The top 10 things you need to consider as a food or drink start-up
Posted: Wed 29th Jul 2020
Starting any new business requires financial planning and a marketing strategy. If you're launching a food or drink business, you've also got to get on top of safety, labelling and certification and develop an appealing product.
Don't know where to start?
This blog post breaks it down into manageable chunks, with advice from people who have been there, done that and learnt from the experience.
1. Get on top of the finance basics
Start by asking yourself some basic questions. Are you going to be a limited company? Do you need to be VAT registered? Do you need an accountant?
Most accountants will be willing to advise you on what you need to do through an exploratory call at this stage so call around. You can search for experts on Enterprise Nation.
How are you going to fund your business?
Many food start-ups begin as a side hustle and establish themselves as a cottage industry first. If you go for this approach it may be slower, but it allows you to juggle the business with a part-time job to help pay the bills while you're testing the concept.
Will you need to attract investors to help you scale up? If so, work on getting your brand established now so you have a strong pitch.
2. Calculate your costs and pricing
It's critical to understand what your selling price needs to be to make a profit and whether your selling price fits your target market once you've built in retailers' margins.
Take time to cost out all your expenses. It's likely you will need to rent commercial space to develop your product - do your homework on what's available in your area as costs can vary greatly.
Then factor in all the rest - transport and distribution costs, ingredients and packaging, your time or a labour cost, plus marketing and branding overheads.
To find out more about maximising profitable sales for your food business, watch our online masterclass with Karen Green from the Food Mentor. Karen helps you understand the key drivers of profitable sales and explains how to establish the right retail price for your products.
3. Research your customers and market
Build a clear profile of who your customers are and what they want. This will allow you to make decisions about your brand based on evidence and understanding, rather than guesswork or generalisations.
Retailers will expect to see proof that there is demand for your products and that consumers like your brand - know them inside out so you can tailor your product to your audience.
Brand strategy consultant Sandeep Das suggested a range of ways to research your target audience:
Consulting with family and friends
Attending networking groups and joining start-up communities
Reading relevant trade and industry publications
Attending themed conferences
Keeping abreast of trends and reading research papers
Conducting expert interviews, consultations and informal conversations
Following and connecting with influencers on social media
Using surveys to identify the size of your target group and the scale of the problem your product aims to address
You'll also need to get a clear picture of what's happening in your marketplace, what your competitors are doing and how their pricing stacks up against your plans.
4. Sort out manufacturing and certification
Even if you're making products in your kitchen, start thinking about how to scale up the volume, as well as meeting regulatory requirements for food safety and hygiene.
"Commercial premises may be a daunting step for some businesses, but it's often necessary once sales start to reach a certain level," said Bonnie Joplin from SALSA. "Operating from a professional workspace can also help build business credibility and it's usually a requirement for trade customers."
Many food businesses start in production kitchens, which allow you to pay an hourly or daily rate to work in a professional kitchen. They'll have all the relevant approvals in place so you can move up without having to commit to production runs.
If you're looking to outsource manufacturing straight away, The Association for Contract Manufacturing, Packing, Fulfilment & Logistics can put you in touch with partners.
If you have plans to target larger retailers, look at getting your production site certified by an appropriate body to prove that your food is safe and legal.
SALSA, which stands for Safe and Local Supplier Approval, runs an approval scheme, which helps local food producers sell to national and regional buyers. This is usually the best bet in the beginning as it's only granted to suppliers who can demonstrate to an auditor that they produce safe and legal food.
5. Develop a strong USP
Building a strong USP (unique selling point) is critical in helping you target your consumers effectively and in getting your product listed.
"Even with a fantastic product, you need a point of difference if you're going to persuade retailers to list your brand," said Jo Densley of Relish Marketing.
Remember that you're competing for space on their shelf against numerous other brands. It doesn't have to be revolutionary; just a point of difference that means something to your consumers, a story to get the retailers to listen and see potential.
You'll stand a much better chance of getting your product listed if you're clear about how the USP ties in with your consumer research and can show there is demand for your product.
6. Design your packaging
When it comes to food products, packaging isn't just about creating something that looks good and sells your brands and its values - it also has to be safe.
What type of packaging requirements do you need to tick off to ensure your product is safe and legal? If you're not sure, you may need help from a packaging technologist.
The type of packaging you choose could also affect what shelf life you can give your products. And it will need to protect your product through your sales channels, whether that's online, wholesale or direct to retail.
Even if you're currently selling direct to the customer at fairs and markets, think about these aspects now, so you're ready to grow your business when the time is right.
7. Know your labelling requirements
"You'll need to understand labelling, EU legislation, allergen legislation, font point size and branding. It's an incredibly steep learning curve but, if you learn how to do it all yourself,it pays in the long-term ," said Julian Abel, co-founder of Nowt Poncy.
Avoid copying label information from products similar to yours or you could end up in a sticky situation when they don't meet legal requirements.
It's worth speaking to a food technologist or your local Trading Standards Officer to check that you comply with regulations.
Consider what your customers are likely to want to see. For example, if your product is aimed at the health market, nutritional information that's easy to read will be critical.
8. Work out your shelf life and buy a barcode
To find out how to get your product shelf-life tested, contact your local Environmental Health Officer. Their details will be available on your local council website under Environmental Health.
To begin with, you could try going for a slightly shorter shelf life than that of an established competitor, then amend it when you get the definitive answer from your own lab tests.
Before you think about doing business with supermarkets, you need barcodes for your products.
The leading supermarkets and retailers all mandate the GS1 Global Trade Item Number as the product identifier you need for your barcodes so make sure you go to an authorised supplier such as GS1 UK.
Luckily, these are quick and easy to get - the barcode image will be sent to you by email then you can provide it to your packaging designer.
9. Think about distribution channels
You may be selling directly to customers at farmers' markets or fairs, but make sure you consider the different distribution channels you would like to use in future.
If you're thinking of using a wholesale distributor, do your research now and build their margin in at your initial costing stage. This way you can see whether your brand will be profitable in the long term.
This may seem daunting, but the increased volume will eventually bring down all your other costs. And, using a wholesaler will also save you time and money on chasing payments, handling orders and invoicing.
10. Write a marketing plan
You will need to raise awareness of your brand, build relationships with potential customers and demonstrate to retailers that you're driving your own sales and that there's demand for your product.
Make sure your plan includes your approach to social media, a blog, website and newsletter, media and PR, food fairs, trade shows and tastings.
Want to learn more?
Watch one of Enterprise Nation's masterclasses about food and drink:
The Amazon Small Business Accelerator helps businesses start, grow and accelerate with free training, services and support. To access the e-learning, click here to sign up or if you're already an Enterprise Nation member, log in to your dashboard.
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