How to Start an Online Food Business: The Ultimate Guide

How to Start an Online Food Business: The Ultimate Guide

When Bob McClure wanted to level up his family pickle business, he found shared commercial space in a tofu factory. The healthy bacteria in the air—caused by the fermentation process of the tofu—began to ferment their first batch of pickles and everything needed to be scrapped.

In every new business, there are hard lessons to be learned, each industry with its own unique complications and legal considerations. The food business, though? It’s in its own league. There is a dense forest of information (and misinformation), more risk of legal implications, and a volatile supply chain that can be affected by anything from weather to, well, healthy airborne bacteria.

If your passion is jewelry, and you’re looking to sell your living-room-made embroidered bracelets online, the barrier to entry is fairly low. And, your product probably won’t make someone sick. With food, however, safety is always a concern. National and regional government organizations closely regulate and monitor the food industry to ensure public safety, but the onus is on the producer and the merchant to stick to the rules and be obsessive about quality.

If that’s not daunting enough, running a food business also involves a delicate inventory dance to avoid spoilage and waste, which can cost a new business a lot of money.

Have I scared you yet?

Don’t fret—I waded through the information and consulted some experts so that you don’t have to. In this post, I’ll cover the basics of starting a food business—everything from production to labelling—and ultimately how to sell food online.

Meet the Experts

Bob McClure, Co-owner, McClure’s Pickles

Glenford Jameson, Food Lawyer, G.S. Jameson & Company, and Podcaster, Welcome to the Food Court

Jodi Bager, Founder, JK Gourmet

Daniel Patricio, Owner, Bull & Cleaver

Casandra Campbell, Co-founder, Liberty Village Brewing Co.

Note: each country and region will differ in terms of food laws and licensing requirements, and some industries like dairy and alcohol may be subject to additional rules. Be sure to consult with a lawyer or your local government for information specific to your business and region. For the purposes of this post, the information and advice will be general, unless noted.

(Header image by: The Fresh Exchange)

Food to Make and Sell: Finding your Niche

Photo: gourmet lollipop brand, Lollyphile

In many cases, business ideas are born out of passions or hobbies. If you make jams for friends and family, growing your own backyard strawberries, that’s a good place to start. You already know the process, and have had experience honing and testing the recipes.

Bob McClure and his brother Joe grew up making pickles with their grandma, Lala, and it was her family recipe that ultimately inspired the business. An actor and a psychology major respectively, they didn’t know the first thing about business or manufacturing, but the tried-and-true recipe was their foundation.

If you have an idea already, as in any industry, test its viability. Is there a market for this product? If it’s a saturated market, how can your product differ? Is there an untapped niche audience? Also consider if yours is a product that can easily be sold online and shipped—consider legalities (say, with liquor), fragility, and shelf life (does it require refrigeration?).

Food Trends

If, however, you don’t yet have a product idea, look into current food trends for ideas. Eater.com’s A-Z list of 2017 food trend predictions includes healthy chips, kombucha and flexitarian dieting. Back up the claims with your own sleuthing, though: look at search volume, Google Trends, and check out the competition.

When the McClures decided to offer a premium pickled product, they had very little competition. 10 years later, pickling well into its hipster heyday, Bob welcomes his competitors.

“Yeah there’s competition, but it's the right type of competition if it's bringing awareness to highly specialized quality-driven entrepreneurial products. The more I can get consumers to pay attention to that category, rather than price-driven, poor quality ingredients, the better for my business. It helps improve our entire category.” – Bob

Food Business Ideas

Does your idea tap into an existing niche category? Explore:

  • Custom, novelty
  • Gourmet, artisanal, small-batch
  • Dietary restrictions: allergen-free, gluten-free, nut-free, etc.
  • Certified organic, natural, fair-trade
  • Ethical and religious: vegan, vegetarian, kosher, halal

Jodi’s business, JK Gourmet, was designed to help her manage ulcerative colitis, and her audience is people also suffering with colitis and other forms of IBD—1.6 million people in America alone. She produces healthy snack options without the ingredients that commonly trigger her condition.

“We’ve carved out our niche with grain-free products, which ensures we’re gluten-free as well. We also address the needs of the growing paleo community, and because we have always eliminated the use of refined sugar and artificial sweeteners, we’re appealing to a wider audience than ever before.” – Jodi

How to sell food online

Look into easy first-time food-businesses that require low start-up costs, minimal equipment, and fewer shipping challenges, and legal restrictions. Consider:

  • Candy
  • Packaged snacks
  • Canned and pickled products
  • Dried herbs
  • Baked good ingredient kits
  • Seeds
  • Raw ingredients (flours, etc.)
  • Curated resale
  • Coffee and tea

Produced vs. Curated

Much of this post applies to businesses who produce their own food, whether it’s through a 3rd party manufacturer, a home-based business, or a full-scale commercial facility.

If you’re looking to curate existing food products, say in the case of an online gourmet marketplace, skip ahead to Pricing. You may also like: Redefining Local: Small-Batch Producers Collaborate to Disrupt the Grocery Industry, our profile of Shopify merchant, Many Kitchens.

Sourcing Ingredients

Food lawyer, Glenford Jameson, stresses the importance of doing your homework when 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.

Helpful resources:

If you plan to produce a product that will be labelled organic, for example, be sure that your raw ingredient supplier has the proper certification, before making claims on your packaging.

“We work with distributors of raw nuts and seeds and dried fruit. We sometimes source our own ingredients if we have a new product we want to bring out and we can find no one in our group of suppliers who carries the ingredient in question. Sometimes our suppliers make suggestions based on something new that comes to market. It's a collaborative partnership.” – Jodi

💡 TIPS:

  • When you’re just starting out and producing small batches, it may be cost-effective to shop for ingredients at consumer warehouse club stores like Costco or Sam’s Club.
  • Make connections: in certain industries, finding suppliers may rely on word-of-mouth and personal introductions. The founders of Soul Chocolates networked in the industry to make connections with regional cacao farmers.
  • Alternatively, for commodities like cacao and coffee beans, look for a distributor or broker who works directly with farmers.
  • Team up: network with other small-batch producers to purchase bulk wholesale ingredients together

Sometimes our suppliers make suggestions based on something new that comes to market. It's a collaborative partnership.

Jodi Bager

Food Production: Commercial Kitchens, Home-based Businesses, and Manufacturing Facilities

Photo: Kitchen Co-op

While McClure’s Pickles started as a family tradition in their own kitchen, they continually improved their digs, eventually landing in the 20,000 square foot factory space where they operate today.

“When we were first starting out, we literally made it the same way we did when we were kids. We rented a kitchen that had a larger stove and we would go buy fresh product, bring it back, call up our friends and say ’Hey, I'll buy you pizza and beer if you come make pickles with me on the weekend.’” – Bob

When we were first starting out, we literally made it the same way we did when we were kids.

Bob McClure

As you’re launching your business, you have several options for production:

Home-based business: some food items can legally be produced and sold right from your domestic kitchen, but look into the regulations surrounding your chosen product. In the US, the FDA requires that you register your home-based business as a facility

Shared commercial kitchens: many facilities offer shared or co-op kitchen space that you can rent hourly or monthly, depending on your production needs. The benefits are reduced costs and paperwork (the facilities are already registered as commercial space). There are several region-specific directories for shared kitchen space:

Photo: Soul Chocolate's kitchen space, by Matthew Wiebe

Set up your own commercial facility: be sure to check with your local food governing agency to ensure your facility is properly registered and meets code.

“We started small in our home kitchen and then grew from there. We did not move out until we were bursting at the seams and knew we had a big enough business to support the move. We did look for co-packers—another company to manufacture our products for us—but because the mandate for our products are so specific (no grains, no gluten, peanut-free, dairy-free, kosher) there were too many issues with cross contamination with every other facility we met with. In the end we had to manufacture it all ourselves and now we do some co-packing and private label for other companies.” – Jodi

Work with an existing manufacturer: this option is great for hands-off entrepreneurs who are more interested in the business than the production. It’s a great option for industry newbies, too, as the manufacturers should already be versed in food safety and regulations. Find a food manufacturer via a manufacturing directory like Maker’s Row.

“We partnered up with someone that had a USDA inspected facility so that we could ship across the USA sooner without any issues with the food safety concerns. It is really impressive how much diligence goes into running a USDA inspected facility and it really isn't something most people will be able to do straight out of the gate.” –Daniel

It is really impressive how much diligence goes into running a USDA inspected facility.

Daniel Patricio

Packaging, Branding, and Labelling

Photo: Shape Magazine

Ecommerce is especially challenging for food, because the most important decision-making sense—taste—is in the dark. Because customers can’t sample your product, branding is especially important. Package design, photography, your website, product page and package copy, need to pitch in to tell the story and help customers imagine how it might taste.

Because packaging is extremely critical in this industry, consider hiring a designer to help with your branding needs.

"Before you taste the product, it's got to be something that attracts you to you. It has to be appealing. And it has to be familiar, so we chose our name and our identity, everything from the label, the look, the feel, the text, to be something that connotes handmade family, yet urban. Most importantly, we wanted you to see the product in the jar. It's not covered up by a label.” – Bob

Photos via: Grant Burke, Jayce-o-Yesta

Most importantly, we wanted you to see the product in the jar. It's not covered up by a label.

Bob McClure

Aside from the visual appeal of your packaging, each country has its own labeling requirements, which may include best before dates, nutritional information, allergen warnings, and country of origin. If you plan to ship your product across borders, especially to retailers, be sure to check the destination country’s rules around labelling.

Resources:

Pricing Food

In my interviews with merchants over the past year, one thing is clear, regardless of the product: pricing is hard. Ultimately there's no one magical pricing formula that will work for everyone. Know your costs, and keep adjusting until you get it right.

“The biggest challenge is dealing with the pricing when starting out small. The important thing to remember is if you have a quality product getting it in front of as many people as possible is the best way to grow. This means, in the short term forgo profit and get as many people to try your product. Overtime those cost savings will come, and you don't want to do that prematurely.” – Daniel

Photo: Bull & Cleaver

With McClure’s, Bob says they stand by their pricing. If you believe in the value of your product, price it accordingly.

“We're not the cheapest product out there, so we have to compete on something that's truly unique otherwise you just become one of the other commodities that you're competing against and then it's a race to the bottom.” – Bob

Resources:

Additional Reading:

Expiry Dates and Inventory

JK Gourmet’s brand is built on natural ingredients, and therefore, no preservatives. The shelf life on most of her products is only 5-6 months, and Jodi therefore keeps inventory tight, turning it over every 1-2 weeks.

While McClure’s Pickles have a longer shelf life of one year, Bob wants to be sure that customers get his product as fresh as possible. For that reason, the company’s inventory strategy errs on the side of producing too little of the product, rather than too much.

“It's a juggling act and we're always getting better with forecasting our needs and making sure that any business opportunities that we have are aligned, especially when a new product launches. That's the trick, we have to make so much to justify a production run, while I have to make sure there's a sales channel or outlet and enough demand behind it to really make it work.” – Bob

💡 TIPS:

  • Investigate the tools available in the Shopify App Store—they’ll integrate with your store
  • Use batch numbering or barcodes to keep inventory organized
  • Educate your team on your inventory management practices

“Over-communicate to anyone who touches your inventory about the importance of rotating your stock.” – Casandra

Casandra Campbell, Liberty Village Brewing Co.

Over-communicate to anyone who touches your inventory about the importance of rotating your stock.

Casandra Campbell

Growth and Product Development

McClure’s Pickles found success by honing in on their namesake product, perfecting and iterating on their grandmother’s recipe. Expanding their offering, initially, was in response to overwhelming customer feedback.

“We started with the pickles and very quickly made a bloody mary mixer. We had so many people saying to us, ‘Hey, your spicy pickle brine makes the best bloody marys.’ And that's when that lightbulb moment happens, and you go, ‘These customers are saying that they would buy two of our items instead of one!’ A lot of our product ideas come from the customers.” – Bob

A lot of our product ideas come from the customers.

Bob McClure

Low-risk ideas came next—tried and true pickle flavours, applied to other products like chips. Since the early days, however, product development has become more sophisticated and the family relies on data to inform their next move.

“Now we get a lot of data and we analyze what’s really driving the market, what are the consumers looking for. Before we had access to data, it was a lot of word-of-mouth." – Bob

While they still love engaging with customers and hearing their ideas, Bob warns to take them with a grain of salt.

“Not all ideas are like gold ideas. Customers love to talk to you about their ideas and you have to take that and refine that and make sure that there's enough critical mass behind the idea before you take that into a product launch.” – Bob

What else can you sell?

Liberty Village Brewing does not sell beer direct to their customers through their online store, due to Ontario alcohol regulations. However, their website serves as a branding and marketing tool, helps customers find retail and restaurant partners, and sells items related to their product.

Ideas:

  • Branded merch
  • Complementary food products
  • Kitchen and serving tools
  • Recipe books
Liberty Village Brewing Co. Store

The Fine Print: Food and the Law

Provided you do your homework, acquire the proper licences, and meticulously track everything, the likelihood of getting into legal hot water is low. If you do—and this is the scary part—the consequences can be severe.

“You as a food producer are exposed to both civil liability—being sued by a private party, be it a store that you sell to, or a restaurant, or an individual— and also regulatory liability. The regulatory liability flows primarily through the Food and Drug Act (in Canada).as well as several other federal and provincial statutes The Food and Drug Act is a serious piece of legislation. The government can throw you in jail, or take all your products and destroy them, or shut you down, or give you a big fine. There are some folks facing criminal fraud trials right now in Ontario relating to whether chicken was mislabeled organic or antibiotic free.” – Glenford

If your product is complicated or falls under a particular set of categories that requires additional licensing (meat, fish, and some agricultural products, for example), you may wish to consult a lawyer with experience in the food industry.

“Small businesses don't often like starting up with a lawyer because we're expensive and we’re hyper-aware of risk, which leads to policy and process. The last thing that they want is the same rigidity that they sought to leave behind when they decided to start their own gig.” – Glenford

However, Glenford says, “with the understanding that there's this broad, significant regulatory framework and legal liability,” there are some best practices if you choose to navigate the legal bits on your own.

💡 TIPS:

  • Don't get people sick. “If you're going to sell food learn how to handle food and learn how to store it. Get trained." – Glenford
  • Trace the supply chain. “If you produce a food product and you're buying stuff off the web, it's really important to trace that supply chain. Ask questions of your suppliers, check them out, get referrals.” – Glenford
  • Work with a lab to test your products. “Labs help you trace elements that you may not have known existed that particularly relate to allergies. People are allergic to everything now so it's really important that those core allergies are identified. Also you may find that there are things in your food that you didn't think were there that may change how shelf stable they are.” – Glenford
  • Keep thorough records. “We track everything coming in and out of the facility; that way if there is ever a recall on our raw ingredients, we are prepared.” – Jodi
  • Make friends with the food inspector. “Reach out to public health, to whoever certifies your premises because they're often set up to be your friend. These are pretty approachable people and they'll be able to identify issues—this is what they do for a living. They really offer you some pretty sage and frankly free advice on how to make sure that you're making a good and reasonable product.” – Glenford
  • Get liability insurance that covers people eating your product and getting sick as well as you accidentally burning down the space you use.” – Casandra

Ask questions of your suppliers, check them out, get referrals.

Glenford Jameson

Ethics and Transparency

Beyond legality, bad decisions around ethics and transparency can ruin a brand. This is true of any business, but the layers of complexity in food can make your business especially vulnerable.

“My best clients typically ask themselves ethical questions about their actions, their suppliers, how they treat their customers, their employees, and how they impact the world. When they approach problems in that way they're typically in a better position to maintain the respect and goodwill of the community that they operate in as well as from their customers. Respect and goodwill are hard to earn and they're pretty easy to lose. Even though that has nothing to do with the law per se it's a really important M.O.” – Glenford

Respect and goodwill are hard to earn and they're pretty easy to lose.

Glenford Jameson

Shipping

We’ve spent a lot of time building resources to help ecommerce entrepreneurs streamline their shipping processes. It is, after all, one of the most common pain points among our merchants.

And, no surprise, shipping food carries additional challenges, especially when shipping outside of the country.

“When you're exporting food, there are a series of foods whose export is regulated under commodity legislation—Meat Inspection Act, Canada Agricultural Products Act, Fish Inspection Act, for example. Those have their own rules. Otherwise, you fall back on the Food and Drug Act and you complete a manufacturer's declaration for export of food products manufactured in Canada. Essentially, you swear an affidavit with a notary that sets out the country that it's being sent to, it sets out that it's made in Canada, that sort of thing.” – Glenford

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Keep in mind to also consider the potential restrictions on your product in the destination country. Technically, once products are in the shipping stream, they become the problem of the purchaser, but the poor customer service experience can be bad for business. Mitigate the customer’s ultimate frustration by versing yourself on the laws where you ship.

Alternately, to avoid the red tape, you may consider working with a 3rd party warehouse if you do a lot of business across the border.

“We found the cost of shipping individual orders to the US was prohibitive. For that reason we ship bulk orders to the US where they are warehoused and shipped directly out to US customers.” – Jodi

Products requiring refrigeration aren’t ideal for cross-border shipping, but Vegan Supply in Vancouver successfully ships their cold products nationally across Canada, using cold packs and expedited shipping.

Creating Your Store

First, let’s set up your store. It only takes a few minutes, and we’ll let you muck around with it for 14 days.

As I mentioned with branding, the look and feel of your website is important in helping influence the customer to buy a food product without tasting it first.

Photography is therefore hugely important. You can opt to DIY your photoshoots, or hire a professional who has experience with styling and lighting food properly. Shoot product packaging and close-up detail of the product to show texture and true-to-life color, but also experiment with lifestyle photography that suggests serving and pairing ideas.

Photography and Styling by The Fresh Exchange

Use product page copy to describe your product’s taste and texture in detail, and include ingredient and allergy information in full. To keep the product page uncluttered, invest time in a thorough FAQ page to answer additional questions about ingredients, dietary information, and production methods.

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.

“Even though we’re in 5,000 stores worldwide we still have a great, core group of people that come to our website, purchase every year, like to see what we’re doing, get connected to our brand, our story. They really spend their time investing in what we do and most importantly, why we do what we do.” – Bob

Theme suggestions for food stores:

Retail and Wholesale

McClure’s initially grew their business through retail partnerships, and the success with that channel relied on truly making them part of the business, and inviting them to care about its mission.

“Some of our retail partners take on more familial partnership where we'll have a very direct interaction and we'll work with them to do menu pairings or specific events that focus around our products and their products.” – Bob

how to sell food online

Finding and Pitching Retailers

Resources:

Additional Reading and Listening:

“We do whatever we can, whether it's with a restaurant partner, a snack partner, or a retailer stockist, to really emphasize our story because we feel that it's unique.” – Bob

Marketing & Content

Marketing your online store is another topic that we've covered extensively in this blog, and for food, the same rules apply. In the absence of taste testing, connecting your customers to your story, is extremely important.

Social media is a very big part of our brand. That's where their core consumer goes, that's where the most vocal action lies with their consumer and we take that very seriously. We want to be engaged with our core community because they're the influencers and word-of-mouth can take your brand extremely, extremely far, as we've seen.” – Bob

McClure’s dedicates a significant percentage of their site to community—extra content, recipes (their own and customer-generated), and prominent social calls to action.

Word-of-mouth can take your brand extremely, extremely far.

Bob McClure

Condiment brand, Green Mountain Mustard, takes recipe content one step further, using it to grow their email list:

Though your business plan may have no room for a physical retail strategy, it’s still important to take your product to the streets, and to the mouths of your potential customers:

  • Generate buzz locally by participating in farmer’s markets
  • Run a pop-up
  • Partnering with restaurants or other complementary brands on a tasting event
  • Host a private dinner for influencers
  • Periodically invite customers into your process
  • Launch your brand at a consumer food and beverage expo

The length of this post may have a little to do with my inability to self-edit, but this, friends, is a very big topic to cover. Thanks for hanging in there! It’s a challenging industry, but one that can bring you success if you’re passionate and willing to wade through the legalese.

10 years into his business, McClure's now employs 31 people who make and ship their product to consumers and over 5,000 retail partners internationally. Though Bob tells me he can't confidently say he has it all figured out, the journey has been a rewarding one.

“I think in entrepreneurship, there's always a series of challenges and they don't go away. How successful you are depends on how you handle those challenges at any point. Some of them are big enough to break you, but how you use them as a learning experience in the future is what really makes for a great ongoing success story. If we don't learn from what we do as entrepreneurs, we don't truly grow.” – Bob

If we don't learn from what we do as entrepreneurs, we don't truly grow.

Bob McClure

About the Author

Dayna Winter is a Storyteller at Shopify. She follows more dogs than humans on Instagram and isn't a real redhead.

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