photo credit: Jack Skipworth Loop via photopin (license)

How to launch a food product from nothing

“In preparing for battle I have always found that plans are useless, but planning is indispensable.”
— Dwigth D. Eisenhower

At the moment I’m considering launching a food product with a friend (Wilhelm). It’s going to turn one of the most unsustainable part of this industry upside down, every bite in our product will improve the global warming situation. And though I’ve been in the startup scene for a few years (ex MD at Startup42), I have to say I know nothing about launching food products specifically.

So I did a little research and found great articles online (see the sources section at the end) and decided to compile them in a massive To-Do that will guide us for a while. I hope it will help you as well!

But enough with the chit-chat! Here’s the (massive) To-Do!


Goals

Everything starts with setting up the correct goals

It might be obvious once said but this is what you should aim at. A product that:

  • Is Tasty
  • Aligns with customer needs
  • Aligns with customer lifestyles
  • Aligns with customer values
  • Has good margins

0. Start with why

Setting up the goal for the product is critical, but you also have to acknowledge your own goals and expectation for this beautiful journey ahead

0.1 Build a strong food philosophy

It’s important to start your business with a strong set of values that can serve as a compass. Answer these questions:

  • Why are you launching a food brand?
  • What kind of impact do you want to have on the world?
  • How do you want to make people feel?

Of course you can watch the famous video from Simon Sinek to refresh your memory on that topic (I’m also thinking about publishing a list of questions that help you for that step, let me know if you find it interesting)

0.2 Decide whether you are building a lifestyle business or a scalable business


1. Understand the potential customer

Get a deep understanding of your potential customers and identify a problem worth solving: to create products that win people’s hearts and minds, you first need to understand their lifestyle, beliefs, values, attitudes, interests, behaviours and needs. This will also get you to understand who the potential competitors are and stay focused. In order to get there:

1.1 Pick a niche:

  • Remember that too narrow is better than to wide
  • It should be a set of people that resonate with your food philosophy
  • It should be a set of people that you understand.

1.2 Run:

  • Surveys — offline or online
  • In-Home Ethnographies — explore your customer’s viewpoint in depth, potentially even going to their place
  • Digital Ethnographies — explore your customer’s viewpoint via a video chat
  • Studies of Online Communities — see what people say online on subreddits, facebook groups, forums, twitter…
  • Identification of Food Tribes — pay attention to new diet trends
  • Polls on existing communities — maybe there’s a community you can directly ask for ideas to?

1.3 Fully understand your customer, ask them:

  • What are their values and why?
  • What keeps them up at night, and why?
  • What are their pain points, and why?
  • What role does food play in their life, and why?
  • What does a day in their life look like?
  • What is their lifestyle like, and why?
  • What is their household composition?
  • What do their meals look like, and why?
  • Where do they shop, and why?
  • What do they buy, and why?
  • What drives purchasing decision?
  • What is their budget?

If you’ve never interviewed people from a potential target market, I recommend you watch the Justin Wilcox’s content. And in particular one of his most helpful video hosted by Techstars and often broadcasted at Startup Weekends:

Customer Discovery: What Do You Ask, with Justin Wilcox

2. Size the target market

Once you have a detailed target you should understand your product’s market size potential and category dynamics. It’s important to understand how your product might cross over into mainstream:

2.1 Size the target market and the pain:

  • How big is the target market?
  • How big can the target market become?
  • What is the potential for crossover to adjacent markets? How big are these markets?
  • What is the potential for crossover to mainstream audiences?

3. Find a few ideas

If the potential market seems big enough for starting something, then you should try to find a few solutions by brainstorming:

3.1 Go out and explore…

  • Supermarkets
  • Online retailers
  • Blogs
  • Meet people in the industry
  • Look at the international market. Many products abroad could also have a good chance in your domestic market

3.2 Generate many ideas / think outside the box

3.3 Pick the best idea(s) and challenge it/them against your understanding of the audience:

  • Where would it sit on the shelf? Which category does it fall in?
  • What would it take to move it off the shelf?

Note: If you have several ideas, it is suggested to spend an average of two weeks on points 4., 5. and 5b. with each idea to benchmark them against one another


4. Refine the idea

Outline the technical requirements of the product:

  • Category
  • Ingredients
  • Packaging
  • Specific Certifications or Accreditations (Bio, Fairtrade, Vegetarian, Vegan, etc.)
  • Distribution method
  • Safety measures
  • Shelf life
  • Quality
  • Machinery and production process needed

5.* Understand your unit economics and the feasibility of scaling the product

*Note: It’s hard to tell whether 5 should come before 5b or whether they should be done sequentially or simultaneously. I guess it depends on which one is the easiest, because a negative outcome to one of the two is enough to stop the whole process

Many costs associated with producing a product and getting it to market, like ingredients, production, packaging, freight, warehousing, distribution, slotting fees, trade spend, marketing and sales. If our unit economics — the direct revenues and costs associated with a product on a per unit basis — don’t allow for a 35–50% gross margin, our business won’t be sustainable. And don’t forget to account for margin that you’ll have to give to your distributor and/or broker as well. We should answer these questions:

5.1 How difficult is it to lock down your supply chain?

  • MOQs
  • Safety Stock
  • Pricing
  • Lead Times
  • Timing of all various suppliers Just In Time (JIT): ingredients, packaging, production slots etc.

5.2 Where will you produce your product?

Think about:

  • Image
  • Expansion possibilities
  • Costs
  • Simplicity
  • Any other relevant factors

5.3 If you need to work with a co-packer, what are their standards:

  • Production capabilities
  • Minimum order quantities (MOQs)
  • Tolling fees
  • Availability
  • Equipments specifications
  • Certifications
  • Lead times / Slots

5.4 Define the potential targets for you product’s:

  • Availability
  • Pricing
  • Minimum Production
  • Possibility to Scale / grow / expand

5.5 Evaluate short and long term unit economics

The goal is to see if the product can survive at its target Manufacturer’s Suggested Retail Price (MSRP), consider all the costs that can be involved:

  • Costs Of Goods Sold (COGS)
    - Production costs:
     * Ingredients
     * Packaging
     * Co-packer’s Tolling Fees
    - Scrape Rate / Return Rate
    - Freight costs
    - Storage
    - Customs Duties
  • Distributor’s margin
  • Retailer’s margin
  • Marketing
  • Overhead
  • Define how you will reduce the Costs of Quality in the long term

5b*. Test your idea

*Note: It’s hard to tell whether 5 should come before 5b or whether they should be done sequentially or simultaneously. I guess it depends on which one is the easiest, because a negative outcome to one of the two is enough to stop the whole process

Find product-market fit as fast and cost-effectively as possible: Too many startups spend a lot of time and money developing the perfect product before ever testing it with consumers, this is especially true of startups who are working on highly technical food science innovations.

What is the minimal amount of money and time you can spend developing your product before you start testing the concept with potential customers? Do you even need to develop a product to test it with consumers? Do you need to develop packaging and a full brand to test it with consumers?

Do as many of these as early as possible to share your idea and get feedback:

  • Run Ads
  • Get People to pay (E-Commerce, Food Markets, Crowdfunding, Popup shops…)
  • Organise giveaways
  • Get a co-packer on board
  • Sell to independent retailers

If you want to learn how to do good Facebook Ads to test and validate your idea, I’d recommend watching this video from Pirate Skills Meetups by Ben Sufiani:


6. Choose the right channel strategy for your business

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

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


7*. Set up production

*Note: Again, it’s hard to tell whether 7 should come before 7b or whether they should be done sequentially or simultaneously. I guess it depends on where the momentum is the easiest to build and on available funds before raising capital

Once the product is defined, the idea is challenged against the market and against numbers. It’s time to go one step further with setting up the production:

7.1 Engage a food scientist or product developer to offer high level advice as to what’s needed to produce it at a commercial scale

7.2 Draft a detailed product memo that can be shared with the co-packer including (get the help of the development expert for that step):

  • All product information
  • All relevant business information
  • Include a NDA if you’re more comfortable with this** (if you don’t have a suitable template, ask the co-packer they usually have some ready)

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

7.4 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

7.5 Begin to source ingredients

7.6 Register your production to local authorities

7.7 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)

*Note: Again, it’s hard to tell whether 7 should come before 7b or whether they should be done sequentially or simultaneously. I guess it depends on where the momentum is the easiest to build and on available funds before raising/finding more capital

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 economics and the assumptions behind
  • Cash-flows in the first three years and the assumptions behind. If you’re not the finance person, there are great templates online, which not only save you time, but also help you to 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, banks, investors, love money, crowdfunding…)

7b.4 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 that 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.5 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: Different strategies can exist when going through the prioritised list. 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 the most important investor at last and practice your pitch with less important investor. Or you could 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:

8.1 Work with the co-packer but make sure that:

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

8.2 Solicit the feedback of unbiased, candid third parties:

  • Do focus groups
  • Run surveys

Note: Value any certified sommelier’s opinion 10x


9. Get retail ready

Note: Retail is not the only path forward, but go through this list because retailers requirements are generally relevant for everyone and chances are that you’ll hit retailers at some point.

Quality assurance and category managers will look into the following things to decide wether they are selecting your product or not:

9.1 A detailed description of who the end consumer is

9.2 A clear description of what you bring:

  • Who the company is
  • What the product is with:
     a) Unique Selling Points (USPs)
     b) Key differentiators. It can be, but not limited to: quality, price to quality ratio, special origin, strong regional relevance, a strong brand, packaging, product innovation, specific accreditations (ex: Bio, Fairtrade, etc.), seasonal offer potential
     c) A clear price positioning
     d) Which category it belongs to and who the competitors are

9.3 A proof of marketability towards the end consumer which can be acquired through focus group studies and/or survey. It should answer these questions:

  • Did the group like the product?
  • Did they found the product was priced fairly?
  • Would they choose the product over other options

9.4 A clear description of the product and specific requirements on how it should be stored

9.5 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

9.6 All food safety and legal requirements certifications from relevant certifiers

9.7 Certifications that support product claims such as: Bio, Fairtrade, Vegan etc.

9.8 Opinions from consultants on product claims that do not fall under a specific certification such as “high in protein” from example

9.9 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 to payment terms (30–60–90 days) and their impact on cash-flows when signing a contract


11. Stay retail ready

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

11.1 Setup a clear process for updating all retailers with any additional informations and updates

11.2 Get their feedback regularly

  • Quantitative: sales, stocks, speed etc.
  • Qualitative: their feeling of the consumers reaction

11.3 Be very careful 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 that should give a rough guideline already.

If you have suggestions of additions/editions or questions because a point lacks clarity (and I’m sure there are some) don’t hesitate to contribute to this To-Do by commenting. I’ll consider making some fixes.

The sources

Much of the content is there thanks to the NX Food blog. NX Food is a food accelerator located in Berlin. Massive thanks to them (and their guests) for their awesome content. Here are the articles I used:

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

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

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

And finally I watched a live webinar from The Food Business School where 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, Wilhelm and I added our pinch of salt to the mix. I’m currently a freelance helping innovative projects build products 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 (hint: our product 😉), leave us your email here:

Looking forward to your comments, shares and claps!

Cheers 👏