Image: The U.S. National Archives via Flick
November 7, 2012
Food, glorious food — where better to eat it and create it than in this deliciously diverse and multicultural metropolis. Toronto is a magnet for food processors, and although we do produce our fair share of white bread, food creation in this town goes well beyond Campbell’s soup and Kraft dinner. In fact, demand for Toronto’s booming ethnic and speciality foods market has grown 50 per cent faster than the sector average of five per cent and is expected to grow 12 per cent annually over the next five years.
Be it chipotle pumpkin pesto or frozen Tandoori dinners, niche food products can mean big business. It can also mean a lot of headaches if you spend hours whipping up sumptuous edibles while ignoring the business aspects of your food pursuit. We could write a book on the subject of starting up a food biz (and several have been written), instead, we’ve distilled our advice down to these 10 tips:
1. Do your foodie research
Even if you already have a sense of what you want to make and sell, it’s still a wise idea to check out what is all the food rage these days. As the Direct Farm Marketing in Ontario Primer puts it, “you must understand what the market wants, not what you think it should want.” Websites such as Bakers Journal, specialtyfoodnews.com, Food in Canada and SpecialtyFoodResource.com are a great way to keep in touch with upcoming trends. The Small Food Businesss website, which caters to artisan food entrepreneurs, also provides some helpful information, but keep in mind that it is an American site and not everything applies in Canada. On the print end of things, take a gander at Stephen F. Hall’s Sell Your Specialty Food. And never underestimate good old talking to people. As Your Guide to Food Processing in Ontario put out by the Ministry of Agriculture, Food and Rural Affairs (OMAFRA) says: “Field research can give you more specific information than you’ll get from published sources.”
2. Start small
If you’ve got a great idea the temptation may be to move it forward at breakneck speed. Avoid this. Instead, start your business on a part-time basis and get it going slowly, says Michael Wolfson, City of Toronto food and beverage sector specialist, who spoke in September at a How to Start a Food Business seminar. One of the things that gets entrepreneurs into trouble is the financial stress on their personal lives, said Wolfson in an email. “You have to pay the mortgage, you have to pay for food and clothing for your family and so you need a source of income that you can rely on aside from your start-up business. … [And] you cannot rely on this new business to provide this. A start-up business cannot expect to make money from the first day you begin operations. It isn’t possible, and if the financial pressure is too great you will give up and look for a steady income.”
3. Figure out what your niche market is
One way to be smart about your business is to do a competitive analysis of the products already in the marketplace and how your product stands out from the competition. “People are often very naïve and think their product is different because it tastes better. But you need to drill it down to the message,” says Barbara Lang, author of From Restaurant to Retail, in this article.
4. Consider selling directly to consumers
Instead of trying to get your product into Loblaws or Walmart right away, look at selling directly to the consumer at places like farmers markets, roadside stands, mall kiosks, craft shows or fairs, or by mail order. (The Business Idea Center: Specialty Foods article points out that competition for supermarket shelf space is “fierce” and you’ll be expected to pay a slotting fee of as much as $25,000 to get your wares on the shelves.)
5. Develop an exact and precise recipe
Adding 1/2 cup of dates to your muffin mix today and 2/3 of a cup tomorrow is a-okay when you’re baking for friends and family, not so okay when making food products for the general public. Consistency is key in any food product line. The Recipe to Market: How to Start a Specialty Food Business in Maine article notes that when developing a food product, you have to come up with “a concrete recipe with exact temperatures and times noted during the process.”
6. Set a realistic price
As a rule of thumb, price the product at least five times the aggregate cost of every physical item — ingredients, packaging and labels — that goes into it, according to the Starting and Running Your Own Specialty Food or Beverage Business article. “If the marketplace won’t support a selling price based on this ratio, move onto something else, because sooner or later financial failure is all but guaranteed.” (Ouch.) Also be aware that you will have intangible costs like labour, sales, promotion and marketing expenses, and business overhead. For comprehensive info about pricing, check out the OMAFRA guide.
7. Promote your product
It doesn’t matter how good your gluten-free chocolate chip cookies are if nobody knows about them except your three-year-old nephew. You need to get the word out on your wares. The How to Start an In-Home Business Baking Cookies article mentions heaps of ways you can advertise your small baking business on the cheap: posting fliers, networking with local coffee shops and restaurants, asking your local newspaper to do a piece about your new business, or offering to do a baking segment on a local morning show.
8. Come up with labels and packaging
No matter how amazing your prepared food is, sales may be hindered if the overall look of the product is not inviting. When it comes to packaging, containers and wrappings not only need to look pretty but they need to meet legal requirements, protect against contamination, be tamper-proof, identify the product, and supply all required info. The OMAFRA guide discusses the different types of packages (metal vs. paper for example) and where to source them. Although you might think labelling would be a fairly simple procedure, the Canadian Food Inspection Agency has managed to come up with a whopping 15 chapters devoted to the topic. One thing to know is that most food items need a nutritional panel; Maxxam Analytics and the Guelph Food Technology Centre are just two of the labs that can test for nutritional content.
9. Know about health risks
All the coverage lately about tainted beef in Alberta, brings home a point Michael Wolfson made at the food biz seminar: “food is a dangerous item” that can do damage if not properly prepared. You need to make sure your business complies with the Food Premise Regulations that explain the minimum standards for areas such as maintenance, equipment, food temperatures and hygiene. (To ensure your business complies with the regulations, contact Toronto Public Health at 311.) In addition, food processors should be covered for product liability and completed operations liability so that they will be protected against claims by customers who have incurred damages or become ill through eating their food product.
10. Get support
Wolfson advises would-be food entrepreneurs to try and surround themselves with an advisory board of people who have experience in the industry and will give you free advice. One great resource is the Toronto Food Business Incubator (TFBI), which helps provide new entrepreneurs with hands-on management assistance, education, business support services, networking resources and financial advice. If you partake in the TFBI’s Pre-Commercial Program, you receive access to a production space and fully equipped commercial kitchen, product testing at consumer markets and business advisory support. You can also get help with your business plan and more at Enterprise Toronto.
This article originally appeared in poss.ca.