Industry Snapshot: A Quick Look at the Specialty Food Industry
The Staff of Entrepreneur Media Inc. explain how you can launch a profitable specialty food business, with information on the hottest trends, insight from practicing specialty food business owners, and how you can differentiate your business. In this edited excerpt, the authors describe the different ways you can work in this industry to sell your specialty foods.
From cheeses, meats, and seafood to shortbreads, toffee, and maple syrup, the specialty food industry has such a wide range of entry points that if you have a food skill and feel passionately about letting others enjoy the fruits of your skill, you should certainly consider taking it to market. And not only is the range of food types broad but you can choose how to participate -- as a producer of a specialty food, you can make your product and sell it in your own retail store or via mail order or be strictly a producer providing your product to retail stores or mail order catalogs to sell.
The specialty food industry has far exceeded the realm of the niche market. While some items within the industry may be niche-driven, overall specialty food is itself a force to be reckoned with.
There are several avenues you can take if you want to start a specialty food business. These include:
- Homebased business that's self-limiting from not only space but also state and federal food production and sales laws
- Homebased business that has more opportunity for growth because you've created a commercial kitchen space in your home
- Your own retail shop that includes a production area
- Production-only specialty food business that distributes to a network of retailers
- Production-only specialty food business that focuses on mail order
Of course, a combination of one or two of these is not only a possibility but quite likely. Which is to say that with the specialty food market, the sky’s the limit! You need to do some soul searching and figure out some logistics to decide which approach makes sense for you and the business you envision.
The SBA suggests you think about the following four questions to help you decide if a homebased specialty food business is right for you:
1. Is your home properly equipped for the business of food production? What do you intend to produce? Do you have the equipment? Do you fall within the limits of local zoning laws?
2. Are you ready to take the appropriate steps to license and register your homebased business? It's not worth it to try to skirt around the regulations. You don't want to risk your business.
3. Do you understand the regulations that govern food production? Again, you need to know what you're required to do and then do it. It's not worth risking all your hard work trying to skirt around regulations that just seem too difficult. Contact your county’s public health department and find out all you need to know.
4. Are you ready to market your food product or service online? Don’t look at the internet as regulation-free. The food business has very specific regulations governing online ordering and marketing of food, much of which, the SBA says, is state-regulated. If you plan to sell across state lines, it gets even more complicated. Find out what these regulations are before betting your whole business on online sales.
Starting and running a retail store is an animal all its own and one that, according to the SBA, more than a quarter million people in the U.S. earn a living doing. The SBA offers the following tips to get you off on the right foot:
Determine which type of retail model is right for you. If you've decided on a physical store as opposed to online retailing, you might want to consider whether there's an existing store for sale that would meet your plans. If you're going to start from scratch, be sure to check all the regulations for retailing the specific type of specialty food you are planning to create.
Find the right location. You need your location to be where your target market goes. The SBA recommends making sure to “combine visibility, accessibility, affordability, and commercial lease terms that you can live with.”
Take care of the regulatory requirements involved in starting and operating a business. The food business has some unique and strict regulations that you'll want to be sure to know and adhere to. If your retail store has a production area, you need to know the regulations for two very different aspects of your business.
Production and Distribution
You may decide that a retail store isn't right for you and that you'll produce your specialty food but leave it to others to sell it for you. Your product still has to get to the retail stores, and the stores need to know about your product, so there's a still a lot to do besides produce your specialty food.
If the idea of marketing and the organizational details of marketing, selling, and shipping don’t appeal to you, you'd better plan to find someone to whom that does appeal, because getting those three things right will make or break your business. You can produce all the great product in the world but if no one knows you have it, and no one sells it for you, your business is going nowhere.
To make the initial decision to do the production and let others do the selling, you need to focus on getting that production facility just right. First, make sure you check with state regulations about a production facility. You can choose to buy an existing facility or build out your own. It's often best to locate near your target market. But no matter where you choose to locate, the regulations for the inside of the production facility will be the same. Be sure to find out what they are.
Once you have your production facility planned and you know when you expect to start rolling out your first product, you'll need to start marketing to the retailers you hope will sell your product. Be prepared to provide samples to potential retailers. You can either send samples to potential retailers or attend a trade conference where retailers check out wholesaler booths/products.
However you decide to approach retailers, be sure to send the product in the actual packaging you plan to use so they can see the finished product and how it will look on their store shelves. If you're not sure of the finished packaging, use potential retailers as an unofficial focus group and ask their opinions about different packaging possibilities.
Once you’ve landed several retailers, you need to get your products to them. This is where you need to decide on the best shipping method to ensure your product gets to the retailer intact, the way you intend it to look. For instance, mail order specialty food retailer Omaha Steaks ships their products via overnight mail; their products are flash frozen with dry ice inside a Styrofoam shipping cooler. Recipients are instructed on the outside packaging to unpack and put the contents in the freezer as soon as possible.
Not only do you need to decide on distribution range and packaging, but your facility needs to be able to accommodate the packing and shipping process. This is a whole different animal from creating the specialty food you plan to sell, so if this isn't something you’re interested in, make sure you hire someone who has the skills to get an efficient distribution process underway and operating.