What Leads Food Startups to Fail
Anyone Can Start a Food Business but Only a Few Succeed
Anyone can start a food and beverage business, but many who try, end up failing. Why? Maybe, because they're stuck in the kitchen worrying about the food. Kastytis Kemezys, the founder of DrinkPreneur based in London, has made some suggestions to guide and inspire future and current beverage entrepreneurs by providing necessary information about the industry. DrinkPreneur is a unique community of drink entrepreneurs. Here's why Kemezys thinks so many fail and what you can do to avoid making these mistakes.
Limited Access to Market Insights
This information is costly, and it's usually inaccessible by small and medium enterprises, but it's nonetheless crucial during the strategy-building process. Brand owners usually learn the importance of market research far too late when retailers start cutting down the category and denying their recently produced products. Failing to understand the consumer and shopper trends could cost you a fortune.
Essential Brand and Design Mistakes
Only 10 percent of new product developments are ready to pay a bit more to recruit professional packaging design experts. Never underestimate the value that a well-done packaging design can bring. Remember that 99.99 percent of your first-time consumers will buy your product based on a first visual impression. Lots of companies invest thousands in new product development, but they spend mere hundreds hiring a designer they happened to know back in college—then they complain about the bad results.
The Product Development Process
Food and beverage entrepreneurs often fail to evaluate the risks they take when they're trying to create the product in their kitchen. The products must meet FDA standards or EFSA requirements in Europe.
They have to be scalable. There are millions of different ingredients with different prices and certificates. As you develop drinks, you'll constantly deal with problems that might bring the product down quickly if they're left untreated or if the product is developed without any support from experienced food professionals.
Underfunding and Business Model Failures
A food and beverage business should have a proper and healthy business model and enough capital to execute it. Most startups are one- to two-men armies with lots of ambition but only 24 hours in a day and no cash to afford any additional help.
Sometimes this works, but it often burns out the owners, destroys the passion, and leaves many bugs in the system. There's very little information on managing a drinks business out there, so many entrepreneurs fail to understand the processes they have to deal with until it's too late.
The Route to the Market
With so many brands competing for limited shelf and fridge space, most retailers don’t care much about brands that haven't yet demonstrated that they're worthy of replacing another product that is doing relatively well. Even if the new brand somehow does get a deal with one of the major retail accounts, it tends to disappear from the shelves in the first six months because it fails to deliver on its promises and expectations.
The Bottom Line
Most beverage startups focus on adding the whole periodic table to their functional drinks, and they spend lots of time and money on the product development process, then they fail immediately. Others focus on only the drink, hoping that it will sell itself without any external push.
There's always a balance of a healthy business practice model, marketing, product, brand, communication, and promotion behind successful brands. Most of the food and beverage entrepreneurs focus only on one aspect. There has to be a balance between them.