I help startups start up!

Years ago my friend Gordon and I started Califa Foods. Our original intention was to commercialize his family’s recipe for caponata, an eggplant based sauce/relish. Along the way, we learned a lot, but never did produce the caponata. Recently I saw some folks on Hacker News asking for information about starting a packaged food business – that motivated me to write up the following summary of some things I learned:

• Production happens in factories, typically fairly small scale, that often produce similar (or identical!) products for many brands.
• You can easily get started by “private labeling” a manufacturer’s existing formulation – for example, they already have 12 kinds of pasta sauce in their “catalog” – you choose three, maybe pick a custom jar (if you want to get fancy), get labels printed, and the manufacturer will put it together for you – then you need to market and sell the product. Talk to Mad Will’s Foods to get started.
• Selling into grocery stores is possible, but can take a lot of leg work. Big chain stores are very tough to penetrate, but local chains and one-off stores are much easier.
• When selling to grocery stores, they typically want you to have a “range” of products (more than one type of pasta sauce) – you should have an odd number (three flavors of sauce is good, five might be better, but two or four is not recommended).
• Selling direct to consumer via special events (put up a booth at a street fair, jazz festival, etc) is the route my partner and I chose – we made higher margins, and got our brand established (over 1mil “impressions”!), then sold the company to someone that was going to shift to the higher-volume, lower-margin sales to grocery stores. This type of selling is a lot of work, but you can get some valuable product feedback.
• On the other hand, when selling packaged foods, customers (at least in the grocery setting) can’t taste your product first, so they make their decisions based on price, appearance, and copy (the words on your packaging). Getting these right is tricky – we used a combination of rapid feedback from the customers at special events, and digital label printing (to eliminate costs of printing plates when changing label copy) to iterate and find the optimal mix.
• You can also sell direct via new and not-so-new online markets like Amazon and Foodoro – my company sold a few jars now and then through our own website.
• Developing your own recipe is tricky – expect to pay a contract manufacturer to do this for you (they have the skills) – you might just have to commit to a minimum purchase, or you might have to actually pay them for development AND commit to minimum purchase. Once developed, the formula is fairly transferable – you can take it to a different manufacturer, either to get a better price, or to produce elsewhere to minimize shipping costs (which can be a LOT on product in glass jars).
• Organic is a big draw – it raises costs a bit, but can raise your price a bit more, leading to higher margins.
• The above is drawn from my experience with food that is cooked then jarred. Other types of food and preparations (like baked, canned, dried, etc) may be similar.
• The main industry event, which you must attend (at least as a registrant, to learn the business, if not as an exhibitor, to sell your product) is the Fancy Food Show, which is held in both NYC and San Francisco every year.

Let me know if the comments if you have questions not answered, or if your facts/opinions are different than mine.

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