8 Tips for Starting a Canned-food Business
Starting any kind of business is an exciting experience, especially if it’s something you’re passionate about. So if you have a top-notch product to get out there, why not start your own canned-food business.
Of course, there are several things you need to keep in mind to get started, like finding a niche for your business idea. Below are some tips to consider for successfully starting up a canned-food business.
1. Create an Outstanding Product
This may seem like a no-brainer, but this is the most important part of the process. You need to have a great product. Not an average, not a good-enough product, but an outstanding one.
The food produce market is a very crowded space with established players, so your product needs to stand out to be successful. There are many average canned foods out there, mostly produced by big companies with an edge over pretty much every start-up when it comes to production, distribution, and marketing. This is a huge competitive hurdle to overcome, so you need to outsmart them by creating a great product.
It may be a good idea to focus on certain niches like organic foods and the use of sustainable ingredients. But make sure to do your research beforehand and understand how big this market segment is, the competition and the costs. Organic ingredients will cost you substantially more and this will be reflected in your final price.
Even if your product is the best out there and the most eco-friendly, preservative-, gluten- and sugar- free, if it’s too expensive for the majority to afford, you may not grow your product into a profitable business. So think about about your choice of ingredients and don’t shy away from some pragmatism: you may find some cheaper and very suitable alternatives for some of the more expensive ingredients.
2. Start Small
Rather than trying to establish a big canned-food business, start small. If possible, continue to learn how to improve your products before scaling up and expanding production.
Don’t rely solely on friends and family for feedback. This is big mistake. They may leave out some good constructive feedback because they may not want to hurt your feelings. Give samples away to people you don’t know and ask them for feedback.
Something to look after at this stage is repeat buyers. This is probably your most accurate success metric. If you don’t have many reorders, that’s a signal of an underlying problem. First, you need to understand what it is.
It may be product-related. Perhaps your product is not as good as you thought and you need to tweak the recipe a bit. Maybe it’s the price. People may buy it once for the novelty factor but find it too expensive to consume on a regular basis. Whatever it is, you need to stay calm and objective, and focus on solving the issue. Remember, this is a business, and while this is your baby, it may need some fine-tuning before everyone falls in love with it.
Talking about fine-tuning, packaging is one of the things you need to be paying attention to. Good packaging is visually appealing, creatively describes the product without causing confusion, and reflects well on what your product and brand stands for. So check out online resources on how to package canned foods such as www.tdipacksys.com/. You’ll also get a glimpse of how packaging automation and systems work.
3. Perform Market Research
Conducting market research is crucial when starting a canned-food business. It may seem like a complicated process, but it’s actually not that hard to accomplish if you do it locally. A few things that you should research:
- Who are the other players in your local market?
- How good is their product (yes, it’s a good idea to try them all out)?
- How is it priced?
- Where is it distributed?
- How good is their packaging?
You could even get a bit more sophisticated and assess their marketing strategy. Take a good look at their packaging, branding, their online presence (i.e. website), and social media. How do they differentiate and what are their strong points?
For example, some companies target the premium segment, which you will spot if they use high-quality ingredients, top-rate packaging, pricing, and branding. Others will position themselves as organic or eco-friendly. Understand that even if you sell the same product, you might not be competing all the other producers as there are different customer segments and niches within every product category.
It would also be great to talk to some of their customers to find out what they like and dislike about the product. This would be an incredibly valuable experience that you could use in the production and design of your own products.
Now, if you plan to sell your product on a regional or national level, you may require help with full market research. There are plenty of companies offering market research services, some better than others, but they are quite expensive. Do your due diligence before hiring one and make sure you pick one that has experience in the canned-food industry.
There are many reasons you should conduct market research, but one of the principle ones is that it will help you determine what the competition is like, costs of canned products, and the number of consumers interested in canned goods.
4. Create a Business Plan
Yes, this is a critical part of launching a business and can make a huge difference in the success rate of a start-up. You need to understand that opening a business is a very risky endeavor and the odds are not in your favor. 9 out of 10 new businesses fail in the first ten years, and while ten years may seem like a rather long time, the failure rate is as high as 50% in the first two years!
Now, you don’t need to get discouraged. Just make sure you are well prepared, and that’s what a business plan will do for you.
Once you have done your market research, you will have completed a large part of what you need for your business plan. It will give you a good idea of your customer base, how to price your products, what your customer base likes and dislikes, where to sell your product and how to market it. All these things need to go into your business plan.
In addition, you need to figure out your operational and production costs, plan of distribution, staffing, marketing, and carry out revenue and profit projections.
You will experience many Aha! moments when you make a proper business plan. You may realize that production costs are prohibitive at low scale, that marketing is more expensive than you realized, that you need to price the product differently to make a profit, that some investments are better left for later, or that you may require more or less staff than previously thought.
So don’t skip this step as you’ll most probably regret it later.
5. Chose the Right Production Equipment
If you’ve already had a successful canned-food business for years and are ready to grow it, then the next step is to think about production and how you will be able to efficiently produce more of your great canned food.
You have two options: either rent a fully-equipped commercial kitchen or a similar-use facility, or you do everything in-house, leasing a facility and buying your own equipment.
Both come with pro and cons. Leasing a fully-equipped facility is much cheaper in the short-term and it allows you to concentrate on other things that are more important when starting a business, such as sales and marketing. But it does have its drawbacks and you may find it difficult to find a facility that meets all your requirements.
We recommend you talk to a specialist if you opt for buying your own equipment. It’s not cheap and this is not something to take lightly as mistakes can be very, very costly. There are lots of things to consider and having an expert on your side will definitely make the buying process smoother.
Take for example an X-ray inspection system. This is a machine designed to detect contaminants in cans. This is particularly helpful in ensuring the quality and safety of your food products. Safety should be your top priority, but should you buy this rather expensive machine on your own or outsource this process? This is an important question that a consultant can help you with.
However, you don’t have to go all out if you’re just getting started. If your budget is tight, think about leasing or only buying the production equipment that you don’t trust outsourcing to someone else.
6. Pricing
This is where the fun part begins. Pricing is hugely important and should already be covered in your business plan. But pricing is also very dynamic and you may need to make adjustments on a quarterly or yearly basis.
There are many things that can impact your pricing decision, such as your raw ingredients costs, growing marketing expenses, higher energy and transportation costs, higher leasing costs, and let’s not forget inflation. And that’s not all: competitors can put a lot of pressure on you by reducing their pricing, a strategy used by many large corporations to squeeze out newcomers.
Large corporations can afford to lower their profit margin temporarily or negotiate better terms with production facilities and distributors, while it may be more difficult for you to do that.
Anyhow, you need to stay informed about your competitors’ prices and be nimble in adjusting yours.
7. Distribution: AKA Where and How to Sell your Goods
One of the essential decisions you need to make is through which channel or channels you will sell your products.
Big retail stores are, of course, on everyone’s dream. But it’s very though to get a contract with a large retailer right from the get go and it may not be a very good idea either. You will have to commit to certain (large) quantities of product and you may not be ready to finance all of that.
As with other things, it’s better to start small. Think about channels where you can reach the most potential buyers with the lowest cost and be prepared to experiment. Let’s cover a few channels:
- Sell from home – This requires the least investment, but unless you own a home on a busy street which you can transform into an appealing store, this option will severely limit your exposure to your prospective customers.
- Local Farmers’ Markets – Many farmers’ markets are open once or twice a week and this is a great venue for selling your goods and getting feedback from your clients. It’s a great channel when you are starting out and is relatively cost-effective, but you may outgrow it in time.
- Fairs or Trade Events – These are great places to sell your canned food and meet potential distributors and other key people in the industry. Learn how you can participate and give them a try.
- Local stores – Go local, right? It’s much easier to get your products on the shelves of local stores than big retail. You may already know a few local store owners and can give them samples to test out. You can even do some local marketing events to drive awareness of your products and bring in additional sales.
- Online (Amazon, Social Media, Own Website) – This is perhaps the most efficient way to reach a mass of people at reasonable cost, but it requires skill. Not everyone is born a social media marketeer. But so many goods are sold online nowadays that we really encourage you to at least give it a try. Or if you don’t feel up to the task, hire a great online marketeer. It will be one of your best decisions ever.
8. Be Aware of Local and National Regulations
And here comes the not-so-fun part: regulations. Yeah, you need to know them by heart and make sure you adhere to them. You don’t want your business to be shut down or get loaded with fines that you can’t afford because you have failed to meet the regulations.
And here comes the good news: at present, many states support small canned-food businesses, making it more accessible for entrepreneurs to get started. To support micro-businesses, some states have passed laws that allow certain forms of canned products to be processed for sale in home kitchens rather than have to invest or rent commercial kitchen space.
Unfortunately, the laws may vary from one state to another and may change at any time. As a business owner, it’s your responsibility to understand and research all aspects of the laws in your state.
Conclusion
Starting a canned-food business can be challenging and complex, and there’s much more to cover than we have here. Take the time to learn about running a canned-food business and remember to start small and give yourself time to grow.
Create a business plan, make an informed decision about leasing or buying production equipment, spend a good deal of time thinking about pricing, marketing and distribution, and don’t forget to have a bit of fun doing all of these.
Featured image by Claudio Schwarz on Unsplash.
