Growing your food business: Part 2
Learn how to grow your business from a direct sales or small wholesale business into a large-scale wholesale business. Michigan food processors offer tips that they have learned through the school of hard knocks.
In this article, the President of The Gluten Free Bars talks about tips for business expansion. The tips were given as part of the Making It In Michigan specialty food conference in Lansing, Michigan in November 2014.
Marshall Rader, President of Gluten Free Bar in Ada, sells in over 3000 stores. “It is critical to evaluate whether you can make and sell your food product at a profit,” said Rader. He also advised that it is important to understand if you can scale the quality of your product when making larger quantities because you cannot cut corners on quality. If you cannot scale your quality, then you have a limited opportunity for profit in the food business.
When it came to a business plan, Rader made it brief and stuck to a one-page document that identified that a market existed and what price would work for a profit. “Be successful at what you are doing now to show a success story before you try to grower larger,” he recommended. Rader also believes it is important to know who you are and turn down offers that end up being a distraction to what your company really is.
Rader advised that as your business grows, “know your production capacity and know what the next step is if a higher order than your current capability comes in.” Whether it is having trained production workers who are ready to assist, finding a larger kitchen to use, identifying a partnering company to work with or identifying a co-packer, know what that next step is and have it ready when the time comes.
When dealing with distributors, Rader cautioned that the bigger the distributor is, the higher the margin they take and the harder it is to deal with problems when they arise. The MSU Product Center points out that full service distributors that offer warehouse to shelf services will charge a 20-30 percent margin. For this reason, specialty distributors may be more in-line with small specialty food processors.
The MSU Product Center, in partnership with Michigan State University Extension, provides business counseling for product development and marketing strategies that will help Michigan entrepreneurs commercialize high-value, consumer–responsive food products. For more information, visit the MSU Product Center website or call 517-432-8750.
Other articles in this series: