How to Start an Online Food Business

 Are you a foodie or an aspiring restaurant owner with a fresh new idea? Well, today we're gonna learn how to start an online food business from idea all the way to launch and we've even pulled together a step-by-step beginner's guide, so if this is just an idea for you at this point, 

this article is gonna be all that you need to get started. Stay tuned because we have some insider tips to give you every chance for success. (fast-paced music) Welcome back, I'm your host, Michelle Bali. And if you are new, I am very glad to have you here. To Learn with Shopify is an article that is dedicated to helping start and grows your online business. So if you're a small business owner and you have big plans, make sure that you're articled. In 

every new business, there are definitely hard lessons to be learned but the food industry though is in a league of its own. There is lots of information, there's lots of misinformation and there are legal consequences. So if you're selling jewelry from home, for example, your product probably is not gonna make someone sick, but with food, safety is always gonna be a major concern. The onus is on you to stick to the rules and be obsessive about quality. All 

that scary stuff aside, let me tell you why running a food business brings great opportunity. So first of all, it can be lucrative. Food will not be in necessity. Secondly, it can become very rewarding. Watching people enjoy your product, will make all that hard work 

worth it in the end. And lastly, it's stimulating. There is tons of room for creativity in this industry. So if your business idea is too good not to pursue and you're ready to take on this challenge, then I and Kailey are here to help you succeed and sell online. Kailey is the owner of NONA Vegan. She sells vegan Italian sauces. Her business was founded as a tribute to her mom, and her mom would actually say, "This is how Italians get facials," as 

they were stood over the steam of pasta. Now, before we hop into it, I just wanna say that every country and every region is gonna differ in terms of food laws. So make sure that you are consulting with a lawyer and your local government. All right, without further ado, let's hop into it. In many cases, you can find your niche through your passions or your hobbies. 

Kailey says, "After my mother passed away, I longed for the special times that we shared in the kitchen. So I began to make her sauces myself. Cooking has this way of bringing back memories of loved ones, certain flavors, aromas, and sensations have the power to send you right back to treasured moments." Kailey's niche is vegan Italian sausages, but what's your niche? Okay, first let's define what a niche is. So a niche is when you cater to a distinct 

segment of people, tastes, or ideologies. You could choose to center your business around a specific cuisine or a specific food category. You could look at selling a specific type of cooking. Maybe it's about a specific ingredient for you or maybe it's about selling to a 

specific type of person, right? There's a lot of ways that you can take your direction of niche. Do competitive research. Do research to test out if there is a market for this product. If it is a saturated market, ask yourself, "How can my business be different?" So make sure that you're looking at your direct competitors and your indirect competitors. Also, consider if 

there is a product that can be easily shipped and sold online. And remember if your competition is doing well, your odds for success are actually higher. Here are some key things to look at as you're doing your competitive research. So first of all, you're gonna wanna determine which regions you'll be able to serve. Second, can your business fill a gap? There's got to be a market gap which your business can fill in those regions. And then third, 

you're gonna wanna refine your offerings to exceed the regional competition. So how do we do this? Here's what you're gonna wanna do. Start by compiling a list of competitors. Indicate whether they're direct or indirect. Next, you're gonna want to analyze their operation, their menus, their marketing, and promotional materials, and hot tip. Make sure that you also analyze their customer reviews. That's gonna help you find their weaknesses and make them 

your strength. NONA Vegan certainly fills a gap because Italian sauces sometimes have those milk and creams, so Kailey's product really stands out from the competition because she has those unique ingredients. Food trends. If you don't yet have a product idea, make sure that you're looking at current food trends for some inspiration. Actually, foodandwine.com predicts that the at-home restaurant experience as well mushrooms are 

gonna be one of 2022's hottest trends. They definitely have one of those, right, so far, but in any case make sure that you're backing all these up with research, right? Look at search volume, look at Google Trends and then check out what the competition is doing. We asked Kailey how she did trend research to ensure that her products were hit. I am my own target 

demographic. As a vegan for over 17 years, gluten-free for health reasons, and a big-time foodie, I navigate the world of taste buds first. Industry trade shows are a great place to spot upcoming food trends. In my industry, most of the trends start in California, so I keep an eye out there. Food business ideas. All right, let's spitfire a few business ideas just to give you some direction. Okay, so you could do gourmet, you could do artisanal. You could serve 

dietary restrictions like gluten-free or nut-free. Maybe you wanna think about social or environmental directions. So you could try natural ingredients or even fair trade, and you can even target ethical or religious markets like vegan, vegetarian, maybe Kosher, or Halal. So hopefully those have given you a few ideas just to get you started. But as far as specific ideas, you could do canned and pickled products, you could try dried herbs, think about 

baked goods or you can even do ingredient kits. And if the actual creating, maybe isn't your thing, you can try curated resale. All of these ideas that we just talked about are great because they are low investments and they require minimal equipment. They also don't have many shipping challenges or legal restrictions. Sourcing ingredients. Food lawyer, Glenford Jameson, stresses the importance of doing your homework when you're sourcing your 

ingredients. "Trace the supply chain," he says. So that your packaging claims match what's inside and you're working with trustworthy companies. We ask Kailey how familiar she was 

with her supply chain, and she also has some tips on how you can become even more familiar with your own supply chain. Kailey says, "I started the company on my own, so I created the supply chain from the ground up. I am still intimately involved with the supply 

chain, though many things are now delegated and subcontracted out. I do think the old adage of a CEO knowing each role within their business is important. At the same time, bringing in experts and delegating are essential parts of running a successful business." Developing a relationship with your supplier is going to improve the trust and it's gonna make them feel more invested in your business. So if you plan to produce a product that's 

gonna be labeled as organic, for example, make sure that your raw ingredient supplier has those proper certifications before making claims on your packaging. A quick tip when you're sourcing ingredients. So when you're just starting out, you're gonna obviously wanna be producing in small batches. So make sure that you're being as cost-effective as possible by shopping for ingredients at consumer warehouse clubs like Costco or Sam's Club. You're 

also gonna wanna make sure that you're making connections. So in certain industries, finding suppliers might rely on word of mouth or personal connections. So start building that foundation, start building that network right away. If you have a ton of ingredients or maybe direct relationships, it just seems like a lot, and maybe just a little daunting right 

now, what you can do is you can look for a distributor or a broker who works directly with farmers. As you're launching your business, you definitely are gonna have several avenues for your production. So here are some ways that you can start selling. You can start selling your food from home. So some food items can actually be legally produced and sold right from your domestic kitchen, but make sure that you are looking into regulations surrounding 

your chosen product, for example, in the US, the FDA requires that you register your home-based business as a facility. If you need a bigger operation, try shared commercial kitchens. Many facilities offer shared or co-op kitchen spaces that you can rent out either hourly or monthly just depending on your production needs. Now the benefits are reduced costs for one 

and the facilities are already registered as commercial spaces, so that you don't have to deal with as much paperwork. There are several regions specific directories for shared kitchen spaces, so you can check out culinary incubators that is if you are in the US, you can check out Ketchup, which is for all my UK people. And then if you're in Australia, check out Book to 

Cook. You can set up your own commercial facility. Now, this might not be the best option for new or budding entrepreneurs, but maybe it can be a future goal. Most small businesses are not gonna take this step until they're just bursting at the seams, and they know that they have enough business to support it. Another option to look at is working with an existing 

manufacturer. This option is great for a hands-off entrepreneur who is just more interested in the business side than the production. It's a really great option for industry newbies too, as manufacturers should already be versed in the food and safety regulations. To find a food manufacturer via a manufacturing directory and you can check out something like Maker's Row to make that connection. Packaging, branding, and labeling. E-commerce is pretty challenging when it comes to food because people can't taste your product through their screen, right? So that's why branding is especially important. Package design, photography, your website, and the wording that you use need to help consumers imagine how your 

products might taste. Before you taste the product, it's gotta be something that attracts you, right? So quick tip, because the packaging is extremely critical in this industry, you're gonna wanna consider hiring a graphic designer. Aside from the visual appeal of your packaging, each country is gonna have its own labeling requirements. That might include best before dates, nutritional information, or allergen warnings. If you plan to sell outside of your country especially to retailers, make sure that you're checking the country's rules around 

labeling as well. I will link food labeling and packaging requirements and information in the description box below. How much does it cost to start an online food business? Now because of the different models that we've already talked about, the cost to start a food business can vary wildly. If you were to open a restaurant or a physical food store, your upfront costs would be upward of $200,000. Small batch producers who have home-based 

businesses have far less overhead. So without leases or staffing costs, you could realistically start with just a few hundred dollars to cover ingredients, your website, marketing costs, and your packaging. You can always expand into the commercial spaces later as your business grows, and actually, you may even be able to claim some of your 

housing and utility costs at tax time if your living space doubles as your business space. So if it's not possible to run your business from home, consider the monthly cost of a commercial facility as you're calculating your startup costs. Production facilities can be expensive but many co-ops and incubators offer shared kitchens to entrepreneurs for a fraction of what you'd be spending in a dedicated space. In Hamilton, Ontario, the Kitchen Collective offers memberships for as low as $200 per month or $16 per hour. How to price 

food products. So ultimately, there's no one magical pricing formula that's gonna work for everyone, but you need to know your costs and just keep adjusting your profit margins until you're getting it right. To make your life a little easier, I'll leave a link in the description box to a pricing calculator spreadsheet for you guys, but one strategy is to forego profit at first just to get your product in front of as many customers as possible. Otherwise, if you do believe in the value of your product, make sure that you are pricing it accordingly. So try to 

compete on something actually unique. That way you won't have to compete on price because eventually, it is really just a race to the bottom. Kailey lets us in on a few tips on how to price your products. Number one, don't count on future price cuts when pricing. I made this mistake multiple times. I know it's tempting to think, "Once I can order 100 units of x my price will go down, So I'll just build out my pricing with that price break." While 

that may be true, keep in mind that most commodities continue to rise in price and will often offset that price break. Price for where you're at right now to ensure you aren't losing money. You can always lower your price if need be. Number two, price as if you've reached your ideal future distribution model. If you always wanna go direct to consumer, then that's fine. If you ever wanna wholesale to other distributors or stores, make sure you build your 

pricing out to include distributor margins, broker margins, and retailer margins. When you do sell direct to consumers, you can provide discounts and or keep the extra margin. Number three, work your pricing both top-down considering what you want the end-use to spend, what the market can bear, what your competitors are doing, and bottom-up, getting a fulsome look at your COGS and COS and building a comfortable margin for yourself based 

on industry standards. Number four, cold call successful folks in your industry to get an idea of what the industry standard is for margins and markups. How can COVID affect your business? COVID has stirred up some new challenges in people's lives. Getting groceries, prepared meals and affordability have been challenging for most of us if not all of us. So if your business can solve one of these problems, then you're gonna have a better chance 

at success. Cost and availability are certainly challenges people are experiencing, so it can be worthwhile looking into these. So if COVID has taught us anything, it's that your business definitely needs to have an online presence. There has been a shift from eating out to ordering in and this has created a surge in demand for things that can be easily and 

quickly ordered online. Also, it's worth noting that starting a home-based food business is a lot easier in this climate, especially if you choose to produce foods that are considered non-hazardous and don't need refrigeration. This will allow you to leverage that online advantage and expand to different regional markets. The fine print, food, and the law. If you 

do your homework, get proper licenses and meticulously track everything with your batches, then the likelihood of you getting into any legal trouble is gonna be low. If you do get into trouble though, the consequences can be severe. As a food producer, you're exposed to both civil liability and regulatory liability. According to food lawyer, Glenford Jameson, "The government can throw you in jail, take all your products and destroy them and then shut you down or give you a big fine," he says. So to be on the safe side please do a consultant lawyer with experience in the food industry. It's gonna be expensive at first, yes, 

but you might be thanking your lucky stars later down the line when you avoid even more costly consequences. So here are some tips. Learn how to properly handle and store food to avoid getting people sick. Trace the supply chain. Ask questions of your suppliers and get referrals. Work with a lab to test your products. Labs can help identify and trace elements 

that may be known to cause allergic reactions. Keep thorough records, track everything coming in and everything going out of your facility. Make friends with the food inspector. They are there to identify any issues and set you up for success. They offer you free advice, 

so take it. And finally, get liability insurance. Be sure that you are covered in case anyone does get sick. Kailey certainly does her due diligence. She recommends ensuring you have adequate liability insurance and necessary licenses for your industry. Doing things the right way from the start will save challenges down the road. Ethics and transparency. Beyond legality, bad decisions around ethics and transparency can ruin a brand. The best businesses are gonna ask themselves ethical questions about their suppliers, how they treat their 

employees and how they impact the environment. This earns trust, respect, and business from customers and your community. Shipping and delivery. It's not a surprise that shipping food has its own set of challenges, especially when it's being shipped abroad. So check out 

the Meat Inspection Act, Canada Agricultural Products Act, and Fish Inspection Act, just to make sure that your food is okay to be exported. Consider as well, the potential risks on your product in its destination country. Technically speaking, once products are in the shipping stream, they do become the problem of the purchaser. But that's pretty poor customer service, right? That's obviously not great for business. So the rule of thumb is to understand the rules of your shipping destination. If this seems like a lot, you may wanna consider working with a fulfillment service if you do a lot of business across the border. Kailey tells us about her challenges with shipping her products and she tells us about how 

she bypasses these issues. She says, "I wish I hadn't started a refrigerated food company. We need to ensure we ship with ice packs, in cooler boxes for our products. If I could do it all again, I'd do a tea or a spice company." Love that honesty. Order pickup and local delivery. If you're selling an item that simply cannot be shipped by post, maybe it's like fluffy cupcakes, then you're gonna wanna consider alternatives that still allow you to sell online. You can formulate a line of products that you know for sure will ship well like cupcake flavored cookies instead. Otherwise, you can get local customers to order ahead online and pick it up. So good news, in response to COVID, we have actually put together a full guide to help you set up your delivery methods. So I will leave that in the description box for you 

guys. Building a website. In this era, more and more people are searching online for food deliveries and products that they need. This means you need to set up a virtual version of your business with a welcoming informative website and social media pages. If you're looking to start an online food business which I know you are then Shopify makes selling online easy, fast, and scalable. You can get started with a free 14-day trial, no credit card required, and this is gonna give you a full two weeks to build a beautiful e-commerce store so that you can start making your sales right away. I will leave a link in the description box for you guys to get started with your free trial. The look and the feel of your website are gonna be very important in helping influence a customer to buy a food product that they haven't tasted first. So you can opt to DIY your photoshoots or you can hire a professional 

who has experience with properly styling and lighting food. Shoe product packaging and close-up details of the product to show texture and true-life color, but also experiment with lifestyle photography. That suggests serving and pairing ideas. Now we have an entire 

article dedicated to shooting products at home with just your phone, so make sure that you're checking that out right up here. Even if your website isn't supplying the bulk of your sales it's important to nurture it as a tool to connect with customers and tell your story. Remember the internet never sleeps, and an online store is gonna allow you to sell your products 24 hours a day. This will allow you to increase your audience and open up your customer base. An online presence with positive customer reviews will allow new potential customers to 

build trust in your company and your product. Retail and wholesale. You can grow your business through retail partnerships. You can expedite your success by getting retailers to be a part of your business and inviting them to care about your mission. So for example, your partnerships can be more familial where you're working with them to do menu pairings. So 

I'll make sure to link some directories in the description box to help you guys find some retail partners. Offline marketing. Though your business plan may have no room for a physical retail strategy, it is still very important to take your product to the streets and to the mouths of your potential customers. To generate buzz by locally participating in farmer's markets, you can also try running a pop-up, or you can partner with restaurants or other 

complementary brands to host a tasting event. Why not host a private dinner party for influencers or maybe periodically invite customers into your process like a brewery tour for example. You can also participate in food and beverage expos as things start to open up. Marketing your business is a deep topic. A lot of your success especially in the food 

industry is going to rely on this. So if you're interested in learning more, register using the link below to gain access to a free 30-minute webinar, and that will help you level up your marketing by changing the way that you think about your store's marketing funnel. Learn 

how to go from the first day to the first sale in this free training course. I'll leave that link in the description box for you guys. If you liked this article, make sure that you're giving it a big thumbs up. That helps our article and our community grow. Now starting a food business is truly a complex topic. So if you have any questions that have been left unanswered make 

sure that you're dropping those in the comment section and we'll create another article to help you on your journey. Thank you guys so much for watching. I'm your host, Michelle Bali, and I will catch you in the next one. Bye.