Avoid These 5 Major Problems of Food Startups

Anyone can start a food business... only a few succeed. Why?

Drinkpreneur logo on table with juices
Drinkpreneur Live “is the first specialized start-up accelerator for RTD beverages". Drinkpreneur

Anyone can start a food business, but most fail. Why? Because they are stuck in the kitchen worrying intently about the food. This is why, after 35 years in the food business, I started The Foodpreneur, where we help food entrepreneurs take their ideas and turn them into commercially viable products.

I ran into Kastytis Kemezys, founder of the Drinkpreneur, based in London, United Kingdom. DrinkPreneur is a unique community of drink entrepreneurs.

Our main purpose is to guide and inspire future and current beverage entrepreneurs by providing necessary information about beverage industry. Between Drinkpreneur and MYdrink Beverage Innovation, which help food entrepreneurs you bring better products to market, I had to reach out since Kastytis and do the same thing, just 3000 thousand miles apart!

So Kastytis, what are the top 5 business startup problems food or beverage “preneurs” experience?

Well, there are many but here are my top 5.

Limited access to the market insights

This information is costly and usually inaccessible for the small and medium enterprises, but is crucial during the strategy building process. Usually brand owners learn the importance of market research far too late – when the retailers start cutting down the category and deny your recently produced product. Failing to understand the consumer and shopper trends could cost you a fortune.

Essential brand and design building mistakes

Based on my experience, only 10% of new product developments are ready to pay a bit more and to recruit a professional packaging design expert.  Never underestimate the value that well-done packaging design can bring! Always remember that 99.99% of your first-time consumers will buy your product based on a first visual impression.

I know lots of companies that invest thousands in New Product Development, but spend 200$ for a designer they know from college and then complain about the bad results.

Product development process

This was the first challenge we faced as an early stage drink start-up in 2008 and led to the establishment of MyDrink Beverages. Food and beverage entrepreneurs often fail to evaluate the risks they take when trying to create the product in their own kitchen or working with the factory close by. The products have to meet FDA or EFSA (Europe) requirements they have to be scalable, the recipe – transferable. There are millions of different ingredients with different prices and certificates. As we develop drinks in our laboratory for 6 years already, we constantly deal with problems that might bring the product down really quickly if untreated or developed without any support from experienced food professionals.

Underfunding and business model failures

As any other business food and beverage business should have a proper and healthy business model and enough capital to execute it (Dom: I believe Crowdfunding will be the new funding path for food entrepreneurs). Most of the start-ups we meet are 1 to 2 men armies with lots of ambition, but only 24 hours per day and no cash to afford any help.

On rare occasions, it works out well, but often it burns out the owners, destroys the passion and leaves many bugs in the system. As there is no or very little information on managing a drinks business, many entrepreneurs fail to understand the processes they have to deal with until it is too late.

The route to the market

With so many brands competing for the limited shelf/fridge space, most of the retailers don’t care much about the brands that have not yet proven to be worthy of replacing someone who is doing relatively well. And even if the new brand somehow does get a deal with one of the major retail accounts they tend to disappear from the shelves in the first 6 months because they fail to deliver their promises and expectations.

DrinkPreneur is all about guiding the brands through the whole process and facing these challenges before they start spending money.

We get them in front of the retail and distribution buyers and help them understand what little twists and tweaks they need to succeed on the shelves.  

I always pose “Why Do Food Entrepreneurs Fail?” with my immediate response “because they are stuck in the kitchen! What is your take on why so many food startups fail or languish?

I absolutely agree with your point. Most of the beverage start-ups focus on adding the whole periodic table to their functional drinks and spend lots of time and money for the product development process themselves and fail immediately. Others focus on the drink only and hope it to sell itself without any external push. I always say that there is always a balance of a healthy business practice model, marketing, product, brand, communication and promotion behind the successful brands. Most of the food and beverage entrepreneurs focus only on one aspect and fail. There always has to be a balance between them.