Recipes for success.
REMEMBER GRANDMA'S SECRET recipe for hot and spicy spaghetti sauce? Year after year, you would sit and watch her add "a dash of this" and "a pinch of that," wondering when she would realize that it was good enough to sell. But she never did. Michele Hoskins, owner of Michele Foods Inc. in Calumet City, Illinois, recalls watching her own grandmother serve up a family favorite that reaches back four generations and today has become the flagship product for her $5.5 million premium syrup manufacturing company. "When my grandmother was alive, we used to go to her house every Sunday for breakfast to eat her honey creme syrup over waffles and pancakes," says Hoskins, whose great-great-grandmother, a slave from Arkansas, developed the recipe in the late 1800s. "Selling everything but the children," Hoskins raised $100,000 in start-up capital to launch her business with Michele's Honey Creme Syrup in 1984. The company has since grown to include two additional syrups (Michele's Butter Pecan and Maple Creme Syrups), a $3.5 million food service contract with Denny's and a product development project with America's Favorite Chicken, owners of Popeyes and Churchs franchises.
Hoskins, 49, is not alone when it comes to turning a prized family recipe into a successful food business. Her products share shelf space with thousands of new items ranging from salad dressings to gourmet barbecue sauces to soul food in a can. "Each year, there is a new product," says Brian Todd, senior vice president of member services for the American Institute of Food Distribution in Fair Lawn, New Jersey. Last year alone, there were 13,266 new food products introduced and the top 10 generated over $2 billion in sales.
According to industry experts, total food expenditures for 1996 totaled about $686 billion. While there's little information to show how much of this revenue has come from home recipes, a stroll down any grocery store aisle indicates that Mrs. Paul and Sara Lee aren't the only ones stirring up success. Wally Amos did it in the 1970s with a recipe for homemade chocolate chip cookies that became the Famous Amos Cookie Co. And Bill Williams (president of BE's 1996 Emerging Company of the Year) continues to carve a niche in the soul food arena with his $10 million operation, Glory Foods Inc. But these successes have not been without the proper planning, research and financing required to take a recipe from the stovetop to the store shelf.
Before building your food empire, first study your market and determine whether your product is something, that the general public will want. Also, canvas supermarkets and gourmet shops for similar products because you don't want to duplicate a hundred other items. "It would be very hard to get a new cookie on the shelf today because you have too much competition," says Hoskins. "Make sure you have a niche."
Keep in mind that it takes more than just a few mixing bowls, measuring cups and a kitchen stove to start a successful food business. Depending on the product, start-up costs range from $25,000-$100,000 and should cover production, packaging, labeling and advertising. Preparing a recipe for mass consumption requires assistance from food industry experts such as food brokers and chemists, who can help with product formulation, packaging and labeling. Going it alone could mean disaster.
You must be dedicated to making it work. It can take years before a product is ready for consumers and even longer before a profit is made. "When I started, I would have a plant make me a 55-gallon drum of my syrup," recalls Hoskins, whose product volume fell short of the requirements for many manufacturers. "I would take it home, put it in my basement, and after work and on the weekends, I would go in the basement, hand pour it and hand seal it. It took me about 6 hours to do one case," says Hoskins who ended up filling 100 cases.
DOES YOUR RECIPE WOW THE MASSES?
While family and friends will rave about your chicken gumbo and insist your rice pudding is "to die for," it's the reception from the larger audience that really matters. While successful products are high in quality and attractively packaged and labeled, most of all, they're unique. To determine if your recipe wows the masses, take some daily mental inventory.
When enough customers told Sylvia Woods that they'd buy her homemade barbecue sauce by the gallon, the owner of the famous Harlem soul food eatery, Sylvia's Restaurant, realized the potential success of bottling one of the products on her menu. "For the holidays, people would bring bottles and jars and ask us to sell them the barbecue sauce," says Woods. "Then one night, firemen came in with a gallon jug and said, `Can you give us a gallon of your sauce because it's so good.'"
That's when Woods and her son Van, president of Sylvia Woods Enterprises, decided it was time to begin developing a line of products using Sylvia's down-home Southern recipes. Taking customer favorites from the restaurant menu and packaging them for sale, Woods launched her Queen of Soul Food line in 1992. "We first started with the barbecue sauce and from there, Van said, 'Well, why not the hot sauce?' Some people liked the collard greens, so he said, 'Look, let's put the greens in the can,' and then, there was the beans," recalls Woods, 71, who launched her soul food line with about $200,000 in start-up capital. The products are a $6 million extension of 35-year-old Sylvia's Restaurant, which now boasts a second location in Atlanta and a soon-to-be opened third site in Brooklyn, New York, early next year. The retail food line contains 17 items including Sylvia's Specially Cut Yams, Kicking Hot Sauce, and Mild & Sassy Original Sauce. The products are available nationwide in such stores as Pathmark and D'Agostinos in New York and Stop, Shop and Save in Baltimore.
PREPARING YOUR PRODUCT FOR SALE: JUST ADD WATER, RIGHT?
At home, your five-pound recipe requires a stick of butter and a half cup of cream. But once you multiply it several hundred times, a process known as product formulation must take place to develop it into something manufacturable. "You just don't double up on the butter and double up on the cream," says Hoskins. "You have to use ingredients that are going to actually blend well and be preserved." Working with a food chemist or recipe development specialist is crucial to creating a quality product that is both safe and appealing. Hoskins admits to having wasted time and money trying to produce the product herself. "Before I really even talked to anyone, I would make it up on the stove. I had a long bottle, some handmade graphics and I called myself Supreme Food Products," says Hoskins. She left the product at an area restaurant, and like many people, thought she would make millions. But it's not that simple. "The next day, the owner called me and said, `Come get this stuff, it's separating, it's rancid, it's spoiled because you can't leave it out,'" she explains.
There are many things to consider when formulating a home recipe. Everything from the ingredients and packaging to your marketing method affects the process. For example, butter contains a lot of fat and does not cook well when used in large quantities. While you may use it in your recipe at home, when mass producing your product, you might have to find a substitute, an ingredient that will yield the same taste. Also, keep in mind that not every recipe is the same and each--depending on whether it is a dry, liquid or meat-packing products--has a different manufacturing process.
A food chemist can formulate your recipe and distinguish from a chemical and technical standpoint what needs to be added or omitted to ensure that it maintains its original taste once it hits the market. Food chemists also determine your product's shelf life--the time it takes for your product to deteriorate. Having a good shelf life is an important selling point of your product.
Food chemists work in the test kitchens of major food chains such as Nestle and Beatrice Foods, but rarely are they in a position to work one-on-one with you to develop your product. You should be able to find an independent food chemist in the Yellow Pages or within the food science department of a major university. These experts have backgrounds in food science and engineering. Hoskins spent $3,500 to have a food chemist formulate her product. However, this cost did not include production, packaging or labeling.
A more cost-effective way of formulating your recipe plus having the resources and equipment for its total manufacture is by working with a co-packer. These nationwide food processing and manufacturing firms can formulate, manufacture, package and label your product, all for a set price. Some may even provide distribution. All you would need to do yourself is to come up with a design for your label, which can be outsourced to a graphic artist.
When looking for a co-packer, consider the type of product that you have. Not every co-packer will specialize in your type of recipe. Some work only with dry recipes (baked goods and seasonings) while others deal with liquid recipes (syrups and sauces). Also, not every co-packer will provide such services as product development and conversion, packaging and labeling. Still others will offer a combination of all three.
Depending on the co-packer, type of product and volume produced, cost can range between $1,500-$4,000 per product. The more products produced, the lower the per-unit cost, says Tim Ashman, president of Ashman Manufacturing & Distribution Co. in Virginia Beach, Virginia. His company manufactures dry mixes as well as barbecue and hot sauces. Each co-packer has different volume requirements. While Ashman's 10-year-old co-packing business accepts runs of 75 gallons or more--the amount of product to be produced--he says most co-packers enforce a 250-500 gallon minimum. Depending on the complexity of the recipe, the manufacturing process can take anywhere from a few weeks to several months. Van Woods says preparing his canned vegetables and the entire food packing process took over a year. "Vegetables are a much more complicated packing form. You just can't pack them, you have to cook vegetables, then work to get it to taste in a can."
Using a co-packer provides a number of benefits. First, it eliminates the start-up cost of building a facility. Building your own plant can cost millions, says Woods who currently uses a co-packer. Last year, Woods expressed interest in purchasing the Rockland County food processing plant in Orangeburg, New York, to house his food operation. The initial asking price was $22 million.
Co-packers can also provide your product's nutritional information. And worries about producing a safe product are virtually eliminated because these facilities must be approved by the U.S. Food and Drug Administration. UPC (Universal Product Code) labels used for scanning in supermarkets can be obtained through an independent labeling company. Two publications that can help you locate a co-packer include From Kitchen to Market (Dearborn Publishing Group; $27.95) and Thomas Food Industry Register (Thomas Publishing Co.; $185). Check your local library or bookstore.
For those who want to begin manufacturing a recipe from home, it's not impossible if you plan to start small and you have professional experience. Be sure to abide by Federal Drug Administration regulations concerning food preparation. Some states prohibit the use of home kitchens for mass production.
Vivian Gibson, owner of the MillCreek Co. in St. Louis, invested 10 years of catering experience and $40,000 in start-up capital to develop her hot sauce recipe from home. "The first steps were really in my own kitchen trying to get it into this consistency I wanted," recalls Gibson who launched her business in 1994 with Vib's Caribbean Heat, a hot seasoning sauce made from imported Scotch Bonnet peppers. "I called the food science division at the University of Missouri and started talking to the professors," she says. "They have a service where you can send your products there and they can give you ideas." After getting the product to a manufacturable form, Gibson sent samples to an FDA-approved lab for testing. After approval, she purchased a bottling machine for $7,000 and began taking orders. "I can fill a bottle every six seconds with my machine, and that's slow by industry standards, but it works fine for me," says Gibson. Her product, which earned $30,000 in sales last year, is sold in Schnucks, a Midwest supermarket chain, and other stores throughout Missouri and Illinois.
To locate a laboratory that will test the safety of your product, contact the FDA at 800-332-4010. Testing can take a couple of weeks and costs about $300 per sample. Generally, two to three product samples must be submitted.
WHAT'S IN A NAME? PROTECTING YOUR PRODUCT
After spending thousands of dollars to develop your recipe, the last thing you want is for someone to steal it. You also want to protect yourself against being held liable if someone gets sick from your product. There are three types of product protection that every would-be food manufacturer should have: a trademark of the product name, a confidentiality agreement among parties involved in developing your recipe and product liability insurance.
Trademarks will not protect your idea for a product; however, they will protect the name you've chosen. "When I came out 14 years ago, people asked, `What's to keep General Mills or anyone from copying your product?'" says Hoskins. They can copy [a syrup], but they can't call it Michele's Honey Creme Syrup because my protection is my label."
Filing for a trademark requires written application, a drawing of the mark (how the title will appear on the product), and a filing fee of $245. It takes approximately 13 months for approval. To get more information about the trademark process or to conduct a search of your product name, contact the U.S. Patent and Trademark Office at 800-PTO-9199, or www.uspto.gov/. Or call the Trademark Assistance Center at 703-308-9000.
To protect your product at the manufacturing stage, draw up a confidentiality agreement among all who are privy to your recipe's contents. Like the rights to a song, this document, generally two to three pages long, sets forth ownership of the product and outlines in detail how it is to be used and by whom. "At any point where you have an outside entity having access to the recipe, you should have a confidentiality agreement in place with that individual," says Gail Saracco, an associate attorney with Mayer, Brown & Platt in Chicago. You can have multiple agreements in place.
Creating a confidentiality agreement should be done with an attorney. Saracco says be sure to include a product survival provision. "You'll want to provide that the terms of the confidentiality agreement will survive the termination of the agreement so once they've converted your recipe, manufactured your product and are no longer working for you, they don't, two years later, go out and give everyone else the recipe," he says.
Once you've protected your product name and the recipe's contents, you'll need to protect yourself. Product liability insurance provides coverage if someone gets hurt using your product. It should be held by each person who makes contact with your product. Hoskins, who carries $5 million worth for her syrups, says sales determine the amount of insurance you should carry. Steven Goldstein, vice president of the Insurance Information Institute, a New York-based trade group, says the type of product is also a factor. Consult your insurance agent for more details.
TAKING YOUR PRODUCT TO MARKET
Before going retail, you may want to see how the average consumer will respond to your product. Keep in mind that you're not just gauging how consumers like the taste, but also such things as its coloring, packaging and labeling. You don't want to run potential customers away with a product that is offensive or one that does not capture the eye. "I had some marketing research done by graduate students at the Washington University Business School," says Gibson, whose product was chosen for research in a class project. Gibson says the yellow color of her hot sauce was a barrier for some people initially. "They were accustomed to red hot sauce and had not seen a yellow or a green hot sauce, so people were wondering about the color and it didn't appear hot to them." That's when she decided to come up with an ad campaign--"What Color is Hot? It's Not Always Red."
You can test-market your product through various ways including trade shows or focus groups. Hoskins, who carried her syrups to the twice-yearly International Fancy Food and Confection Show in Atlanta in 1984, says focus groups are great barometers. If the findings are good, they can be used to persuade buyers to purchase your item. While you can hire a consultant to form a focus group--at $30-$100 per person--you can create your own for much less using family, friends and people from your community.
When pricing your product, determine what your costs are, what profit margin you would like (Hoskins suggests 17%-20%) and where you want to sell it. Then price competitively with similar products. Once you've done that, you're ready to hit the shelves.
Getting a store to buy your product is perhaps the most difficult part of turning a recipe into a business. Supermarkets and grocery stores are bombarded with products, but have limited shelf space that commands slotting fees ranging from $1,000-$30,000 per item. You can market your products through direct sale or by using a food broker. Through direct sale, you present your product directly to the store owner (if a small shop) or a buyer in the corporate office (of a large chain). Hoskins sold her honey creme syrup to 20 local independent mom-and-pop stores in Chicago before going national with all three products in 1994. Today, her syrups, which each retail for $2.79-$2.99, are sold in 3,000 stores including Win Dixie, Walmart, Food Lion and Kroger.
If you're uncomfortable selling the product yourself, you can hire a food broker. "They represent the manufacturer of the product and they sell it to any local market buyer or whoever is the intermediary between the consumer and that product," says Mark Baum, senior vice president of the Association of Sales and Marketing Companies, formerly known as the National Food Brokers Association. Food brokers work on commission--generally 3%-3.5% of sales made, depending on the food category. "I think it's extremely difficult to bring new products to the marketplace without them and almost impossible for small companies," says Baum. They have the inside track to the food industry and established relationships with buyers. Food brokers can also assist with product promotion and advertising as well as conduct a wide range of in-store merchandising services. To locate one, contact the Association of Sales and Marketing Companies at 703-758-7790.
Preparing a recipe for market is very time-consuming, but don't forget to form the business side of your venture. Your formula for success begins with a sound business plan. Hoskins also advises seeking incorporation because on one end, you want to have a product that you can sell, but on the other end, you want to have a legitimate business. With a pinch of planning and a dash of determination, your prize-winning recipe can become a consumer favorite.
RELATED ARTICLE: Your Basic Food Groups
Whether you are just getting started or looking for support, these organizations and publications can help you stir up success
* National Food Processors Association 1401 New York Ave., NW Suite 400 Washington, DC 20005 202-639-5900
NFPA represents commercial processors of food products including vegetables, meats and canned goods. It operates three scientific laboratories for the purpose of researching principles of canning, quality control measures, spoilage prevention and sanitation techniques. Primary focus is on food safety.
* National Association for the Specialty Food Trade Inc. 120 Wall St. New York, NY 10005-4001 212-482-6440
A nonprofit trade organization, NASFT represents food manufacturers, processors, importers, retailers and brokers of specialty and gourmet foods. NASFT sponsors the twice-yearly International Fancy Food and Confection Shows, which attract over 50,000 buyers. The next show will be held Feb. 22-24, 1998 at the Moscone Center in San Francisco.
* National Barbecue Association 4425 Randolph Rd., Suite 304 Charlotte, NC 28211 704-365-3622
NBBQA promotes and supports suppliers and manufacturers in the barbecue industry. Its annual conference and trade show provides seminars on many food industry issues including developing and taking sauces to market.
* Snack Food Association 1711 King St., Suite One Alexandria, VA 22314 703-836-4500 or 800-628-1334
An international trade association, it represents more than 1,000 members including snack manufacturers and suppliers. It operates the only annual conference geared exclusively to the snack food industry, which attracts over 3,000 representatives and about 200 exhibitors. The next conference will be March 14-17, 1998, in Anaheim, California.
* Association of Sales & Marketing Companies 2100 Reston Parkway, Suite 400 Reston, VA 22091; 703-758-7790
Formerly known as the National Food Brokers Association, this nonprofit trade group represents the interest of brokers in the consumer goods industry nationally and abroad.
* American Institute of Food Distribution 28-12 Broadway Fair Lawn, NJ 07410 201-791-5570
A nonprofit information gathering and reporting service for the food industry, this organization issues statistical and analytical summaries on food distribution and related topics. It also represents canners, packers, manufacturers, brokers and wholesalers.
* Institute of Food Technologists 221 N. LaSalle St., Suite 300 Chicago, IL 60601-1291 312-782-8424; www.ift.org
IFT works to support the improvement of food supply through science, technology and education. This organization can help you determine what impact technology will have on the entire marketing process of your product. There are more than 50 international sections and divisions around the world to assist you.
* The Trademark Assistance Center 2900 Crystal Dr., Room 4B10 Arlington, VA 22202-3513 703-308-9000
A pilot program of the U.S. Patent and Trademark Office, this center provides general information about the trademark registration process. It also responds to inquires about application status. Information about trademarks and patents is also available via the Automated General Trademark or Patent Information line, 800-PTO-9199.
* U.S. Food and Drug Administration Center for Food Safety and Applied Nutrition 200 C St. SW Washington, DC 20204 800-332-4010; www.fda.gov
The FDA provides information concerning the safety and wholesomeness of foods except meats, poultry and eggs, which fall under the USDA. The agency can provide guidance on how your product can comply with their regulations.
FOOD INDUSTRY PUBLICATIONS
* From Kitchen to Market Dearborn Publishing Group 800-235-8866
Now in its second edition, this book provides information about how to sell your recipe. It also provides an extensive list of nationwide co-packers and broker associations who can help develop and market your product; $27.95.
* Thomas Food Industry Register Thomas Publishing Co. www.tfir.com
This three-volume directory is the only comprehensive book that covers thee entire American and Canadian food industry. Indexed by company, product, service and location, it lists over 30,000 food processors, equipment, supply and service manufacturers, brokers and wholesalers/ distributors; $185.
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|Title Annotation:||includes a directory of helpful organizations; Black-owned businesses based on family recipes, including Herbert and Sylvia Woods' restaurant and $6 mil canned food line|
|Author:||Beech, Wendy M.|
|Date:||Aug 1, 1997|
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