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Five reasons food start-ups are not making the right impression

06 Sep

Five reasons food start-ups are not making the right impression

Celtrino Marketing

celtrino Marketing

The Food & Drink sector is a vibrant space that increasingly attracts start-ups looking to build successful and long-lasting offerings.

Recent years, in particular, have seen the number of food start-ups growing significantly – causing established, large-scale producers to take notice.

Food start-ups are beginning to take a significant chunk out of the market

However, 90% of food start-ups fail in their infancy citing issues around funding, cash flow, and distribution.

There are, however, a number of other aspects that contribute:

 

Choosing the wrong go-to-market approach

Given the volume of new food start-ups and the ubiquity of new food offerings, there is a temptation for start-ups to attempt to create a brand new phenomenon that stands out from the crowd.

However, the reality is that it is much easier and cheaper to enter an existing sub-sector that needs rejuvenation.

Start-ups still need their own point of differentiation to make an impression, however these can be subtle in nature, rather than creating something new from scratch. Simply adding different ingredients or flavours to an established product category, can help create a unique selling proposition (USP) to help you stand out from competitors.

 

Carrying out minimal research

Market research should be comprehensive and include many different elements, from spending time online, to carrying out observational practices, to testing the product on potential customers. All of which can be achieved without breaking the bank.

Start-ups can use the internet to carry out a wide-range of research activity, such as studying online retailers and their existing ranges all in one place, monitoring competitors’ activity, assessing any potential partners for going to market (such as food incubators), and consulting online forums to read about experiences from those who were/are in similar situations.

Observation should also be a key part of research. Paying a visit to local stores can provide first-hand information into what is already getting listed, how competitor offerings are differentiated and any gaps that can be exploited. What products are already on the shelves? What are the price-points? What is the packaging like? How do all of these differ between the various competing brands that are listed?

It is impossible for start-ups to be fully objective about their own product. They will need to ultimately test the offering with third parties. To ensure objectivity, a blind test can be carried out with the start-ups offering/product and a competitor equivalent both being given to subjects to taste, without revealing which is which. Taste will leave a lasting impression, and it is important start-ups can differentiate themselves in this regard.

It is important to accept constructive criticism, and be potentially prepared to make several tweaks to the product, before being ready to go to market. Ignoring potential customers is a tried way to fail. Not gathering some user feedback and having a tunnel vision are fatal flaws for start-up failure.

 

Failing to establish the right price-point

Getting a product listed on the shelves of the major retailers is a significant business development, however retailers will start to de-list the product if shoppers don’t ultimately buy the offering.

If the product is significantly more expensive than competitor brands on the shelf - even once everyone’s margins have been incorporated - the cost of manufacturing and the full supply chain process need to be reviewed to ensure the correct price point is hit, pre-launch.

 

Becoming too focused on one sales channel

For many start-ups getting listed with retailers is the be-all and end-all, however there has never been more avenues available to reach end customers.

Learn more on how to enhance sales by building an e-commerce online shop

Farmers markets and trade events are a great way for start-ups to showcase their offering to potential customers.

Online marketplaces, such as Amazon, increase overall online presence. Social media platforms present an opportunity to carry out competitions and product giveaways to further entice the customer.

 

Ignoring the back-office elements of the business

Many start-ups don’t spend enough time on the unseen side of their business. In terms of building business relationships, they place too much emphasis on customer loyalty, however most don’t spend enough time building relationships with the main actors across the supply chain, from retailers to distributors to suppliers.  Inevitably, things do go wrong in the supply chain from time to time, but interacting and building relationships will help to amend these issues.

Investing in supply chain solutions – such as automating orders and invoices, managing all trading partners on one system and syncing inventory with online sales channels - will save time and costs in the long-term, so that overall business activity can be managed on a greater scale.

 

Also check out our blog on how start-ups are growing in 2018

Contact Celtrino to take the next step in scaling your food start-up