Want to Start a Food & Beverage Business?

Starting a food and beverage business is a great way to tap into a lucrative market driven by the changing consumer preferences of the 21st century. Small business owners in the food and beverage industry must work very hard to perform all the legwork necessary to ensure that their product is competitive within what is already a very large market. Read on to learn about the steps necessary to be a successful entrepreneur in this thriving industry.

How Does a Food & Beverage Business Differ from a Restaurant Business?

Food and beverage businesses are different from the restaurant industry as they are more focused on food and beverage as a consumer good rather than as a restaurant experience. The licensing requirements for restaurants and food and beverage businesses can also be very different. For example, you may be required to file paperwork with the federal Food and Drug Administration, or FDA, in starting your food and beverage business, but the FDA does not regulate retail food establishments such as grocery stores, restaurants, cafeterias, and food trucks. However, people interested in opening a restaurant will need to obtain various other types of licenses from their local authorities, such as a foodservice license, music license, dumpster placement permit, food handler’s permit, sign permit, among other paperwork. This makes opening a food and beverage business seem much more straightforward.

While opening a restaurant has many more required permits and licenses than a food and beverage business, you shouldn’t immediately rule out opening a restaurant as a newcomer to the food and beverage market, either. Once your food and beverage business is more established, you may consider opening a restaurant, pop-up shop, or food truck. However, as with all businesses, it’s best to start small and expand slowly for the greatest chance of entrepreneurial success.

How to Start a Food & Beverage Business

With the proper research and planning, developing a new food & beverage company can be a lucrative business venture. Here are the first essential steps for those seeking to start out in this industry:

1. Narrow down your product ideas and a develop a prototype.

Without a clear vision of your product, your business will go nowhere. However, while essential, an idea is only the first step to success in the food and beverage industry. Consider, also, the specifics of the industry itself. For example, if you have a beverage idea, consider whether your product will be marketed as an energy drink, juice, soda, or another type of beverage. To start a beverage company, you will likely need to consider several iterations of your beverage in your test kitchen, trying different formulations until you come up with the perfect recipe. This may require some creativity and patience but the time invested is worth it to come up with an excellent product. Enlist your friends and family to perform taste tests and tell you their opinion. Visit a grocery store and ask shoppers which of your potential products they would buy. The opportunities are seemingly endless when it comes to testing recipes. Whatever route you choose, make sure to obtain insight from your testers regarding what your product requires to be successful. This will help you come up with a popular initial formulation for your food or beverage product.

2. Once you’ve chosen your product, handle all of the required legwork.

Once you have decided on an idea, devise a good business name. Make sure to register the business and its name with the relevant government authorities. Think, also, about the type of business structure you would like to establish. Performing the research and securing the rights to your business’s name early on will save you headaches in the long run, and will help ensure that you are compliant with the IRS tax code.

You will also want to establish a business plan. Coming up with a business plan will help you with marketing and selling your product after it is launched. It will also help you keep tabs on the cost of your venture and whether it is truly worth it to bring the product to market in the way you propose. Business plans help entrepreneurs save money and work smarter, setting them up for business success.

3. If you espouse specific values about the quality of your food or beverage product, don’t shy away from them.

With increased attention to sourcing and ethical standards in the production of food, consumers are gravitating toward new, innovative food products that, in addition to being delicious, align with their life and values. This is a huge market opportunity as research indicates that consumers are willing to pay more for a product that aligns with their ethical standards. “Ethical eating” involves consideration of the moral consequences of food choices and can include terms such as organic, fair-trade, free-range (referring to poultry and livestock), and vegan. These ethical options seek to preserve the fundamental rights of both the animals that contribute to food products and the humans that help manufacture them, is gaining more and more traction in the food and beverage market.

An early example of ethical eating is Newman’s Own brand of food products. In 1982, Paul Newman established this brand of food and drink products which donates 100% of products to charity through its Newman’s Own Foundation, a charitable business entity supporting nonprofits worldwide. The success of Newman’s Own products suggests that these types of products enjoy high popularity in the food and beverage market.

Of course, if you are not seeking to sell a product that is specifically marketed as “ethical,” you can still enjoy success in the food and beverage industry, but you will likely be appealing to a different subset of consumers.

4. Analyze the market.

Make sure to survey the competition for your food or drink company. This includes local and regional competitors as well as those which may be national or international competition. Consult industry websites, the internet, and other resources. Unless you seek to be in direct competition with a local company, you can ask to meet with or even shadow their executives or higher-ups. For national and international merchants, make sure to consult industry websites and publications for more information about the history of the merchant. You may want to learn more about who is in charge of these competing businesses and their relevant experience and training to have an overall better idea of the market in which you are seeking to participate.

Be sure, also, to check out the important trends in your industry. For example, if you are opening a coffee beverage industry, you may want to look into how many consumers are opting for cold-brew rather than traditional methods of coffee brewing such as drip coffee. You will also want to know what demographic characteristics set apart different market segments. The more information you have about the market, the better you can target your products to it.

5. Develop a highly targeted, research-powered marketing plan.

Your marketing plan should be able to identify your target market (or demographic), set your product apart from the competition, define your initial product offerings and lay out a path for future expansion, explain any sales strategies to be utilized, and define whether there will be other promotional activity such as t-shirts, giveaways, or special offers which can draw attention to and promote your product.

6. Focus on establishing your brand. 

An important step in founding any company is to design a great logo that conveys your brand identity. If you are starting a drink company, think about your bottling process and the design of the bottles themselves. How will they look? You may want to choose a unique design to give your product a different aesthetic than what is typically found on the drink shelf. Think about your social media strategy as well. You may want to enlist social media influencers on websites such as Facebook, Instagram, or YouTube, to try your product and offer their opinion in exchange for some free samples. This will increase the visibility of your product and brand.

7. Stay informed on food and beverage law.

The food and beverage industry is a complicated one, regulated by local, state, and federal laws. Make sure that you remain up-to-date on the regulations and laws applicable to your industry through seminars, consulting with a lawyer, and/or joining a professional food and beverage trade association. You can check out some of the laws applicable to food and beverage companies at the Small Business Association (SBA) website here.

The laws applicable to your business will differ based on the contents of your food or drink product. For example, alcoholic beverages are more heavily regulated than non-alcoholic drinks. As another example, dietary supplements are governed by regulations from the FDA which mandate specific labeling for these products and ban the use of certain terms from appearing on the dietary supplement label. The laws for your industry may also pertain to how your product is manufactured and packaged in the production facility.

Bottom Line

While starting a food and beverage business can seem daunting, it is made a lot easier when you take the time to do the research on your product and its competitors, and strive to stay up to date with all the federal, state, and local rules and regulations on your food and beverage products. Once you have an idea, and business plan, remember to continually obtain feedback from your consumers. You may also consider developing a good relationship with consumers through your social media channels. Remember to start small with a well-researched product that, as you have determined, fills an existing market need. Growing strategically, rather than doing too much all at once, will boost your chances of small business success in this exciting and dynamic industry. In summary with research and hard work, you will have the keys to turn a simple idea into a profitable business venture.

About the Author
The Gro Team