From lemonade stand to profitable food business

VANCOUVER -- Every entrepeneur’s got a lemonade stand story.

But Tara Bosch not only had a lemonade stand, she talked four friends into starting their own stands, supplied them with lemonade and took a 50-per-cent cut.

Bosch’s next venture, selling fellow students vinyl-backed chalkboards and whiteboards that adhered to walls without damaging them, yielded $8,000 in profits.

Now 21, Bosch wants to build a sugar-free/stevia-sweetened, natural candy company.

“It’s unbelievable how many people want to process (food) now,” said food industry consultant Andrea Gray-Grant of Good to Grow Natural Products Coaching. “It’s been a pull from the consumer and entrepreneurs are responding.”

Many food entrepreneurs are young, in their late 20s or early 30s, and a mix of aspiring empire builders and values-based entrepreneurs, Gray-Grant said.

The popularity of farmers markets has encouraged local processors to launch products on very tight budgets, she said. “It is inexpensive for processors to have a table at the farmers markets and they can sell their products for maximum profit and complying with market regulations is basic and affordable.”

But farmers market sales offer a false sense of security. Making the transition beyond these markets is a huge step, said Gray-Grant, who worked with Happy Planet and Yves Veggie Cuisine and has owned her own food manufacturing facility.

Consumers who will pay top dollar at the farmers market want better pricing for the same product in a grocery store.

Retail is less profitable than farmers markets, but offers the opportunity for volume.

“You may think you have plenty of money to move your business into retail because today your bank account is full, but there will be a period of time that the money going out is far greater than the money coming in,” said Gray-Grant, who has worked one on one with 70 new food entrepreneurs in the last three years. She also teaches BC Agriculture’s Business Planning for Food Processors two-day courses to help small food processors learn sustainability, profitability and business practices.

Locally owned Choices Market has seen a huge influx of early-stage food entrepreneurs knocking on their door in the past three to five years. Hundreds come every year. Few are accepted.

The key differentiator for success?

“The marketing aspect is probably the most critical aspect of everything they do, Choices CEO Ishkandar Ahmed said. “My job as a retailer is to give them space on the shelf, then I’m done. I don’t sell their product. They have to sell it.”

Product needs good packaging, an eye-catching label, an interesting name. Pricing must be right, and the product must be supported with promotions, deals and product demos. “We don’t have empty shelves waiting for their product to come along. For them to go on the shelves, something has to come out.”

The production of chocololates, as well as fermented foods such as marinated beets and kimchee, are popular. Cost of entry for these products is very low, but so is shelf space.

“We can’t fit any more chocolate on our shelves,” Ahmed said. “The same thing with coffee. Don’t show us another coffee ... You’d better have a real twist.”

Heirloom garlics, tomatoes and potatoes in well-designed “little convenient bags” are popular, and the coconut water craze is progressing to desiccated coconut and coconut flour. Chia and quinoa are in everything from granola bars to chocolates and breads. But Ahmed is most interested in products with less sugar — not products with sugar substitutes — but less sugar overall.

Hooray Truffles by Alanna

Alanna Kingston and her mom make organic, vegan dark chocolate truffles. The mother/daughter duo have sold their truffles at Christmas markets for two years and this May began selling at farmers markets, where they’ve started getting wholesale requests.

“I think the next step is funding, or getting some different equipment or having an extra person,” Kingston said. “What are some of the margins we should be working with? How much money do we need to put out? Do we pay ourselves?”

Gray-Grant said differentiation is challenging in the competitive local chocolate market. “Because they are likely the only chocolate at the (farmers markets), and I would recommend that they stay there for a while longer and build a little brand recognition.”

The need to differentiate can become critical when considering retail, and costs will skyrocket.

Before seeking funding, write a business plan projecting sales from several revenue streams such as farmers markets, Christmas shows, specialty and independent grocery retail and cafés, Gray-Grant said.

Don’t launch with less than a 40-per-cent gross margin (sales minus cost of goods sold) and be sure to account for your pay, whether or not you take it, otherwise costing will not be accurate, causing difficulties down the road, Gray-Grant said.

Munch Fresh Foods

Tina Lung’s two-year-old Munch Fresh Foods sells fresh fruit cups and yogurt granola parfaits to clients including JJ Bean, Vancouver Board of Parks and Recreation’s 13 concession stands and Meinhardt Fine Foods.

Lung rents a 1,500-square-foot plant and runs a simple, but systematized, operation where all fruit is hand prepared by up to 10 employees. She delivers with her own refrigerated van, with product retailing between $4 and $6.50 per unit. Now the former food industry sales rep and café operations consultant wants to brand her product. She’s already started applying logo-printed clear tape on some of her product cups.

Branding will bring consumer recognition and will likely increase sales, Gray-Grant said.

It will also increase vulnerability.

“There are some very large competitors out there who are also doing fresh fruit. Once you brand yourself, then you are on the map and then that competitor can clearly see where you are and where you’re infiltrating,” she warned.

The pre-printed clear tape is a reasonable interim measure, but visibility is poor, particularly in bad light. Lung needs a bolder, easily recognizable look.

Pre-printing cups with the Munch logo and labelling information will be very affordable; branding won’t mean Lung can increase prices.

Sky Harvest

Aaron Quesnel’s two-year-old Sky Harvest urban farm grows organic microgreens, or very young salad greens that are often used as garnishes by chefs. The social values-based business (three or four part-time employees, one full-time) sells to about 40 Vancouver restaurants and has started moving into retail, selling through Spud.ca and a few Choices and Pomme locations. All deliveries are made by bike.

Quesnel encourages larger sales by offering more products to existing customers. Taking into account different package sizes, Quesnel has about 45 products.

Fundamental to success to date is meticulous money management and assistance from like-minded supporters. Quesnel gets legal advice in exchange for greens, for example.

“Every day is a very fine balance,” Quesnel said. “I could use a bunch of new equipment but we try to fix what we have until it can’t be fixed anymore.”

Profitability “is new territory for us,” Quesnel said. “The challenge is maintaining that and increasing that.”

Quesnel has a “pinch point” with his growth, Gray-Grant said. He needs to grow his customers because the restaurant business can be very fickle.

“The potential of him selling to more retailers and going out further afield is really great,” she said. For efficiency, she would encourage more retail, selling fewer products, widening distribution and selling to more locations, “and the bike is going to be a problem.”

But Quesnel’s not interested in trucking his product.

“This is a guy who really walks the talk,” Gray-Grant said.

Another idea is to buy coolers and provide them to retailers.

“His product will last for weeks in a fridge in perfect condition, but it’s often not perfect conditions in retail.”

Buying coolers might sound expensive, but “in the long run, it’s a fantastic investment. You can brand the cooler for your business and you can fill it,” Gray-Grant said. “I think that’s the way of increasing his business.”

AuthenticMexicanFood.ca

Andrea Blendl and her parents, who used to own a restaurant, want to sell canned Mexican salsas and sauces. They are at an early stage in their research and are wondering about market access and health regulations.

The Blendls’ operations expertise has misled them into deciding to manufacture canned salsa, since it will be easier to manage food safety and shelf life, Gray-Grant said. She recommends the Blendls take a step back and do some market research. “You need to figure out what consumers want first. Canned salsa has a connotation of being cheap.” 

Stevi-Sweets

Tara Bosch, now a fourth-year University of B.C. counselling psychology and literature student, wants to sell stevia-sweetened gummy bears and marshmallows.

“People really should be able to enjoy candy without compromising their health,” Bosch said.

She has investigated manufacturing moulds and machines, applied to entrepreneurship competitions and is developing her recipes. She wants information on financing, sourcing ingredients, and the best path forward.

Bosch needs to consult a food scientist to help scale up her recipe, Gray-Grant said. “What you make at home doesn’t necessarily translate into something you can sell at retail. It may be full of bubbles or not a pleasure to bite into or look at.”

Given the hefty cost of moulds and machines, it may make more sense to hire a contract manufacturer such as a gummy bear vitamin manufacturer.

“The best way to manage your cost is letting someone who really knows what they are doing, who is doing products 24/7 and has access to more affordable and better ingredients, and has the know-how to make the product,” Gray Grant said. “It may be more expensive, but it may not. Either way, all costs will be clear.”

The best time to go to the bank and seek financing is after winning a competition, not before.

jennylee@vancouversun.com
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