Strategy for Starting a Specialty Food Company

Question

I have an idea for a specialty food product that I'd like to start with my family, but I have no idea how to get started or how much money may be needed to create the infrastructure to produce the product.  What advice would you offer someone in my position?

Answer

You could create the product in your kitchen, label it at the table and sell it along the roadside for very little cost to you, but it would likely not be possible for you to sell enough product that way to make a meaningful living.  If you are thinking on a bigger scale -- which I sense by your question -- then a different approach is required.

I would focus on the product specification (the ingredients, the recipe, etc.), the brand (the name, label and packaging) and the marketing (pricing, promotion, targeting, etc.) since the most value can be created by controlling those three parts of the equation.  In any typical value analysis (see the VentureGlossary for a definition of value chain analysis) you would likely find out that actually producing the product or retailing the product does not create as much value as creating and controlling the brand when it comes to specialty food products.

If you can create a terrific product and get it accepted at grocery retailers, you can always have a contract food production company buy the ingredients, blend, prepare, package, label and ship your product for you on an outsourced basis.  That way you do not need to invest in all of that complex infrastructure, take on the burden of hiring all that labor and shouldering all that risk. 

It's a great way of sharpening your focus on the product itself, while leaving the large-scale production and logistics processes to someone else.


Michael Silveira November 5, 2007

Could you please define "meaningful living"? It sounds like "meaning" is derived solely from quantity of dollars.

Wade Myers November 6, 2007

What I mean by "meaningful living" is to be able to provide for a family as opposed to just being a part-time hobby. A typical home kitchen is usually not geared up to provide the necessary larger-scale "infrastructure" (as asked in the question) required to pack most kinds of specialty food products in sufficient quantities to be a large enough business opportunity where you can quit your day job and spend full time producing a specialty food product. The home kitchen is a perfect laboratory for creating the recipe and refining the formula, but will typically be inadequate for a sustainable production environment (especially when competing for kitchen resources with a wife and children.) Therefore, my advice is not to raise a lot of money and invest in a lot of infrastructure for larger-scale production, but rather to outsource that to a company that has already made that investment once you've perfected your recipe. Then if the product takes off through broader distribution channels (broader that is than a single road-side stand as referenced in my answer above), the part-time entrepreneur can quit his day job and turn into a full-time entrepreneur since the scale of the business is now at a "meaningful" enough level to provide adequately and demand the full attention of the entrepreneur.

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