I often hear from individuals who have an awesome recipe—usually passed down as a family secret—and they want to know how to bring their product to market.
Don’t Start by Raising Money
Most people who reach out want to know how they can raise money to scale their idea. While raising money to bring your idea to life seems like a logical next step, it’s usually not the best place to start.
One of the things I know from working as an investor is that consumer packaged goods (CPG) ideas don’t get funded. Investors want proof of concept. They want to see customers, sales revenues, and market traction. While this feels like a chicken and egg problem—you can’t get customers without a product, and without a product you can’t get customers—it’s a problem you must solve. And you must solve it as quickly and as cheaply as possible.
Figure Out How to Produce Your Recipe with Scale
Here are four options for producing your recipe with sufficient volume in order to bring it to market and start to get customers—whether retail, wholesale, or both—without raising money:
Produce at Home
- Depending on the “cottage laws” in your state, you may be able to produce your recipe at home and sell it at farmer’s markets. Chicago, for instance, allows entrepreneurs to produce items such as jams and jellies, baked goods, and dried herbs at home and sell them at local farmer’s markets as long as monthly sales are under $1,000.
- Rules and regulations vary by state. PickYourOwn.org has compiled a list of cottage law requirements by state.
Use a Commercial Kitchen
- Find a local commercial kitchen. There is probably one or more nearby. They typically charge by the hour and will have much of the equipment that you’ll need to produce your recipe on a larger scale than you’d be able to manage at home. You’ll most likely have to share space with others and pay extra for storage, if that’s something you’d like.
- Food Corridor recently launched a platform to match commercial kitchens with food businesses needing space. This is probably a good place to start searching for a commercial kitchen.
Partner with A Culinary Incubator
- In addition to commercial kitchen space, many culinary incubators also provide mentorship, office space, and access to other valuable business resources. It can be a great way to get started.
- This list of culinary incubators I compiled might be helpful if it’s an option you’d like to explore. Kitchen or culinary incubators typically charge a monthly membership fee and/or hourly rates for kitchen access.
Find a Co-Packer
- Finally, you might try to find a co-packer who is willing to produce at low minimums. This is usually easier said than done, but depending on how entrepreneurial your community is, it may be possible.
- Depending on minimum requirements, co-packers can be expensive, and they introduce other variables that can make launching your food business difficult. For instance, they may not be able to follow your recipe as you have it written, causing you to rethink your process. They may not be able to use the type of bottles or lids you wanted; and depending on how their lines are setup, they may not be able to run your product at all. You’ll need to do your homework.
- Co-packers can be hard to find. You can always try Google, but you’ll probably be more successful finding startup-friendly co-packers by locating other local entrepreneurs playing in a similar space and asking them how they’re managing production. For instance, if you want to make a barbeque sauce, look for other small businesses making sauces, pickled foods, jams, etc. and ask whether they’re using a co-packer and if they can make an introduction. (If you’re making a beverage, this list of beverage co-packers we put together might have you covered!)
Think Through What Else You’ll Need
While these are four ways to get started with production, you’ll need to do several other things to take your product to market. Think through:
- Whether you need to use preservatives in order to prolong the shelf life and/or ensure the food safety of your product
- What information you’re required to put on your labels, and how you must display that information
- How to price your product for wholesale and/or retail distribution such that you cover your cost of goods sold (COGS) and leave enough profit to help you cover your other costs
- How you’ll receive and fulfill orders for your product
Start with Local Distribution
When it comes to distribution, you’re likely to be most successful—and learn the most in a relatively low-risk environment—by focusing first on forgiving markets like craft fairs, farmer’s markets, gift shops, and independent grocers. You’ll be self-distributing, or practicing what’s known as director-store-distribution (DSD).
Once you’ve learned about the buying process, who your customers are, what your shelf life is and needs to be, and how your products must be labeled, you can start to expand both your production and distribution. From there, with both a compelling product and sales data to prove the world wants want you’re cooking up, you can start to approach investors.
Still have questions, or want to talk through your product launch? Get in touch!
Detailed as expected. 🙂 But what if you’re trying to start a food truck?
Freya, if you’re looking to start a food truck, I recommend beginning with a pop-up and working your way up from there. We’ve got a post for this: http://realfoodmba.com/looking-to-start-your-foodservice-business-begin-with-a-pop-up-restaurant-instead/