This one day course provided, at a high level, an understanding of the process needed to start an artisanal or specialty food business. Taught by a food industry veteran, this course covered the following topics: - Product ideation / Market research - Feasibility analysis - Branding strategy - Company formation and brand registration - Product development - Costing and pricing - Packaging Design - Manufacturing options - Launch process - Distribution channels - Sales and distribution plan - Selling tool development - Price lists - Sales / Marketing / Promotion - Financial planning This event offered an opportunity to tie all of the important pieces of a startup business together.

1. Your Food Business
From A to Z

2. Agenda
•
•
•
•
•
•
•
•
•
•
Product ideation / Market research
Feasibility analysis
Branding strategy
Company formation and brand registration
Product development /Manufacturing options
Costing and pricing
Packaging Design
Launch process
◦ Distribution channels
◦ Sales and distribution plan
◦ Selling tool development
◦ Price lists
Sales / Marketing / Promotion
Financial planning
Financial Controls

3. Product Ideation / Market Research
•
•
Coming up with a product concept (Ideation)
• Intuition
• Market-driven approach
• Friends / family tradition / recipe
Research
• Test markets
• Venues
• Methods
• Informal research (intercepts, other)
• Formal research (qualitative / quantitative)

4. Feasibility Analysis
a.
The Project Scope
a. Business problem and/or opportunity to be addressed
b. Project participants and end-user areas affected by the project.
c. Project sponsor should be identified, particularly if he/she is footing the bill.
b. Current Analysis
a. Product segmentation
b. Strengths and weaknesses of existing products in the segment are identified (pros and
cons)
c. Requirements
d.The method / approach - Course of action to satisfy the requirements. Product concept.
a. Does the recommended approach satisfy the requirements?
b. Is it also a practical and viable solution?
e. Evaluation - examines the cost effectiveness of the approach selected.
a. Begins with an analysis of the estimated total cost of the project
b. Other alternatives are estimated in order to offer an economic comparison.
c. Cost and evaluation summary is prepared which includes such things as a cost/benefit
analysis, return on investment, etc.
f. Review
a. All of the preceding elements are then assembled into a Feasibility Study and a formal
review is conducted
b. Project is approved or rejected

5. Branding Strategy
•
Brand Positioning
•
•
What the brand stands for
Visual Design of Brand Identity (logo,
guidelines)
•
What the brand looks and feels like

6. Brand Positioning
Brand positioning is important because it spells out the
“what?”, the “For Whom?” and the “Why?” of a brand,
among other things.
It also substantiates the relative pricing level of a
product or product line - it serves as a basis for
comparison.

7. Introduction to concepts and terms
Brand Image
Brand Identity
Brand Position
The part of the
brand identity and
How we would like
How the brand is
value proposition
to brand to be
now perceived
to be actively
perceived (ideal)
communicated to
a target audience

8. Brand Identity
A unique set of brand associations
that the brand owner aspires to
create or maintain. These
associations represent what the
brand stands for and imply a
promise to customers.
Benefits
Relationship
Created by the
value proposition
of the brand
Brand
Customer

9. Brand Identity: Core and Extended
The core identity
represents the timeless
essence of the brand (it
contains the
associations that are
most likely to remain
constant as the brand
expands)
Extended Identity
Core
Identity
The extended identity
includes elements that
provide texture and
completeness.

10. Brand Associations
• A brand association
• Is anything that is linked in memory to a brand
• Should be strong and positive to lead to a purchasing impulse and
long-term brand loyalty
• Becomes stronger when a customer is exposed to it multiple times
• Can create value by
• Helping to process info (facts and specs)
• Creating differentiation
• Generating a reason to buy
• Creating positive attitudes and feelings
• Creating a basis for extensions
Brand Image
a set of associations, usually
organized in a meaningful way
(clusters)

11. Brand Associations
Country of
Origin /
Geography
User / Customer
Product Attributes
Intangibles
(“Healthy”)
Brand
Name
and
Symbol
Customer
Benefits
Relative
Price /
Competitors
Product Class
Personality /
Lifestyle / Celebrity

12. Case Study
Gourmet Baby Food Brand

13. Brand Associations
Emotional
Benefits
•Feel good
about
themselves able to give
good food to
children
•Early adopter cool, current
•Safe
•Quality
•Family time less time taken
cooking
•More personal
time
•Traditional
Foods
•Wide pallate educate
children
•Cause - doing
good
Brand
Personality
•Explorer
•Adventurous
•Well traveled
•Early adopter
•Educated
•World-aware
•Fun of learning
•Ethical
•Treat others
well
•Young at heart
•Healthful
•Socially
Conscious
•Innovative
•Tolerant
•Modern yet
embracing
traditions
•Friendly
Product
Attributes
•Quality
•One-serving
package
•Pre-cooked
•Ready-to eat
•Spices and
flavors
•Convenient
Health
Geographic
•Wheat free
•Gluten free
•Kosher
•Organic
•No-
•Traditions and
preservatives
•No added
sugar
•No added salt
•Anti-oxidant
rich
ingredients
from...
•The best the
world has to
offer our
children
•World without
borders
Functional
Benefits
•Organic
•Kosher
•Packaging
(hygiene,
flexibility,
convenience)
•Safe
•Ready to eat

14. Brand Values Map
Modern
Adventurous
World Aware
Organic
Social Cause
Young at Heart
Functional
Rational
Safe
Quality
Emotional
Fun of Learning
NOSTALGIA
Ethical
Established

15. Competitive Set Feature Table
Sprout
•Sophisticated
•Gourmet
•Made by
celebrity chefs
•Good
Packaging
•Nationwide
distribution
(mass &
specialty)
Earth’s
Best
•Established
•Widest
distribution
•Negative:
packaging
•Sesame street
characters
•Lid not BPAfree
Ella’s
Kitchen
•UK-based
(European
distribution)
•Good
packaging
•Kid-centric
(spokesperson /
voice)
•Fun, playful
•Specialty store
distribution
Happy
Baby
•Breadth of
product
categories
•Strong
packaging and
identity
•Some products
are multi-serving
or larger sized
•Nationwide
distribution
(mass /
specialty)
Plum
Homema
Organics de Baby
•Boring / staid
packaging
•Some mass
distribution
•Breadth of
products
(range)
•Organic
•Potential
access to more
capital due to
recent
acquisition
•Fresh
•Not processed
•Limited shelf
life (distribution
challenges)
•Organic
•Kosher
•Local to So Cal
•Own
manufacturing
faciltities (cost
implications?)

16. Positioning Map
$$
Ella’s Kitchen
Homemade Baby
Plum Organics
Sprout
Happy Baby
Brand X
Positioning
Everyday
Earth’s Best
$
Special

17. Positioning Statement - Elements
•
•
•
•
•
What are you making?
For Whom?
Functional Benefit
Emotional Benefit
Value Proposition
Self-expressive Benefit

18. Positioning Statement
• What are you making?
• For Whom?
• Functional Benefit
• Emotional Benefit
• Self-expressive Benefit

19. Positioning Statement
Brand X is a new line of healthy and delicious functional foods - for
babies 6 to 12 months of age - that is the best the world has to offer.
Mothers who buy this line are early adopters. They are discerning,
world-aware consumers, who lead busy lives and who think Brand X
products are the only acceptable alternative to home-made food.
In addition to their organic certification and convenient form factor,
Brand X products afford babies superior nutritional value and a
variety of flavors and textures -- drawn from other cultures -- that will
broaden their palates as they grow. Brand X mothers like to extend
their socially-conscious lifestyle to the products they purchase. For
them, Brand X does good by donating a portion of profits to support
healthy nutrition for children.

20. Communication - Start with Brand Associations
Emotional
•Feel good
about
themselves able to give
good food to
children
•Early adopter cool, current
•Safe
•Quality
•Family time less time taken
cooking
•More personal
time
•Traditional
Foods
•Wide pallate educate
children
•Cause - doing
good
Personality
•Explorer
•Adventurous
•Well traveled
•Early adopter
•Educated
•World-aware
•Fun of learning
•Ethical
•Treat others
well
•Young at heart
•Healthful
•Socially
Conscious
•Innovative
•Tolerant
•Modern yet
embracing
traditions
•Friendly
Product
Attributes
•Quality
•One-serving
package
•Pre-cooked
•Ready-to eat
•Spices and
flavors
•Convenient
Health
Geographic
•Wheat free
•Gluten free
•Kosher
•Organic
•No-
•Traditions and
preservatives
•No added
sugar
•No added salt
•Anti-oxidant
rich
ingredients
from...
•The best the
world has to
offer our
children
•World without
borders
Functional
Benefits
•Organic
•Kosher
•Packaging
(hygiene,
flexibility,
convenience)
•Safe
•Ready to eat

21. Practical Applications of Brand Positioning
•
• Implicit (senses)
Explicit (copy)
• Through attributes (look & feel • Primary
perception)
• For healthy families (Organic)
• High quality (form factor, visuals,
• Multicultural
tone, voice)
• The best the world has to offer our
• Convenient (form factor)
children
• Hygienic (form factor)
• Convenient (pre-cooked)
• Flexible (form factor)
• Secondary
• World-aware (ingredients / spices)
• No-preservatives
• Parents feel good about
• No added sugar
themselves - able to give good
• No added salt
food to children
• No wheat
• Through visuals: consumer profile:
• No Gluten
• Want high quality
• Allergen friendly
• World-aware (world without
• Tertiary
borders)
• Cause (secondary packaging
• Early adopters
panel, front flash on packaging)
• Educated

22. Company Formation / Brand Registration
•
•
•
•
•
•
•
Legal Entity
• LLC
• S Corp
• C Corp
• Partnerships / DBA
Brand Registration
• Trademarks
• Patents
• Copyright
Facility permits
• County Health
• FDA / USDA
• S Letters
Facility Audits
Business licenses
• City Business License
Insurance
• General liability
• Product recall
• Freight / Transportation
• Other (worker’s comp, etc)
Contracts
• Operating agreement / partnership agreement
• Co-packer,
• Broker
• Distributor

23. Product Development
•
Developing the formula
•
•
•
Production environment
Artisanal / small batch production
Scaling up a recipe / industrial formulation
•
•
•
Flavor considerations
Quality Considerations
Cost Considerations
Discussion:
Own facilities versus Contract Manufacturing

24. Costing & Pricing

25. The 4 Cs of Pricing
• Cost
• Understand your cost, then set pricing to achieve gross margin in the 30-40%
range
•Consumer
• Strengthen marketing and sales capabilities to find consumers that will pay
the price you need to make it, as a small scale food producer
• Maximize profit, based on your understanding of consumer price elasticity of
demand
• Leverage direct-to-consumer options (eCommerce, farmers’markets)
•Competition
• Don’t compete with larger scale producers on price
• Understand the pricing environment and motivation of retailers who carry
your product
•Capacity
• Capacity constraints and additions will create “pockets of profitability”for
you at various stages of growth”–understand them and adjust your pricing
accordingly

26. The 4 Cs of Pricing
(1) Cost
Understand your cost, then set pricing
to achieve gross margin in the 50-60%
range

27. Profitability Benchmarks by
Type of Company
Source: Robert Morris Associates, Annual Statement Studies, 2004-2005, all other misc food
*55 companies, averaging $133 million revenue

28. Profit Margin Analysis

31. The 4 Cs of Pricing
Consumer
• Strengthen marketing and sales capabilities to find
consumers that will pay the price you need to
make it, as a small scale food producer
• Maximize profit, based on your understanding of
consumer price elasticity of demand
• Leverage direct-to-consumer options
(eCommerce, farmers’markets)

32. (2) Consumer
• Strengthen marketing and sales capabilities to find
consumers that will pay the price you need to
make it, as a small scale food producer
• Maximize profit, based on your understanding of
consumer price elasticity of demand
• Leverage direct-to-consumer options
(eCommerce, farmers’markets)

33. Marketing Objective
Build Perceived Value
Benefits a consumer expects to
gain from a product or service.
•
Is there something you can add
to your current offering that
doesn’t cost much but has high
client value?
•
Is there something you do better
than anyone else that you can
bundle with your current
offerings?
©
2012,
Michel
Algazi.
All
rights
reserved.
Effective Brand
Positioning

34. Marketing Objective
Build Good Will
Value derived over time via experience
and prestige.
•
What unique experience or
long-time expertise do you
bring to your field?
•
What have you done to build
your reputation or your
exposure in the right circles?
©
2012,
Michel
Algazi.
All
rights
reserved.

35. The 4 Cs of Pricing
(2) Consumer
• Strengthen marketing and sales capabilities to find
consumers that will pay the price you need to
make it, as a small scale food producer
• Maximize profit, based on your understanding of
consumer price elasticity of demand
• Leverage direct-to-consumer options
(eCommerce, farmers’markets)

36. Price Elasticity of Demand
(PEoD)
It is the percentage change in consumer
demand relative to percentage change in
product pricing.
The higher the price elasticity, the more sensitive consumers are to price changes. A
very high price elasticity suggests that when the price of a good goes up, consumers
will buy a great deal less of it and when the price of that good goes down, consumers
will buy a great deal more.
A very low price elasticity implies just the opposite, that changes in price have little
influence on demand.
©
2012,
Michel
Algazi.
All
rights
reserved.

37. Price Elasticity of Demand
(PEoD)
•
Large consumer goods companies have research
departments to figure this out, smaller firms use
experimentation
•
Price elasticity of demand for a given food product will
depend on how essential it is, availability of substitutes, etc.
PEoD =
( Q2 - Q1 ) / Q1
( P2 - P1 ) / P1
• If PEoD > 1 then Demand is Price Elastic (Demand is sensitive to price changes)
• If PEoD = 1 then Demand is Unit Elastic
• If PEoD < 1 then Demand is Price Inelastic (Demand is not sensitive to price changes)
©
2012,
Michel
Algazi.
All
rights
reserved.

38. The 4 Cs of Pricing
(2) Consumer
• Strengthen marketing and sales capabilities to find
consumers that will pay the price you need to
make it, as a small scale food producer
• Maximize profit, based on your understanding of
consumer price elasticity of demand
• Leverage direct-to-consumer options
(eCommerce, farmers’markets)

39. (3) Competition
• Don’t compete on price with larger scale
producers
• You can’t match their scale economics or purchasing
clout
• They may be able to lower price in just the local market in
which you compete
• Understand the pricing environment and
motivation of retailers who carry your product

40. The 4 Cs of Pricing
(4) Capacity
Capacity constraints and additions will create
“pockets of profitability” for you at various
stages of growth–understand them and adjust
your pricing accordingly

41. Pricing - Capacity
Traditional Break-Even Chart
$
Revenue
Profit
Cost
Loss
Units
Breakeven Volume

42. Pricing - Capacity
Pockets of Profitability
$
Cost
Revenue
Pocket of Profitability
•
•
•
Businesses run more profitably at 80 –90%
utilization of plant capacity
Adding new capacity can push a profitable
business back into the red
Try to find the “pocket of profitability”for the
stage you are at right now
Units

43. The 4 Cs of Pricing
Conclusions
•
Appropriate Pricing Strategy will be a function of:
• Cost you need to cover
• Consumer Demand
• Competitive Products
• Capacity that you want to profitably utilize
• If your product has some unique and valued
characteristics, it may give you more pricing latitude
than you realize
• Set a price that gives you the best chance to be
profitable at your current stage of development
• Look for the channels that allow you to keep more of
your pricing, and avoid those where you will get
squeezed due to retailers’need to compete on price

44. A Couple of Additional Ideas
Profit Levers
Raise Prices
(if PEoD permits)
©
2012,
Michel
Algazi.
All
rights
reserved.
Increase
Capacity
(optimize
Pockets of
Profitability)
Reduce
Overhead
Generate Good Will /
Increase Perceived
Value
Improve
Customer or
Product Mix

45. A Couple of Additional Ideas
The Fifth C: Client
Acquisition
Profit-centric Model
(Ideal)
Customer Lifecycle
PROFIT
Lifetime Value (LTV)
(loyalty)
©
2012,
Michel
Algazi.
All
rights
reserved.
Retention

46. Packaging Design

47. The Environment

50. Dos and Don’ts

51. LAURA
DESIGN COMPARISON...
Does the package clearly communicate
what’s inside?
Does the package attract attention?
Does the package instill confidence?

52. The Creative Brief

53. Creative Brief Example
Background
1. Market
2. Category
3. Segment
4. Market Share / Competition
5. Business objectives
Requested Scope of Work
Description of the item being designed
Final Deliverables
Using existing artwork files so as to minimize work and cost, deliverables include the development of
artwork in digital layered files (Illustrator) for packaging* of all 6 product families.
Timing
-
Design quote…………………………………………. Oct
Quote approval (green light)>………………. Oct
2 comps for one product family..…………. Oct
Comp feedback ……….………………………….. Oct
Final art (1 product family).....……………..
Final art for all product families ………….. Oct
ADDITIONAL INFORMATION
Brand Positioning Statement
Target Audience
Brand Associations
Value Proposition
Hierarchy of Messaging
1st
2nd
8th
9th
Oct 15th
22nd

54. Design Examples

55. DESIGN COMPARISON...
Does the package clearly communicate
what’s inside?
Does the package attract attention?
Does the package instill confidence?

56. before
after

59. Line Extensions

63. Q&A

64. Launch Process
Sales & Distribution Plan

65. Launch Process
Sales & Distribution Plan
•
•
•
•
•
•
•
•
Understand distribution channels
Understand distribution universe per channel
Structure sales and distribution relationships
Understand financial impact of chosen channel
Plan 24-48 months ahead
Support with a financial plan and sufficient
funds
Support with a promotional / marketing support
plan
Discussion:
•
Importance of geographical focus

66. Launch Process
Distribution Channels
Channel
Intermediaries
Margins
Other
Considerations
Farmers Markets None
50%-70%
Retailers (WFM) / Other
specialty / natural
Direct or
Distributor
Distributor
50%+ direct
<30%
35%-50%
Direct-toconsumer
Own retail
None
50% to 70%
None
50% to 70%
Awareness
building
Fixed Overhead
Pop-up stores
None
50% to 70%
Concession
Foodservice (Hotels
Restaurants
Others)
Concession Fees
+ labor cost
High cost of sale
Brand is lost
*** Costco and Trader Joe’s

67. Sales / Marketing / Promotion
Direct Vs Indirect Sale

68. Sales / Marketing / Promotion
The Broker
• Fulfills the function of an outsourced sales
force (in other industries, they are called
“Reps”
• Works on a retainer, on commission (typically
5% of gross sales) or on a combination of
both.
• Typically represents up to 30 different
brands / product lines
• Role is to open accounts and doors
• Does not hold inventory or title to your goods

69. Sales / Marketing / Promotion
The Distributor
• Takes your product to retailers
• Will sometimes drop off your product at the dock
and sometimes will provide full service, including
merchandising (DSD).
• Typically works on a margin of 25% to 30%
• Typically distributes hundreds or thousands of
different brands / product lines
• Has a sales force, but is usually not an effective sales
organization for small brands
• Holds inventory and title to your goods
• Will be the party responsible for paying you for your
goods.

71. Margin Expectations
•Brand Owner: Minimum of 40%
•Distributor: Between 25% and 35%
•Retailer (not including Trader Joes or
Warehouse / Clubs): Between 35% and 50%

72. Setting Your Pricing
Structure
©
2012,
Michel
Algazi.
All
rights
reserved.

73. Rules of Pricing
•
Never underestimate your cost of goods (the fallacy
of economies of scale)
• Allocate costs appropriately
• Always define your pricing based on the maximum
number of possible intermediary relationships
• Make a realistic assessment of the “Cost of Sale”
• Clearly understand discount / promotional
mechanics
• Run pricing scenarios for every major account you
open.
• Understand that not every sale is profitable sale
Worksheet
©
2012,
Michel
Algazi.
All
rights
reserved.

74. Launch Process
Price Lists
Dos
• Have product specifications and pallet configuration
• Have lead time
• Have payment terms
• Have pickup point
• Have your distributor’s contact and PO details
• Have manuf customer service contact details
• Have customer signature
• List expiration date or validity
• Show customer’s profit per unit, case or pallet
Don’ts
• Confuse distributor and wholesale price lists
• Demand to control wholesale and retail price
• Allow for partial case purchases
• Circumvent your distributor
• Forget to specify UPC code for shipper if you have one.

75. Launch Process
Price Lists

76. Launch Process
Selling Tool Development - Other Tools
•Sales force training manuals
•Store personnel training
•Web site

77. Launch Process
Selling Tool Development - Sell Sheet
•Front (4 color)
•Brand
•Tag Line / breadth of range description
•Product glory shot (in use and in packaging, preferably)
•Selling points (focus on the right audience)
•Back (B&W OK)
•Table with:
•Vendor item number
•Description / name
•Ingredient statement
•Case pack
•Item dimensions
•Item weight
•Case Dimensions
•Case cube
•Case weight
•Pallet configuration
•UPC Code / Bar Code Graphic
•Contact information (including phone, email, web site)

78. Launch Process
An Effective Support Plan
• It must incorporate all elements of the “marketing mix”
• Product
• Price
• Promotion
• Distribution (place)
• It must consider broker, distributor and retailer Expectations
• Annual plan
• Seasonal support (3-4 times / year)
• Back-pocket deals
• Mix of performance and non-performance based promotions
• Whole Foods programs
• Product Exclusivity
• Team training / appreciation
• Demos
• Premium / giveaways
• POP materials when allowed
• Coupons
• Free-fills
• Other discounts

79. Promotion Types
• Performance based (based on units sold)
• Scan-downs (discount on SRP)
• Coupons (discount on SRP)
• Non-performance based (fixed or time delimited)
• Slotting (fixed price - evaluate customer profitability)
• Free-fills (on cost of goods - evaluate customer profitability)
• Off-invoice distributor (eg Intro or seasonal) (on distributor price)
• Off-invoice retailer (eg Intro or seasonal) (on wholesale price)
• Chargebacks (eg marketing) - variable
• TPR (on SRP)
✴ Note timing of cost impact

80. Financial Planning
Elements of an Effective Financial Model
•Assumptions
•Based on real life scenarios and test market
•Include
•Distribution growth
•Sales velocity
•Seasonality
•Product costs
•Product price
•Product mix
•Costing
•Price
•Operating Expenses
•Profit and loss statement
•Cash flow statement
•Balance sheet
•ONCE COMPLETE
•Work on sensitivity analysis capabilities
•Create model for 24-48 months
•Use it as a monthly planning tool

81. Financial Controls
•Good record keeping
•Financial Planning
•Inventory Management
•Quickbooks
•Support
•Accountant
•Bookkeeper

82. Questions and Answers

83. Review
•
•
•
•
•
•
•
•
•
•
Product ideation / Market research
Feasibility analysis
Branding strategy
Company formation and brand registration
Product development /Manufacturing options
Costing and pricing
Packaging Design
Launch process
◦ Distribution channels
◦ Sales and distribution plan
◦ Selling tool development
◦ Price lists
Sales / Marketing / Promotion
Financial planning
Financial Controls

84. Thank You
Michel Algazi
Food Centricity, LLC
www.FoodCentricity.com
Michel@FoodCentricity.com
y
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