely won't get picked up by a national retailer if they can't sell the product in their CA stores.
• Ingredients 2 - Make sure all of your components and ingredients are easily sourced if you're trying to create a mass market product. If you're going for ultra-premium at a high margin, this may not apply. Example: Our product has seasoning. The seasoning contains an ingredient that the manufacturer only buys for us. This means an extra 8 weeks in lead time. If possible design the product around components/ingredients that everyone in your supply chain keeps in their normal inventory for all their customers.
• Be straight forward with your vendors about your capital constraints - We have an overbox we're making for this product, but we don't even have a customer for the product yet, so it doesn't make sense to pay $300/color for 6 color plates for 3 different skus. Our box guy will use digital printing and an inferior board that gets us to 90% of the quality we want, and the unit cost is only slightly higher than the higher run box that would require us to pay for plates up front.
• Learn about how your components are made - No one will be as interested in finding inexpensive creative solutions as you. If you need boxes, learn how boxes are made. Learn what kinds of boxes are out there. Go look at what's on the shelf and how it's packed. I spent an afternoon in a film plant learning how film for snack product packaging is made. Because of that, we were able to move a bunch of things around and find a way to make the film with a 10k up-front investment instead of the 30k everyone was telling us it would cost.

It's a learning process. The key is being ultra curious about how everything that goes into your product is made.

There's also a gazillion things to do with marketing, pricing and down channel stuff that's way too much to condense. If you run into specific issues when you're preparing for launch, put them here and someone will probably be able to help.

 

[Scot]

Man, I need to get into this business. If I'm gonna sell a product, I should at least be able to eat it.

The food industry is brutal but I will say this, product development is loads cheaper than prototyping a physical product.

Most things you can make in your own kitchen or modify an existing recipe. Then you need to modify it for production and scale. If you find the right operation like I did, less than $1,000 for R&D is loads cheaper than what a prototyping firm charges.

Just something to think about...

 

[G-Man]

There aren't many of us food guys on the forum, so probably not.

With food products, you want to find up and coming markets, but not be trendy. Fads eventually end.

Or you create the trend then dump the company onto a multinational for a massive profit and let them deal with watching the fad die. e.g., Vitamin Water. I suspect the same thing will happen to Bai.

 

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[G-Man]

Do you think it would be best to keep a pulse on what the 'general' food trend is (IE: Healthy, limited ingredients, etc) and then try to set up your product to be the answer to that?

That's actually kind of backwards. Look for a need in the market then design a product that meets the need, but in a way consistent with current trends.

Example: A guy down the street from me is trying to sell his clean label snack bar company. It's a good product at the right price and in the right packaging. It's also on trend. The problem is that there's a gazillion of those products already out there. The market just doesn't really need another clean label snack bar.

 

[G-Man]

Example: A guy down the street from me is trying to sell his clean label snack bar company. It's a good product at the right price and in the right packaging. It's also on trend. The problem is that there's a gazillion of those products already out there. The market just doesn't really need another clean label snack bar.

The opposite of that story would be Krave Jerky. They saw a need for a mass market jerky product that wasn't complete garbage. They saw that the trend in mass market snack foods was to add non-traditional flavors to snack products. End result: Sold the company to Hershey for a ton of money. Another good one to google is Sahale growing to get acquired by Smucker's.

Some people also just have a superior product and create their own trend that everyone else tries to copy later. There's a fast company article on the founder of Chobani that everyone interested in food should read.

 

[Scot]

Missed this thread, upgraded to NOTABLE.

Thank you MJ! Trying to convince some of these guys about how cool the food biz is instead of Amazon. Because I’m getting lonely over here haha

 

[Scot]

Great this is very valuable thank you. Anyone on the forum with experience selling vegetarian food like Hummus? Another trendy product is Hibiscus Tea and I have not seen it in many places.

There aren't many of us food guys on the forum, so probably not.

With food products, you want to find up and coming markets, but not be trendy. Fads eventually end.

 

[Scot]

Awesome, this literally came at the right time.

I'm in the process of working with my relative on an organic food company. He has already the producers, the licenses and we'll be exporting the snacks and distributing them.

Really most of the work in terms of production is done, but how do I (I joined late) start to determine the demand and do a solid market research campaign? I'm really digging in now into the nitty gritty of the industry and competition but it is overwhelming.

The most important thing you need to do is figure out your customer avatar. Is your product really niche? Or is it a broad type category, like a snack?

Find out where those people hang out, and sample and talk to them.

Rxbar was created for people doing CrossFit. So the founder spent a lot of time bringing you different samples to his local gym and having his fellow CrossFiters try them and give feedback.

The original grass roots the way of determining demand and doing market research, is to hang out at the local farmers market. Farmers market now really exist to serve the Whole Foods type customer. Find every farmers market within a 50 mile radius, get a table, and spend a few weeks sampling and getting feedback, and trying to sell It.

What's a good starting point to learn about distribution and e-commerce for organic food companies?

Honestly, I got a lot of my knowledge from listening to different podcasts while driving around. The Food Startup Podcast, Food Marketing Nerds, and Brand Builder have all taught me a lot.

Start small. Start selling direct to consumers through your website. Also sell at farmers market. See if you can get into local coffee shops or other vegan type café’s. And then after that, talk to your local Whole Foods.

You really need to learn to crawl before you can walk in that run. Trying to expand to quickly in the food industry Is a quick way to die.

 

[Scot]

Or you create the trend then dump the company onto a multinational for a massive profit and let them deal with watching the fad die. e.g., Vitamin Water. I suspect the same thing will happen to Bai.

Yeah, that too. I know a lot of the "hot startups" are hitting VC capital hard, expanding rapidly and hoping to exit in 5 years. IMO it's no different than a tech startup if you're taking that approach.

You've got success stories like Honest Tea who sold 40% to Coke for like, $60 or $80 million. But you've got a graveyard of 100's of dead startups too.

I'm not trying to make a legacy brand, I'm open to edits, but I also think if you're trying to hit the Kale market fast and furious, you'll be left crippled in 3 years when Whole Foods forgets about Kale and moves into the next "superfoods" trend.

Edit:
Ps.
Let me clarify what I mean by trends. Following category trends is good, product tends bad.

For example. Making minimally processed food is a trend that will last. But going out and trying to capitalize on the kambucha craze will end in bust. Look at Acai berries. 5-7 years ago they were in everything, now they've died down.

 

[MJ DeMarco]

Missed this thread, upgraded to NOTABLE.

 

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[Scot]

Is it possible to sellnto

Is it possible to sell food without bullshit preservatives and weird chemicals to make it stay fresh or are they mandatory?

My products don’t use preservatives. And a lot don’t. It really depends on what you’re making. Lots of sauces or liquid products are hot filled and preserved that way, think a jar of spaghetti sauce. My products, salad dressings, are what’s called acidified Foods. The pH level of the products are what ensure it stays safe to eat.

Rx Bar didn’t use preservatives either.

That being said safe does not equal quality. I need to use stabilizers to keep my oils from spoiling. If they spoil, they’re still safe, but taste horrible.

Ideally, you’d want to work with a good scientist to determine the best way to naturally preserve your products.


Lastly, don’t fall into the buzzword pit. Many “chemicals” used in foods are perfectly safe and well tested. Just because it has a fancy name doesn’t mean it’s bad for you.

 

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[G-Man]

Let me clarify what I mean by trends. Following category trends is good, product tends bad.

For example. Making minimally processed food is a trend that will last. But going out and trying to capitalize on the kambucha craze will end in bust. Look at Acai berries. 5-7 years ago they were in everything, now they've died down.

It's one thing to capitalize on trends. Other people create them. Stewart Resnick at Wonderful has done it with like 5 products (Pistachios, Cuties Oranges, etc). Anyone interested in food - google that guy.

 

[Scot]

Awesome feedback @G-Man, thanks for answering those questions.

Me personally, I'm focusing on creating/growing a whole category vs a specific item.

 

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[Scot]

One question I was wondering while I was sleeping ( it might be a silly one) which are the common mistakes one can make when launching a food product? and also how do you minimize costs until the launch of it? I would not like to over spend before I do the launching.

This is definitely a @G-Man question for sure.

I'm still pre-launch but I'll share some of my mistakes thus far.

Choosing the right copacker can make of break you. My copacker has a great facility, reputation, and R&D. But, they suck at communication and have delayed my launch almost 2 months. Carefully vett your copacker and find one close to you if possible so you can drop in in person.

Some other things I can think of that can lead to mis-steps in launch. Do your research. Know what your market is and who will buy it. Don't be afraid to hustle your a$$ off at a farmers market if you need to.

Quality control is another mistake you can make. A lot can change to the products taste and consistency between your home cooking recipe and the final product that rolls off the conveyor. Make sure you're involved every step to ensure everything is correct. Product sourcing goes into this as well, which includes pricing. Keep in mind, if you're starting off with a GF, non-GMO, with some Cambodian super fruit, it's going to EXPENSIVE to make and your margins will suck.

I'm kind of minimum viable producting my first product. I know my consumers are health conscious but I know what they want more is products in this space. While I'd love to have soy free and certified GF, it's too expensive now. Once I validate and get sales, I can always formulate a "healthier" option later.

 

[Olimac21]

There are literally a million mistakes you can and will make - just like anything else. Those mistakes are part of what will give your business value when you go to sell. Food (fortunately or unfortunately) also has a lot of barriers that aren't there with other businesses (e-commerce)
I'm sure I'll think of others later, but here's some things we've run into in the last month or so. We're launching a new product line, so it's actually a timely question.

Product:

• Ingredients - If you use a copacker in one state, make sure your ingredients meet labeling requirements in all states. The benchmark state is CA. We design all our products to be CA law compliant for two reasons: One, the laws in CA will be the laws everywhere in 5 years. Two, CA is a country sized market unto itself. You don't want to exclude yourself from it. You also likely won't get picked up by a national retailer if they can't sell the product in their CA stores.
• Ingredients 2 - Make sure all of your components and ingredients are easily sourced if you're trying to create a mass market product. If you're going for ultra-premium at a high margin, this may not apply. Example: Our product has seasoning. The seasoning contains an ingredient that the manufacturer only buys for us. This means an extra 8 weeks in lead time. If possible design the product around components/ingredients that everyone in your supply chain keeps in their normal inventory for all their customers.
• Be straight forward with your vendors about your capital constraints - We have an overbox we're making for this product, but we don't even have a customer for the product yet, so it doesn't make sense to pay $300/color for 6 color plates for 3 different skus. Our box guy will use digital printing and an inferior board that gets us to 90% of the quality we want, and the unit cost is only slightly higher than the higher run box that would require us to pay for plates up front.
• Learn about how your components are made - No one will be as interested in finding inexpensive creative solutions as you. If you need boxes, learn how boxes are made. Learn what kinds of boxes are out there. Go look at what's on the shelf and how it's packed. I spent an afternoon in a film plant learning how film for snack product packaging is made. Because of that, we were able to move a bunch of things around and find a way to make the film with a 10k up-front investment instead of the 30k everyone was telling us it would cost.

It's a learning process. The key is being ultra curious about how everything that goes into your product is made.

There's also a gazillion things to do with marketing, pricing and down channel stuff that's way too much to condense. If you run into specific issues when you're preparing for launch, put them here and someone will probably be able to help.

Amazing thank you I will definitely come back to this post or another thread related to food. I already told some people about the idea and they think is a good one, I am now contacting others in my country who have done it in the past and see all the legal regulations/steps you have to make before lauching a food product.

 

[MidwestLandlord]

Awesome, thanks I'll look into Prop 65. I can't imagine any of my ingredients are scary, but I'll double check.

Here ya go.

https://oehha.ca.gov/media/downloads/crnr/p65single07072017.pdf

It seems a list of what ISN'T included in Prop 65 might be easier, my gosh.

 

[Scot]

what sort of capital are we talking about for a startup. For getting the science consulting firm and copackers to get your drink or snack started

Man, that’s an impossible question to answer.

Between $1 and $100,000

So many factors come into play.

Is it shelf stable?
Is it acidified?
Can you make it at home?
Is it a liquid, solid, baked?


Sometimes your product will have super high MOQ’s, which means more startup costs.

I’d honestly plan to sink minimum $10,000 per product and be pleasantly surprised if it comes out cheaper.

 

[Vigilante]

So, you want to make a food product?



I've got my INSIDERS progress thread here,
https://www.thefastlaneforum.com/co...cialty-food-products-for-medical-diets.73591/
but wanted to put together a general "how-to" guide on the outside for everyone else.


First step: What's your product?


This is the obvious beginning. What are you making? Do you have a killer recipe for a drink you make home? Or a family recipe for cookies? What about a special sauce you put on everything?

You need to have a solid concept or flavor profile before you start production.

Some things to consider. What makes you special?

Right now, more than ever, you need to stand out in the crowded food market. We are in a food startup boom right now. With the ability to market online and be scrappy and larger grocery stories exploring specialty foods, you're going to be swimming up stream. These are thing you need to have down because a buyer from Whole Foods is going to want an answer.

Are you creating a healthier version of an old product (kale chips)? Are you utilizing an ingredient that's new to your country (all the new super food products)? Do you have a special process to make your food (cold brew coffee)?

What if you don't have a recipe? This was me, skip to step 1.5.


Step 1.5. Get your recipe (or have one created)


My situation was unique, I didn't have a product first, I had a market. So I needed a recipe.

You'll need either a food scientist or a research and development group.

Finding a food science consulting firm is expensive and hard. But no worries, most good copackers have a chef or food scientist on staff. This is the route I went. Often times, if it's the copacker you plan on manufacturing with, you can bundle pricing. Well go over copackers in a later step.

Things you need to have down solid during this phase:

-- Recipe measured out in weights. Things like pinch of salt cannot be used. This is a recipe that needs to be 100% reproducible and scalable.

-- A step by step process to cook/manufacture your product that matches the capabilities of your facility. Again, think consistency and scalability.

-- Food safety signoffs. Depending on the type of food, they will have different regulations on food safety. Things like acidified food, canned food, and most shelf stable foods require specific conditions. These are all things your food scientist should handle for you. You do not want to screw this up.

-- Next, you'll need your nutritional panel, serving size, known allergens, ingredients list, net weight statement, and any lab tests required by your category. Again, a good food scientist should have this bundled into their services and pricing. For most foods, your nutritional panel will be based on the FDA's food database and not an actual lab test. If the food label is extremely sensitive for any reason, you can always opt into doing a lab test, but it will cost more money.



Who's going to make your food?



Let's start first with, probably not you. Cottage food laws vary by state, so check yours first. I know in my state if you plan on making more than $10,000 per year, cottage food laws say nope. Also, where you plan on selling makes a difference too. If you only plan on selling at farmers markets, then you may get away with cottage food laws.

You'll either need one if two options.

Copacker or Commercial Kitchen.

If this is a product you believe you can reasonably make consistently yourself, a commercial kitchen mat be an affordable way to start.

Things like snack bars, granola, baked goods can all be made yourself in a kitchen. However, always check your local and state regulations on this. There specific licenses and certifications your facility will need to be able to create and distribute food. Check with your local Dept of Agriculture to find out more. Most kitchens require you get food safety certified. This is pretty easy to get. It's usually $100 ish and most restaurant managers get this, so they're easy to find and get.

A lot of food products however will need a commercial packers or copacker to create your product. This website is a great directory to find copackers. The Directory

I recommend starting with copackers local to you. Being able to show up in person means you can get quicker turn around times on tasks and benchmarks and ensure quality.


Things to consider with a copacker.


Did they have you sign an NDA or confidentiality agreement? If not, red flag. Make sure the NDA covers both your and them, not just them. Also, beware if they offer a private label. I have heard horror stories of copackers using proprietary equipment and processes for other clients they did not have permission to use.

Find out how they charge for production. Do they do a percentage or do they charge an hourly rate? Find out at which level they offer price breaks. Do they sourced ingredients for you? Do they charge a sourcing fee? When you have actually get your pricing sheet, you want them to be transparent about every single charge and where it comes from. Because when you get to scale and you are selling into retail, $0.10 multiplied by 100,000 units adds up.

What is their timeline? Do they have a two week lead time? This is important if you are dealing with retailers that are notorious for short notice purchase order. You want to make sure your copacker can handle a rush order without charging an arm and a leg for it. Seasonality is important here too. Ask them if their lead time changes throughout the year.

Other things to consider are, do they have a logistics department? This is important because trying to coordinate shipment to distributors, warehouses, and vendors is a lot to handle when you're a start up. It's a plus if they can coordinate this for you.

Communication is key. This is one thing that's burned me already. In the early phases, make sure they are punctual with getting back to you. For example, one error in communication has already cost me one month of my time. If they throw up warning signs of being difficult to get a hold of or slow to respond, it may be time to find a different copacker.

Shop around. Don't fit on the first copacker you find. Visit as many as you can.

If you are developing a recipe in conjunction with the copacker, make sure that you own the formula. Any formulations you create, make sure you have copies in your possession and make sure you have in writing that you own all rights to the formula. They should own nothing of yours


How to sell my food?


I'm not gonna teach you how to market your food, that's on you. But I will tell you what you need in order to be able to sell.

Most states require that you have a food distribution permit which is typically a change to your local department of agriculture. You may also need additional licenses and permits depending on your state. It's a good idea to call your local department at a culture, department of business relations, and the FDA. Typically, To obtain a few distribution permit you need it to have a physical location. In some states this can be as simple as having a storage unit in a commercial storage facility. Again, check the local regulations.

Obviously, hustle your a$$ off to sell your product. Find a list of all your local flea markets and farmers markets. Be out there every day you can and sell. Build a local following. Build an online following.

Also, there may be a point when you are looking to get in the grocery stores. If you're going to local independently owned stores, typically you can going to the store, ask to speak to a manager or ask for the buyer.

This is a simple sales pitch where you'll need to sell your product to them. If you are brand new, they may offer you a consignment deal. The best deal is to actually sell bulk of your product to the store. Keep in mind, re-orders are where you make your money. So don't assume you can just sell them a case of your product wash her hands and walk away. You need to market and get people in the store to buy your product. If it's not moving on their shelves, they will not keep you on the shelf.

You may also want to consider targeting larger chains. This could be done in a number of different ways. You can attend food tradeshows and attempt to connect with buyers there. Also, you can attempt to get in front of buyer for larger change. When it comes to places like whole foods, they typically have regional buyers at local stores that you can get in touch with to pitch your product.

You may also look into working with a food broker. A broker is essentially a salesman who has connections with buyers. Typically for a commission they will facilitate deals. The problem is, many brokers are very picky. There is in an abundance of the new food start ups, and they can afford to choose who they want to work with. So, you'll have to sell them on the idea before they sell it for you.

There is a lot more that goes into distribution and sales of food products. I can't give you too much of ice here, because I am not that deep into this stage yet.


--

There aren't many food guys here on the forum, but I hope people who are interested in a food start up can get some use out of this guide.

How the hell did I miss this thread from one of my favorite entrepreneurs? Subscribed.

 

[Scot]

So. Much. INFO!
And your thread on the inside.
Thanks @Scot , I'm going to start playing with recipes at home

I replied to your PM, but I think its important to post publicly what I said to you (just this, nothing else private)

Make sure you have your target market identified. Your market is just as important as your recipe.

If you bake the best tasting protein bar you've ever tasted... who cares? There are 100's of other protein bars, that are better funded and better marketed than you.

Find the white space. Find a good recipe that caters to a group of people who are under-served by the current options. This will give you the best chance to succeed in the cutthroat food industry.

 

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[Johnny boy]

How I would sell a food or beverage product:

1. Call up my local venue for hosting events. A place to host parties of a couple hundred people or so. Ask them how much to rent out the place for a night and include the costs of chairs, tables, etc.

2. Call up every local business and ask for them to sponsor your party with hundreds of people. The local plumber would love to network and get business. The local pizza shop might want a slice of the action. The local car dealership might pay $200 to park their new car out in front of the venue and send salespeople to come network with everyone. Ask the local restaurants to come and bring a small bit of food in exchange for advertising at the event. Invite enough until there's food for everyone.

3. Once you've secured enough sponsorship cash to fund the event + pay for the cost of your own food/beverage for everyone there (cost = what you would sell it for retail), go to the local church, DM the local instagram influencer and invite everyone you can to a free party. You'll get people to show up.

4. You RSVP these people and get their info. You have them sign in when they get to your event.

5. You have a great time, party, meet people, shake hands and you just sold hundreds of units of your food/beverage. You may have even made some extra money if you did a great job getting a low-cost venue and got businesses to pay lots of money to sponsor your event.

6. You add everyone that came to your social media, call them and thank them for coming, keep notes about them when you met them at your party, and market your other products to them to purchase again.

7. Repeat.

Just an idea I had recently. I'm sure it's been done before. It can work for anything that is sold locally. Think about what facebook is. You show up for free and the businesses pay to advertise. A party sounds nice and it is, but there's just enough networking going on for it to pay for everything. If companies can get people to show up for timeshare seminars, you can get people to show up for a fun party.

 

[Scot]

But consumables and food is still a huge world that interests me from a business perspective.

And that's a key word, Consumables. With most products, you really only expect a customer to buy one, maybe two of them. But with foods, you're constantly repurchasing. I have customers who have bought 15+ units from me to date. Recurring revenue at its finest.

Could you share a little more about what you know about acquisitions in the food / consumables industries?

From doing research on M&A's for my investor pitches, the big ones we see are anywhere from 2x-5x gross yearly revenue. A lot of it depends on the total addressable market. Keep in mind, these acquisitions are being done by the big conglomerates, Kraft, Unilever, J&J, Pepsi, Coke... So they have big pockets. But, for them its about the product/market fit.

 

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[Erika]

Awesome thread. Thanks for the information!
I'm thinking about going into the food industry. The product I have in mind is definitely not the first of its kind but from what I can gather so far my product is definitely different to other products like it. At least in South Africa. I've even started trying out recipes to get the taste right.
I'm going to follow here and come back to this thread for more information as I hopefully make progress with my own product.
Thanks for writing!

 

[G-Man]

Georgia cottage law doesn't have a dollar limit, but I could only sell within the state. Its supposed to be a filled chip but I can see how it is pastry-like. I can inject the filling but its the shell that I am having trouble with. As it stands, I get shell base in sheets. I guess I can try to learn how to make the shell and make hollow shells kinda like mini popovers.

Or make a jig to press the pieces together

 

[Scot]

Georgia cottage law doesn't have a dollar limit, but I could only sell within the state. Its supposed to be a filled chip but I can see how it is pastry-like. I can inject the filling but its the shell that I am having trouble with. As it stands, I get shell base in sheets. I guess I can try to learn how to make the shell and make hollow shells kinda like mini popovers.

Freeze the filling into little pucks. Put it between the sheets. The frying process will melt it to the correct consistency.

 

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[Cableabe]

Awesome, this is great information, many thanks!!

 

[JAJT]

Great stuff. Awesome value.

Hopefully this will help a few budding food entrepreneurs

 

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[BrooklynHustle]

So, you want to make a food product?



I've got my INSIDERS progress thread here,
https://www.thefastlaneforum.com/co...cialty-food-products-for-medical-diets.73591/
but wanted to put together a general "how-to" guide on the outside for everyone else.


First step: What's your product?


This is the obvious beginning. What are you making? Do you have a killer recipe for a drink you make home? Or a family recipe for cookies? What about a special sauce you put on everything?

You need to have a solid concept or flavor profile before you start production.

Some things to consider. What makes you special?

Right now, more than ever, you need to stand out in the crowded food market. We are in a food startup boom right now. With the ability to market online and be scrappy and larger grocery stories exploring specialty foods, you're going to be swimming up stream. These are thing you need to have down because a buyer from Whole Foods is going to want an answer.

Are you creating a healthier version of an old product (kale chips)? Are you utilizing an ingredient that's new to your country (all the new super food products)? Do you have a special process to make your food (cold brew coffee)?

What if you don't have a recipe? This was me, skip to step 1.5.


Step 1.5. Get your recipe (or have one created)


My situation was unique, I didn't have a product first, I had a market. So I needed a recipe.

You'll need either a food scientist or a research and development group.

Finding a food science consulting firm is expensive and hard. But no worries, most good copackers have a chef or food scientist on staff. This is the route I went. Often times, if it's the copacker you plan on manufacturing with, you can bundle pricing. Well go over copackers in a later step.

Things you need to have down solid during this phase:

-- Recipe measured out in weights. Things like pinch of salt cannot be used. This is a recipe that needs to be 100% reproducible and scalable.

-- A step by step process to cook/manufacture your product that matches the capabilities of your facility. Again, think consistency and scalability.

-- Food safety signoffs. Depending on the type of food, they will have different regulations on food safety. Things like acidified food, canned food, and most shelf stable foods require specific conditions. These are all things your food scientist should handle for you. You do not want to screw this up.

-- Next, you'll need your nutritional panel, serving size, known allergens, ingredients list, net weight statement, and any lab tests required by your category. Again, a good food scientist should have this bundled into their services and pricing. For most foods, your nutritional panel will be based on the FDA's food database and not an actual lab test. If the food label is extremely sensitive for any reason, you can always opt into doing a lab test, but it will cost more money.



Who's going to make your food?



Let's start first with, probably not you. Cottage food laws vary by state, so check yours first. I know in my state if you plan on making more than $10,000 per year, cottage food laws say nope. Also, where you plan on selling makes a difference too. If you only plan on selling at farmers markets, then you may get away with cottage food laws.

You'll either need one if two options.

Copacker or Commercial Kitchen.

If this is a product you believe you can reasonably make consistently yourself, a commercial kitchen mat be an affordable way to start.

Things like snack bars, granola, baked goods can all be made yourself in a kitchen. However, always check your local and state regulations on this. There specific licenses and certifications your facility will need to be able to create and distribute food. Check with your local Dept of Agriculture to find out more. Most kitchens require you get food safety certified. This is pretty easy to get. It's usually $100 ish and most restaurant managers get this, so they're easy to find and get.

A lot of food products however will need a commercial packers or copacker to create your product. This website is a great directory to find copackers. The Directory

I recommend starting with copackers local to you. Being able to show up in person means you can get quicker turn around times on tasks and benchmarks and ensure quality.


Things to consider with a copacker.


Did they have you sign an NDA or confidentiality agreement? If not, red flag. Make sure the NDA covers both your and them, not just them. Also, beware if they offer a private label. I have heard horror stories of copackers using proprietary equipment and processes for other clients they did not have permission to use.

Find out how they charge for production. Do they do a percentage or do they charge an hourly rate? Find out at which level they offer price breaks. Do they sourced ingredients for you? Do they charge a sourcing fee? When you have actually get your pricing sheet, you want them to be transparent about every single charge and where it comes from. Because when you get to scale and you are selling into retail, $0.10 multiplied by 100,000 units adds up.

What is their timeline? Do they have a two week lead time? This is important if you are dealing with retailers that are notorious for short notice purchase order. You want to make sure your copacker can handle a rush order without charging an arm and a leg for it. Seasonality is important here too. Ask them if their lead time changes throughout the year.

Other things to consider are, do they have a logistics department? This is important because trying to coordinate shipment to distributors, warehouses, and vendors is a lot to handle when you're a start up. It's a plus if they can coordinate this for you.

Communication is key. This is one thing that's burned me already. In the early phases, make sure they are punctual with getting back to you. For example, one error in communication has already cost me one month of my time. If they throw up warning signs of being difficult to get a hold of or slow to respond, it may be time to find a different copacker.

Shop around. Don't fit on the first copacker you find. Visit as many as you can.

If you are developing a recipe in conjunction with the copacker, make sure that you own the formula. Any formulations you create, make sure you have copies in your possession and make sure you have in writing that you own all rights to the formula. They should own nothing of yours


How to sell my food?


I'm not gonna teach you how to market your food, that's on you. But I will tell you what you need in order to be able to sell.

Most states require that you have a food distribution permit which is typically a change to your local department of agriculture. You may also need additional licenses and permits depending on your state. It's a good idea to call your local department at a culture, department of business relations, and the FDA. Typically, To obtain a few distribution permit you need it to have a physical location. In some states this can be as simple as having a storage unit in a commercial storage facility. Again, check the local regulations.

Obviously, hustle your a$$ off to sell your product. Find a list of all your local flea markets and farmers markets. Be out there every day you can and sell. Build a local following. Build an online following.

Also, there may be a point when you are looking to get in the grocery stores. If you're going to local independently owned stores, typically you can going to the store, ask to speak to a manager or ask for the buyer.

This is a simple sales pitch where you'll need to sell your product to them. If you are brand new, they may offer you a consignment deal. The best deal is to actually sell bulk of your product to the store. Keep in mind, re-orders are where you make your money. So don't assume you can just sell them a case of your product wash her hands and walk away. You need to market and get people in the store to buy your product. If it's not moving on their shelves, they will not keep you on the shelf.

You may also want to consider targeting larger chains. This could be done in a number of different ways. You can attend food tradeshows and attempt to connect with buyers there. Also, you can attempt to get in front of buyer for larger change. When it comes to places like whole foods, they typically have regional buyers at local stores that you can get in touch with to pitch your product.

You may also look into working with a food broker. A broker is essentially a salesman who has connections with buyers. Typically for a commission they will facilitate deals. The problem is, many brokers are very picky. There is in an abundance of the new food start ups, and they can afford to choose who they want to work with. So, you'll have to sell them on the idea before they sell it for you.

There is a lot more that goes into distribution and sales of food products. I can't give you too much of ice here, because I am not that deep into this stage yet.


--

There aren't many food guys here on the forum, but I hope people who are interested in a food start up can get some use out of this guide.

Sharing this with my friend who has started selling her sauce locally. Thanks for the share!