Startup step by step. Part II: How to launch a food product from scratch

This is the second part of the guide. Read the first part of the guide here.

6. Choose the right channel strategy for your business

It should depend on your target audience and be clear by now.

Here are a few possibilities:

• Food brokers
• Food wholesalers and distributors
• Foodservice distributors and their brokers that provide food to catering businesses, restaurant suppliers, hospitals etc.
• Self-distributing retailers aka supermarkets
• Direct distribution to a selected choice of restaurants, gyms, independent retailers, coworking spaces etc.
• Farmers’ markets

If you can, add online to the mix in order to have a direct connection with the customer. It could be:

• Your own e-commerce store
• Reselling through Amazon
• Reselling through other e-commerce players

Remember that these channels can evolve over time with your business, the important is to have the right channel for your current sales goals.

7a. Set up production

Note: Again, it’s hard to tell whether 7a should come before 7b or whether they should be done sequentially or simultaneously. Typically, if you have enough available funds, setting up production could show the investor momentum and allow you to raise more easily. On the other hand, raising money could help convince the different suppliers and get better deals with them right from the start.

Once the product and channels are defined, it’s time to go one step further with setting up the production:

7a.1 Engage a food scientist or product developer to offer high-level advice as to what’s needed to manufacture a product at a commercial scale

7a.2 Draft a detailed project overview that can be shared with the co-packer including (get the help of the development expert for that step):

• A product memo with all the information you gathered so far on step 4 with the details from step 5
• All the relevant business information: who you are, what’s your story, your funding and any other information that can convince someone to do business with you
• Include an NDA if you’re more comfortable with this (if you don’t have a suitable template, ask the co-packer to provide you with one)

7a.3 Share the project overview with an accompanying brief email to a targeted list of co-packers. Avoid asking questions you can answer yourself

7a.4 Select a co-packer:

• Create a scoring model for what the best co-packer would be
• Visit them, audit their facility
• Check on the chemistry between you and the co-packer
• Initiate negotiations to get the relevant numbers
• Choose the co-packer with the best score

7a.5 Begin to source ingredients
7a.6 Register your production with local authorities
7a.7 Start making samples for tastings

Note: forcing NDAs at the earliest stages seems to have a low payoff, only do that when the discussion gets serious (“Sign something once you’ve got a foot in the door, not still begging to be let inside”)

7b. Raise smart money (if needed)

7b.1 Before you raise funds, write a business plan that covers:

• The story or the problem you’re solving
• All the information you gathered so far
• Short and long-term economic plan and the assumptions behind it
• Cash-flow for the first three years and the assumptions behind it. If you’re not a finance person, there are great templates online, which not only save your time but also help you make it right

7b.2 Write an executive summary for the above business plan

7b.3 Build a pitch deck

7b.4 Remember that several options are available for raising funds (grants, bank loans, venture capital, business angels, love money, crowdfunding…)

7b.5 If you go with investors:

• Make up a list of the best people, corporations and funds you could raise from
• Prioritise them
• Contact them with confidence
• Make sure they understand the realities of a food business and are patient when it comes to growth
• Sign Letters Of Intent (LOIs) with the interested investors
• Build Momentum
• Get the legal requirements finalised
• Wrap-up the round

7b.6 If you go with love money make sure everyone understands what they are agreeing to and that the agreements are on paper

This video from Virgin StartUp has some additional information on that part:

Note: When it comes to going through the prioritised list, there are a few possible strategies. You could go from Top-to-Bottom, trying as hard as you can with the top ones until you go to the next ones. Or you could go Bottom-to-Top in order to schedule a meeting with the most important investor in the end and practice your pitch with less important investors. You could also use a mix of both of these strategies.

8. Perfect your product recipe

Once you start making samples, it’s time to perfect the recipe:

8a. When working with the co-packer, make sure that:

• You understand all the ingredients
• You understand the whole process
• You stay in control of the vision

8b. Solicit the feedback of unbiased, candid third parties:

• Do focus groups
• Run surveys
• Offer samples in the street or at farmers’ markets and collect feedback

Note: Value any certified sommelier’s opinion 10x

9. Get retail ready

Note: Retail is not the only path forward, but we suggest to go through this list nevertheless, as retail requirements are relevant for everyone and there are high chances that you’ll hit retail stores at some point.

Quality assurance and category managers will look into the following factor to make a decision about your product:

9a. A detailed description of who the end consumer is

Including, but not restricted to:

• Age, gender
• Grocery shopping budget and habits
• Family status
• Typical direct or indirect competitors they buy
• Communities they are part of or groups they identify with
• What they look for, what their current frustrations are as shoppers

9b. A clear description of what you bring:

• Company description
• Product description with:
  a. Unique Selling Points (USPs)
  b. Key differentiators. (These can be but are not limited to: quality, price to quality ratio, special origin, strong regional relevance, strong brand, packaging, product innovation, specific certifications (e. g.: Bio, Fairtrade, etc.), seasonal offer potential)
  c. A clear price positioning
  d. Category and competitors

9c. A proof of marketability towards the end consumer which can be acquired through focus group studies and/or surveys.

It should answer these questions:

• Did the group like the product?
• Did they find that the product is priced fairly?
• Would they choose the product over other options?
• How often would they buy the product?
• How likely are they to recommend the product to a friend? (see NPS score)
• Would they consume this product together with other products in a recipe? If so, which?

9d. A clear description of the product and specific requirements on how it should be stored

• Which section of the store do you think your product falls into?
• Should it be in a fridge, freezer or on the shelves?
• How long is the estimated shelf life?
• How is your product positioned in its category?
• Is it particularly fragile?
• How much does it weigh?

9e. A clear description of the HACCP-concept, preferably from an external certification following the GFSI (global food safety initiative) requirements or any other local market requirements applicable to your case

9f. All food safety and legal requirements certifications from relevant certifiers

9g. Certifications that support product claims, e.g: Bio, Fairtrade, Vegan etc.

9h. Opinions from consultants on product claims that do not fall under a specific certification, e.g. “rich in protein”

9i. Production capacities estimated with your co-packer

10. Start selling

Do one or more of these, when possible get the help of the co-packer and other partners:

• Start selling online, either through your own website or through the traders/partners
• Negotiate with smaller shops and distributors
• Negotiate with regional or national retailers
• Start selling at farmers’/local markets

Note: Be very careful with payment terms (30–60–90 days) when signing a contract. As a supplier you’ll need to invest money in manufacturing the product and give it out to your customers before you cash-in their payment. This can create a cash-flow problem if you do not have enough liquidity to finance your next production batch.

11. Stay retail ready

Retailers want to stay in contact with the brands on a proactive and ongoing basis so make sure that you:

11a. Set up a clear process for keeping all the retailers up to date

11b. Get their feedback regularly

• Quantitative: sales, stocks, speed etc.
• Qualitative: consumers’ reaction

11c. Be very careful when it comes to overproducing

Aaaaand done, your product is on the market! That’s a lot on our plate!

Of course, there might be some things we forgot for some specific cases or others that you’ll have to skip. But this should work as a rough guideline.

The sources

A big chunk of the content is there thanks to the NX-Food blog. Here are the articles I used:

• How to Identify New Product Ideas Part 1 & Part 2
• How to Find Product/Market Fit for your Food Startup
• Advice on Launching a Food Startup Part 1 & Part 2
• Get Retail Ready Part 1 & Part 2

I also tapped into the Food + Tech Connect resources Food + Tech Connect is the largest food innovation community. Thanks to Ryan Williams for his article:

Start With Where: Steps to Food & Beverage Product Development

I took also one or two ideas from a post on Startups.co.uk:

How to Start a Food Production Business

I took some notes while watching a video from the Virgin StartUp Youtube channel:

How to Start a Food Business — The Practical Stuff

And finally, I watched a live webinar from The Food Business Schoolwhere Diane Mina, founder of Diane’s Bloody Mary, was interviewed. The Food Business School is the world’s first business school for food entrepreneurship and innovation, launched by the Culinary Institute of America.

In total transparency, I and my friend Wilhelm added our pinch of salt to the mix. I’m currently a freelancer helping companies build products that people LOVE and ex-MD of a startup accelerator in Paris and Wilhelm works in the food industry.

Conclusion

Last but not least, if you’re interested in knowing more about what the future of sustainable food will look like and learning more about the product we are working on, subscribe to our updates on this page.

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