The top 10 things you need to consider as a food or drink start-up
Posted: Wed 29th Jul 2020
Launching any new enterprise requires financial planning and a marketing strategy. If you're launching a start-up food and 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? In this blog, we break it down into manageable chunks, with advice from people who have been there, done that and learned 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?
At this stage, most accountants will be willing to have an exploratory call to advise you on what you need to do, 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 side hustle ideas and establish themselves as cottage industries 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'll 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 additional costs – transport and distribution, ingredients and packaging, your time or a labour cost, plus marketing and branding overheads.
Watch this video to learn more about maximising profitable sales for your food business, with Karen Green from the Food Mentor:
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's demand for your products and that consumers like your brand. Consequently, you need to know your customers inside out so you can tailor your product to that 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 keeping to the law and following basic food hygiene procedures.
Bonnie Joplin from SALSA (Safe and Local Supplier Approval) says:
"Commercial food business premises may be a daunting step for some, but it's often necessary once sales start to reach a certain level.
"Operating from physical customer-facing premises can also help build a venture's credibility and it's usually a requirement for trade customers."
Many food operations 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 an appropriate body to certify your production site to prove that your food is safe and legal.
SALSA 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.
In this webinar, KERB founder Petra Barran shares her insight into how to start and grow a food business, from the earliest idea stage to the point where you're developing a business plan:
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.
Jo Densley of Relish Marketing says:
"Even with a fantastic product, you need a point of difference if you're going to persuade retailers to list your brand.
"Remember that you're competing for space on their shelves 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's 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 make sure 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
As Julian Abel, co-founder of Nowt Poncy, explains:
"You'll need to understand the essentials of food labelling, food laws, allergen laws, 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."
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 food officers from your local trading standards department to check that you comply with regulations.
Consider what your customer base is likely to want to see. For example, if your product is aimed at the health market, providing nutritional information that's easy to read will be crucial.
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 via food stalls at 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'll 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, blogging, your website and newsletter, media and PR, food fairs, trade shows and tastings.
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