Newcomers to the food industry have boundless opportunities in the modern marketplace for feeding their passions while testing consumer reception. Local farmers markets provide an ideal opportunity to offer new concepts as a first step, and to leverage the benefits of the immediate feedback from customers. Expansion beyond the local markets takes investment, however. Often, the first investments come from family and friends and that money may need to go into a production facility, which is more expensive than many realise.
It’s not just equipment costs that scaling up in the food and agriculture space brings about; there’s also the hygiene of the manufacturing process, the complexity of balancing fresh ingredients with the need for storage and shelf-life, regulations about labelling, and the logistics of transportation. That’s without even discussing the product marketing adjustments for mass appeal. Arguably, food startups have significantly more hurdles to clear than many types of businesses. Navigating health inspections and insurances can make success in a wider market seem unachievable.
If you’ve got a good idea, product-market fit is the most critical bit to get right. Before getting into packaging, manufacturing, quality assurance and go-to-market strategies, test your idea in the early-stage incubator of the farmers markets. When your consumers love your minimum viable product and come back to you for more, you know you have something real to move forward with. Commercialising your idea for wider consumption requires a few areas of focus:
- Intellectual property – protecting your IP as you enter into agreements with partners in your supply chain is important to the longevity of your business and brand.
- Food safety – it’s worth investing in the technical expertise to get food formulation right from the get-go. Food formulation is about more than the ingredients that make the taste good enough for your customers to come back for, it’s about ensuring food safety beyond transport and storage times. Guaranteeing shelf-life while maintaining the familiar flavour and feel isn’t a simple step, and could take a lot of trial and error.
- Reliable manufacturing processes -like most food startups, if you don’t have the capital to invest in your own large scale food production operation, contract manufacturing can be a cost-effective way to scale up production. Compare production partners by considering their reputations, the volumes they produce, and the appearance of their production lines. How hygienic are they, really?
- Operational costs – work backwards from your target market price of your product, to determine whether the costs of licensing are in your ballpark. Keep reviewing cost modelling as volumes change and be prepared when you to need to change elements of the supply chain to keep up with growing demand.
Commercialisation and Funding
Australia is a lot more conservative in the B2B space and getting the first high-volume order is often difficult. A track record in a farmers market is great, but the next step is bigger than most entrepreneurs realise. Australian Government commercialisation grants and entrepreneurial programs are all designed to help get research-based ideas off the ground, and the state governments all have programs of various types, such as the Food Innovation and Artisan programs in Victoria, Jobs for NSW, and SARDI in SA; as well as programs in Tasmania, Queensland and WA, with varying eligibility criteria, including turnover or job-creation potential. Grants for specific outcomes are often available, too, including the Victorian Salt Reduction Innovation Grants on offer from Food Innovation Australia, right now.
Food incubators are becoming more significant players in the maturing startup scene. These programs provide frameworks for rapidly testing new ideas and perfecting product pitches. They connect new business with capital and networks, accelerating product development and distribution. Accelerators like Brinc, in Asia, Food-X in New York, and the Australian, Rocket Seeder, offer access to mentoring and advisors, and the strength of community that comes from graduating as a cohort. For future foods, the opportunities to access venture capital are only going to increase for founders tackling the big problems of feeding the world without continuing to make ongoing negative impacts.
Within Australia, the strongest and most consistent program for financial assistance is the R&D tax incentive, which provides a solid base for any innovative food business, but is so often forgotten about. The application process is lengthy and we often find ourselves coaching businesses through the system, routinely advising clients to keep all documents, including meeting notes, invoices and receipts that can be used for making an R&D claim. This incentive can often be the most effective source of funds for scaling up production. And, for those interested in venturing into global markets for the first time, support from the Export Development Programme can help to engage an overseas market via trade missions to meet with buyers, and prepare for a new export arrangement with relevant quality assurance certifications.
If you’ve been wondering how to take the next big leap, contact us today for advice on anything from managing the manufacturing process to identifying and applying for the best source of funding.