3 Reasons Food Businesses Fail (And What You Should Do Instead)

You’ve probably seen something like this before: you go into a store to buy your favorite small batch artisan cheese only to find a different product in it’s place. And just like that the brand is out of stores and you have to settle for something else.

Was there a problem with the product? Not necessarily. In fact many small businesses with great products fail within a few years.

Here are some of the reasons why, and some ideas of how to avoid the same fate.

The problem: Not filling a gap in the market

One of the biggest reasons food businesses fail is because they are entering an already saturated market with high levels of competition. Just because a product may be great doesn’t guarantee that it will stand out on the shelf, especially against long-established brands.

To be successful in your business, you will need to pinpoint a void in the market where your product perfectly fits. And to do that you will need to find out everything you can about your target consumer.

Just take a look at protein packed cookies that have risen in popularity over the past few years (like Lenny & Larry’s Complete Cookie). Although cookies have been a staple of store shelves for a long time, new brands have recently been able to find a footing in mainstream stores with their unique offerings (and are very successful in doing so).

Why? Because they are filling a gap in the marketplace. While their cookies might not be targeted at everyone, they are perfect for consumers who live fitness-centric lifestyles. Being able to enjoy a treat while getting the added benefit of protein appeals to a select group of consumers, but that group is willing to spend to get those products.

The solution

Finding out what makes your product unique will help you to understand how it can fit into an already crowded store, even if there are already similar products out there. To begin, start by talking to consumers that fit your target demographic. Find out about their preferences, and if there’s anything they would love to have but haven’t found in stores.

And remember, filling a gap in the market doesn’t just apply to the uniqueness of your food, it can apply to your packaging and manufacturing as well. Beyond Meat, a plant-based “meat” company doesn’t just offer a product in a niche area, they also put a strong emphasis on how their manufacturing positively impacts the environment.

The problem: Failing to secure repeat business

Repeat stores

Did you know that it can be anywhere from 5 to 25 times cheaper to retain existing customers than it is to find new ones? And with all the work that goes into getting your products into stores, it’s easy to see why.

Aside from increased manufacturing costs, securing new store placements means extra buyer meetings, more product pitches, long travel times, and sometimes even in-store demoing. And all of that work doesn’t always result in success.

For small businesses, ensuring continued placement in existing stores can mean guaranteed orders and more time to spend on increasing your sales.

The solution

To maintain your presence in existing markets, you need to have a good relationship with the store itself. Brands that frequently have stocking issues or are unwilling to offer support when necessary are more likely to be discontinued.

Especially after you just secured shelf placement, make sure that you offer as much support as possible. One easy way is to set up demos and supply stores with samples to help attract customers to your brand.

And while it may be easier to maintain existing customers, that doesn’t mean you shouldn’t still be trying to expand your reach. Instead, hire reps to visit new stores for you. Or partner up with a distribution company like Pod Foods to gain exposure to new markets and simplify orders (without having to deal with the logistics yourself!)

Repeat consumers

Maintaining repeat business doesn’t just apply to stores, it can also mean keeping steady consumers as well.

Products that have a rapid turnover (like dairy products or produce) have an advantage over products that are used more sporadically (like vinegar or spices). Whereas consumers may need to buy milk or cheese several times a month, they will probably only need to buy salt or vinegar once a year (or even less frequently).

The solution

So how can you increase the number of repeat customers even if you’re selling products that don’t have a quick turnover?

One simple way is to diversify your product portfolio. A perfect real-world example is Bragg Live Foods. Known for their apple cider vinegar (which has a long shelf life and doesn’t get used up too quickly — even if used daily), they were able to enter into a different market with their line of healthy drinks, something that consumers are more likely to buy every time they’re in the store.

Not sure though that your products can be diversified to include rapid-turnover items? Try increasing repeat business by offering different versions of your product (such as travel or sample size) that can be used to both introduce consumers to your brand and increase your monthly sales.

The problem: Not starting with a business plan

If you’re ready to move your business out of your kitchen and into retail stores, you’re going to need a well thought out business plan. Too often entrepreneurs let their passion for their work overtake their business sense and end up burning out quickly.

Food businesses aren’t just about having a great product, they’re also about marketing, product positioning, and shelf strategy (and that’s in addition to the basics of running a business).

Having a business plan can not just help a business grow, it can help to have a plan in place in case the company grows too fast, and you’re having difficulty keeping up. Instead of just winging it, you’ll be able to grow your business sustainably and avoid most unpleasant surprises that may pop up down the road.

It’s also important to know how the business is going to be financed before it really begins. How much capital do you have? Where is it coming from? What happens if your finances run out? What are the estimated costs of starting your business?

The solution

Get help. Especially if you’re a first-time business owner, talking to other entrepreneurs or using detailed templates can help you create a business plan that takes into account things you may not have thought of.

Additionally, be aware of your strengths and weaknesses in running a business. Unsure of how to deal with taxes or expenses? Enlist an accountant. Not feeling confident with the legal side of things? Look for a lawyer or online legal counsel that can answer questions for you.

Remember, growing a successful food brand isn’t just about having a great product — it’s also about knowing how to deal with the business side of things.