Starting Up A New Food Business

Today, I was asked to elaborate on a question from Business Coach, Deborah Richardson, owner of Think Partner Coaching in Vancouver. Deborah posted a great article on LinkedIn from Vancouver Sun Small Business Reporter Jenny Lee. Jenny, summarized 6 tips from Rachel Hofstetter’s book Cooking Up A Business about starting up a new food business.

Here is my response to Deborah’s question:

“Jordan, how would you expand on that for foodies that are starting out with a specialty item? Any advice”

I always like to say MOM knows best! When start up food manufacturers are looking to sell their product, they should consider the following:

1: Do you wish to sell to local and independent retailers and deliver your product to them out of your van?

2: Do you want to sell to larger natural and conventional food chains?

If, the answer is 2, then consider MOM.

Money- Have you built in a minimum marketing spend of 25% to cover the cost of distributor/retailer advertising,quarterly promotions, listing incentives, demo’s and broker commissions? Have you built in the cost of selling to a distributor who may take between a 20%-35% margin to service their retail customers? Next, have you accounted for a 35%-50% margin for the retailer who will be stocking and selling your product in their stores? Finally, consider where your products Manufacturer Suggested Retail Price will end up on the shelf. Will your product be too expensive for your target consumers after factoring in marketing spend, distributor and retailer margins?

Opportunity- what makes your product unique and what problem does it solve for the grocery buyer and consumer? Grocery buyers get hundreds of requests from manufacturers to list products on a weekly basis. Does your product cut through the clutter, or is it a “me too product”?

Market- How big is the market for your product? Is there pent up demand for your type of product that you are producing and will it sustain? or, is it in a category that may just be a passing fad? What channel would you like to sell your brand into? and most importantly, can you generate enough sales to make your business viable?

These are just a few of the questions that I like to ask prospective clients who come to Lloyd-James Natural Food Sales & Marketing, looking to get their products onto retailers’ shelves.

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