The direct-to-consumer food business is exploding. The global packaged food market reached $1.9 trillion in 2020 and is expected to grow at an annual growth rate of 5.2%, meaning the market is expected to reach $3.4 trillion by 2030.
With more and more consumers looking to the internet for food purchases, there has never been a better time to launch that food business you’ve been dreaming of.
Earlier this week, we sat down with two entrepreneurs who turned their food dreams into reality to find out what it takes to run a CPG food brand in 2022.
Meet the Experts
Our first expert is Jim Simon, a serial entrepreneur who started five companies before launching JiMMY! in 2014. Since then, Jim has taken the brand from a small kitchen and onto shelves across the globe.
The second expert we spoke with is Kate Stoddard, a wilderness river guide whose passion for nature and nourishment led her to found Orchestra Provisions in 2018. Her goal with Orchestra Provisions isn’t to get rich but to “incite a food systems revolution” through her products and education.
Finding a Market Niche
Finding a niche and developing a product that fits that niche is no easy task. For Kate, her interest in insect protein is rooted in her scientific background. “I learned about different indigenous peoples across the world using insect protein as a staple in their diet and … they were able to avoid nutrient deficiencies that are really common worldwide,” she says.
Kate, who has her masters in science and nutrition, said she “got really excited about the potential and opportunity in confronting nutrient deficiencies.”
Once she honed in on the insect niche, she started doing research on how to package it. Her original idea was a supplement capsule, but her passion for whole foods eventually led her to the creation of an insect-based protein powder.
“I wanted to drive social impact and be able to feed billions of people,” says Kate. “I saw this as a solution to a lot of problems, all in one place and that’s what really inspired the business.”
Jim also identified a problem when he started JiMMY. “It was sort of born out of discontent for healthy foods out there,” says Jim. “The majority of healthy foods are mostly marketing.”
“I was in the data world … and I just wanted my next gig to be something with a tangible product and, specifically healthy food,” says Jim. “We decided on bars, which are pretty crowded category, but most of the bars out there were junk. I just want to make something with whole foods.”
As you can tell, both Jim and Kate started by identifying a gap in the market. For Kate, that gap was insect-based foods that actually tasted good. For Jim, it was healthy bars that were actually healthy.
Pros and Cons of Bootstrapping of Food Company
Both Jim and Kate chose to bootstrap their operations, a decision that comes with major pros and cons.
According to Kate, there are times when it “sure would be nice to have a lot more funding.” But for now, she is happy with her current slow and sustainable growth. One of the best benefits of bootstrapping, according to Kate, is that it allows her to stay in control. “When you start including investors, they start getting a saying,” says Kate, “I think sometimes you have to compromise your values.”
Jim agrees with Kate about potentially having to compromise your vision if you take on outside investors. “You can accelerate your growth very quickly [with investors], but the cons are “that you’re going to have a 25-year-old telling you how to run your business,” Jim laughs.
Another con to bootstrapping, according to Jim, is that “you use up all your money, which affects your psyche and affects your the way you feel about yourself and affects your lifestyle.” That is one of the reasons why Jim eventually opted to raise a round of funding through friends and family. This allowed him to grow his business without having to turn over too much creative control.
We should say that neither Jim or Kate are completely against the idea of outside funding. In fact, they both recognize the huge benefits an influx of cash could bring.
“We need money all of the time,” says Kate. “the food space is so expensive and you’ve got all of this risk right because you are ordering things before you’re able to make money off of them.
“We are constantly faced with the constrictions restraints of not having the funding,” continued Kate. “So, while I say that we’re bootstrapped up into this point, it is undeniable that we will be looking to raise money.”
Jim echoed that sentiment, “It takes a lot of money. It’s expensive to get on the floor of grocery stores, which a lot of people don’t know.”
In addition to funding, outside investors can also benefit your business in other ways. “There are amazing VCs that will bring incredible knowledge to your business,” says Jim.
“I would advise anyone watching to go raise money and pay yourself,” says Jim.
Finding an Audience
For some brands, their target audience is very obvious. For others, it might take some time to find your target audience.
“In our early days we were like hey, this is a bar for everybody,” says Jim. It wasn’t until the product was in the market for a few years did they really discover their brand was really resonating with “the people who live a healthy lifestyle, but really healthy, you know they work out three, four or five times a week.” Now that they know their audience a little bit better, they can spend their marketing dollars more efficiently.
Kate’s journey was similar. “Quite honestly, in the beginning, I had no idea who I was talking to, but I had some hunches.” Now, she spends much of her time becoming “customer-obsessed” as she calls it. That includes conducting focus groups and sending out questionnaires via email. This has allowed her to learn more about the people who are interested in her products. Interestingly, one of the first questions she often asks is, “What is the most important thing in your life?” The question catches people off guard, but for Kate, this is what really matters.
Right now, Kate has found that adventure sports enthusiasts, “food is fuel” athletes and parents who are concerned about the future of the world gravitate towards Orchestra Provisions.
As you can tell, our recent webinar was jam-packed with interesting conversations surrounding the food and beverage industry. Don’t miss your chance to register for next month’s webinar featuring an ecommerce and digital marketing expert from Nuun.
In part two, we’ll recap Jim and Kate’s thoughts on these topics:
- Harnessing Influencers
- Retail vs. DTC
- Marketing to Investors