Published April 12, 2021 on NE Connect
As a small business owner or startup founder you may have walked down the aisle in the Supermarket and thought to yourself ‘I can do better than that!’.
Well, it isn’t as easy as you think. Years ago the Food & Drink market was dominated by large brands and own label products, but since then, life has moved on and consumers are no longer sold on big advertising campaigns and being told what to eat or drink. This led to more consumer-friendly brands like ‘Innocent’ and ‘Fever Tree’ emerging and pulling the rug from under the huge multinationals.
However, starting a Food or Drink company isn’t as straightforward as you might imagine. If you see a mass of products in a category such as Kombucha or Energy Drinks, chances are you have missed the boat and the only way to get into this category is by being cheaper or throwing more money at your brand than the competition; neither of which I recommend.
Instead, you need to have a POD (Point of Difference), something that others aren’t doing and is clearly a direction for the market. The trend now is very much ‘health, taste and low or no sugar’, even more so since COVID19 as everyone wants to get healthy, fight off potential viruses or illnesses and strengthen their immune system.
So before jumping into this industry, consider the following:
- RESEARCH your market! We have so many clients that come to us with very little idea of the competition in the category they are planning to enter. The more established a category is – such as energy drinks – the harder and more expensive it will be to make any inroads.
Don’t just look in the UK, research the rest of the world. You can learn a lot from other brands’ mistakes and get some great ideas from the flavours they have used. You can understand their messaging to their audience, how well they are selling in their market and at what retail price.
Is your idea already available? Did you perhaps see it on holiday and think this is a good idea, let’s do it in the UK? If it is a well-established brand overseas the chances are they will have huge marketing budgets and be able to swallow any market you establish in the UK – beware of this.
Many years ago, I went to a conference and one of the speakers spoke about ‘Ways to Fail’. His basic message was – don’t take money from a successful business and invest in something you know nothing about, as it’s a sure way to fail, also keep this in mind!
- POD (Point of Difference): Think long and hard about what you are offering and why it will stand out in the marketplace. There has been A LOT of innovation in the drinks category over the last 10 years. Many small brands have grown and even taken on the likes of Coca Cola, so much so that the big players have spent millions to acquire them. This is the dream of any new brand, but in reality rarely happens. Far too many products simply don’t stand out anywhere near enough to make a real difference in the market.
To stand out from the crowd you must have a point of difference, drawing your target audience in so that they want to cross the road to buy your product, rather than finding the closest offer. For long term success, aim to create a following so that your brand is more attractive and appeals to the big players, they want your audience!
What is a point of difference? It’s not just a funky flavour or eye-catching packaging. It’s being unique, blending ingredients that others have not thought of before and at the end of the day, making sure it tastes great.
- MONEY; This isn’t a cheap industry to get into and one of the issues is the minimum runs for production. You can develop a production recipe (as opposed to one made in the kitchen), get a brand name and branding, and then attempt to raise the money after that in order to pay for a production run. However, it’s virtually impossible to raise money just on a basic idea. If you have no seed funding to get started, you may have to rely on family and friends to invest or donate, but this can be high risk and potentially harm your relationships.
You must think very seriously about where the money will come from, I have seen too many entrepreneurs who’ve only had just enough money to do their first production run and left with nothing for their marketing. This is destined to fail. It can take up to two years before you make any money to support yourself. Before you take that risk, make sure you have enough available to pay for adverts in wholesalers’ catalogues, sending out samples and possibly attending exhibitions, all whilst supporting yourself.
It’s essential to have a clear financial budget for your business – whether you are self-funding or reaching out to investors. With many products you can start with what is known as an MVP (Minimum Viable Product), but this doesn’t work in the drinks sector. The taste, the name, the branding, the distribution, the samples, the presentation pack for buyers – all this needs to be spot-on from day one, and that requires money.
- RECIPE DEVELOPMENT: Just because you have made your drink in the kitchen doesn’t mean that it can be exactly replicated in a mass-production situation. We work with several recipe development experts to help us source the ingredients at a competitive price and ensure they work together – resulting in a drink that tastes just like the one you created in your kitchen, but will suit your co-packer.
Some ingredients just don’t blend. This is a very specialised area and the recipe needs to be perfect. So, you will definitely need expert help. Any contract manufacturer will expect an exact recipe, and for the packaging, you will need to know all the nutritional information for labelling.
One area that many entrepreneurs overlook is ‘Novel Foods’. The regulation on Novel Foods applies within the UK and the EU. If your ingredient falls under ‘Novel Foods’ you will probably need to pay for research to prove it is safe for human consumption. (See: https://ec.europa.eu/food/safety/novel_food_en)
Not all ingredients are allowed to be used in drinks and this is protected by Novel Foods, so you need to be sure that all your ingredients are in fact allowed to be used. This will save you time in the future rectifying any obstacles you could have tackled in the initial stages.
- PACKAGING: This can make a huge difference to your cost outlay.
For example, glass is the cheapest option as you can do the smallest production run. But, neither wholesalers nor retailers like glass, the former due to the weight, and the latter because it may break – making it by far the hardest to sell.
Second cheapest in terms of small production runs, is Hot Fill PET (plastic) which is small volume as the PET bottles can be filled with high temperatures. The negatives are that the bottles are ugly with solid ridges down them. Also, with the backlash of PET polluting the oceans – these bottles have a lot of PET in them – consumers are turning away from this type of packaging.
Next up is Aseptic Fill, where the PET bottles are blown on-the-line and then filled in aseptic conditions to keep all the bugs out – after which the contents are pasteurised in the bottle, locking in all the nutrients. However, you cannot do a small run with this method. The minimum runs are massive as the factory needs to completely clean the entire line in between flavours – and with productions running at 25,000 per hour, you can imagine how many you’d need to produce to make this a viable option.
Fourth option is cans. These are very popular now, but minimum runs are high. For example, minimum runs for printed cans are 150,000 and minimum filling runs are 75,000. There are options to fill blank cans from as low as 12,000 volume and then sleeve them afterwards. It is a more expensive option but a far better way to test the market.
Fifth, is Tetra Pak but the printed runs of the cardboard are around 100,000 and need to be used up within a year. It’s a difficult option until you have the volume to justify it.
Last but not least is HPP (High-Pressure Processing), this is great for juices as the temperature is only 4C so it preserves all the goodness, antioxidants and flavour. The runs are small, but the cost is 10-15p per bottle just to put them in the machine as they use pressure instead of heat to pasteurise. The distribution must be chilled and has only a one or two-month shelf life, which makes the product more expensive.
Understanding the best type of packaging for your drink and your target market is important. It’s a large part of your initial outlay so you want to get it right. Also, a wrong decision could leave you with a lot of very expensive unusable products on your hands.
- CO-PACKERS (Contract Manufacturers): These are the people that fill your drink in bulk. They are a very important part of the process and therefore you need to be careful who you choose to work with. Although there is a lot of choice in both the UK and EU, there are several companies that care more about making money than they do about making the perfect product. Then, there are the big players that just don’t care about start-ups. Do your research and make sure that the company you select has a good reputation. Also make sure they have the right certification as once you start to get listings, you’ll be asked that question by wholesalers and retailers.
Very few people try to do this alone and succeed, you will need help and advice because when you make a mistake it can not only cost a lot of money but also may be the end of your brand.