Business Monday

Food entrepreneurs: The next breakout food product is just waiting to be discovered

Jacqueline Jones makes the most delicious red velvet cookies for the holidays and arranges them so beautifully on a plate that many of her friends have urged her to go into business. It is a common encouragement this time of year when people in kitchens across the country bring out to-die-for holiday recipes and get egged on by friends and family to launch upon the path of entrepreneurship.

While Jones, a Davie mom, has decided against selling her cookies commercially — she sells them only to a few friends — more than 20,000 food products a year actually get off the ground, according to the United States Department of Agriculture.

What most people typically discover is that being a food entrepreneur — someone who launches a business around a food item new to the marketplace — can be fun and profitable. But it isn’t a path to pursue as a side hustle or quick trip to fortune. There are dozens of nuances in taking your fabulous tasting cookie batter from a hobby to a brand, which is why many food entrepreneurs fail. Those who have taken the journey say it takes a huge time commitment, work life trade-offs, financial sacrifice and a determined but flexible mindset.

“The food business is brutal,” explains Chris Cornyn, food entrepreneur consultant and judge on Lifetime’s new food reality show, Supermarket Superstar. “In any supermarket you have 500,000 products you are vying for attention with, and the average shopper leaves with fewer than 100 items, so your odds of getting your item in a cart are small.” Now, factor in that 15,000 to 20,000 new food products are introduced each year, and “that quickly wipes out a false sense of confidence,” he said.

In Florida, people can take a chance and start a food business without making a hefty investment. The law allows anyone to make cottage food products such as breads, cakes, cookies, candies, jams, jellies and fruit pies in an unlicensed home kitchen as long as sales don’t exceed $15,000 annually. The products must be sold directly to the consumer and cannot be sold over the Internet or wholesale. In South Florida, there are dozens of food entrepreneurs taking their businesses to the next level, producing everything from sourdough bread to wine to frozen cupcake batter to chocolate with a flair and even tapping into family recipes from their Jamaican and Hispanic heritages.

Starting any business is no easy task, and becoming a food entrepreneur is a special challenge. Stephen Kushner of Cooper City acknowledges that becoming a food entrepreneur has been trickier than he expected. Kushner, who grew up in Philadelphia, wanted to introduce Florida to the fresh pretzels he bought on the streets as a kid. He has come to realize that passion for a product is just one ingredient for success.

Five years ago, Kushner brought his food concept to South Florida and envisioned people and venues clamoring for his high-quality soft, salty pretzels made in a retail/commercial Davie storefront known as Philly Pretzel Heaven. But over the past five years, Kushner said he has experienced roadblocks.

“I’ve been told I make the best pretzel people have ever had,” Kushner said. “But after five years, I have come to realize South Florida is not a fresh-pretzel market.”

Kushner said he expected to sell his pretzels wholesale to universities, public school districts and entertainment venues: “I thought they would rather have fresh than frozen. In my case, I’m not sure I did enough homework in the places I thought would be sure sells.” Kushner said that after launching, he discovered that most of those entities outsource their buying to national catering companies.

On the flip side, Kushner’s retail business has been stronger than he expected, buoyed by word of mouth and passersby who created foot traffic. In addition, some South Florida restaurants serve his pretzels in their bread baskets; some theaters and casinos sell them also. He now sells more than 2,000 pretzels a day for $1, pretzel dogs for $3 each, and about 45 dozen frozen pretzel dogs a week to a distributor.

Kushner said that South Florida food entrepreneurs also need to expect that summers will be slow. You must have marketing skills and staying power to survive those months, he said. “What I did to survive was, I began banging on the doors of my biggest clients, urging them to buy more.”

Rather than give up, Kushner, a former podiatrist, put in more hours. “I work way harder than as a podiatrist. There is no comparison. But then again, if you don’t work hard, you aren’t going to be successful in anything.”

Now, Kushner said he has a new plan: “I’m going to figure out a way to sell frozen and in bulk instead of individually and fresh.” As he retools to thrive and survive, Kushner said, he’s extending his product line to include hamburger and hot dog pretzel buns: “I have to make what Florida wants, not what I thought Florida would want.”

In Tamarac, chef Michelle Jones, a culinary instructor, is launching four food products. By networking and visiting grocers, she has managed to get two of her products in local ethnic grocery stores. In April, Bravo Supermarkets in Broward County began carrying her Caribbean Boniato Sweet Potato Pudding, and in September, local liquor stores began carrying her tropical wine cakes. Both products are made in rented kitchen space in Tamarac, packaged under the Chef Jones label and draw on her Jamaican heritage, culinary expertise and family recipes.

Jones said she is in the early stages and already knows she has a long road ahead: “It’s definitely a challenge. I have learned a lot and now know that packaging is a big thing. I’m going through the process.” So far, Jones said, the biggest lesson has been about marketing: “I have to go into the stores and do tastings and let the customers know my products are here.” Jones said her next move is trying to get her products into Publix: “For that I need a distributor and manufacturer.” Jones said she has jerk ice cream and four flavors of sauces she also hopes to get into grocery stores.

Miami’s Jennifer Behar, who is much further along in the process, has also experienced challenges.

For Behar, getting her homemade flatbread, biscotti and breadsticks onto supermarket shelves was the easy part. She spent her days canvassing small grocers, convincing them that her products filled a demand in the marketplace. With Gardener’s Market , Norman Brothers and Fresh Market agreeing to carry her products, she began selling her flatbreads under the label “Jennifer’s Homemade.”

Before long, her items were on shelves in dozens of stores. At the same time, she also struggled to juggle the business with her personal life: She wasn’t spending time with her daughter, she wasn’t exercising, she had 20 employees, a huge commercial kitchen space and too much debt; she had maxed out her credit cards and had taken out a second mortgage on her home.

“When you are working at building a business, you’re operating at a very high adrenaline level, but you can’t do it forever. You have to find balance because it’s easy to lose yourself,” she said.

Behar, a single mother, restructured. She downsized her space, replaced all but three employees with machinery, and made her weekends her sacred time with her daughter.

Now, eight years after she started out, she says she has stopped the pursuit of new retail accounts and has concentrated on wholesale, where she sells in bulk. “There’s less packaging and more profit, but it’s not as sexy,” she concedes. “I have come to realize it’s not about getting my name everywhere. It’s about running a business.”

Cornyn, founder of DINE, a California food and beverage marketing agency, said one of the most common mistake food entrepreneurs make is they believe their unique or scrumptious food product is all they need to succeed. He has worked with more than 2,000 food clients on branding and packaging. “It’s not just making the best-tasting product. It requires learning about how the food business operates and understanding the rudimentary mechanics,” he said.

For example, food entrepreneurs must work with brokers, distributors, co-packers and grocers to get a product on store shelves. Along with product development, they need to meet labeling and regulatory compliance, find a processing facility location, come up with product pricing and develop promotional material. That takes start up funds and most people bootstrap it, borrowing from their 401k, maxing out their credit cards and borrowing from friends, Cornyn noted. With proven sales, it becomes more possible to get small business loans, money from angel investors and private equity funds to help with expansion. “On average, it takes at least three years to become profitable and lots of people don’t have enough capital to slog through it,” he explained.

Leslie Kaplan and her partner Carolyn Shulevitz are learning the challenges of the food business as they roll out their colorfully packaged dessert items in Florida’s Whole Foods stores and Epicure Markets.

Kaplan had been operating a Miami luxury yacht charter business when she noticed her party-goers were raving about her caterer’s cupcakes. Shulevitz, the caterer, mentioned that she was inundated with cupcake orders. Together, the two decided to go into business in 2010, freezing the preservative-free cupcake batter and frosting and selling it under the brand, Ready. Set. Cupcake! Their initial financing came from their own funds, $50,000 each. Their initial expenditure included hiring a consultant to help with the logo and branding, and hiring a local packaging company to prep the product for distribution.

Kaplan, a natural at sales, said she approached Whole Foods Market with the unique qualities of her cupcake products — a healthier dessert made locally without preservatives, trans-fat and hydrogenated oils. The product emphasizes the ease of baking and can be customized by adding flavoring and ingredients into the baker’s bag. Whole Foods agreed to carry the frozen cupcake product in its Florida stores. That was just the first step.

The Piping Gourmets, the name the women now go by, needed to get the word out. They quickly discovered the financial and time commitment was more than expected. The two spent their weekdays in the kitchen and office and their weekends at Whole Food stores around the state, giving out samples and conducting demonstrations. They took no vacations or time off, and there was no money to spare.

But putting in seven days paid off: It was during in-store product-tastings at the Whole Foods when the women stumbled upon their next big idea: whoopie pies, a cake sandwich. After they made a few in stores to demonstrate their cake batter, customers began asking for the ready-made whoopee pies. “We had no idea whoopie pies would take off so quickly and turn out to be what’s now supporting us,” Kaplan said. She said sales have tripled since they launched the gluten-free pies that sell for $6.99 for a four-pack. The whoopie pies made by the Piping Gourmets are certified gluten-free and dairy-free, certified vegan and kosher, and come premade and frozen. Kaplan said that after securing a manufacturing facility in Central Florida to make the whoopie pies, she realized it was a good time to approach Whole Foods about its low-interest, local-producer loan program. With a proven track record, the women became recipients of a $12,000 loan. The duo used the loan to buy machinery to expand production capacity.

For now, the partners are putting revenues back in to expand the business. “In 2014, we hope to turn a profit,” Kaplan said. Meanwhile, The Piping Gourmets have their sights set high: Within the next two years, they want national distribution, and within the next five years, they want global distribution. Kaplan said a food retailer in the mid-Atlantic region will begin stocking their products in March, and to supplement store sales, they now are marketing whoopee pies in bulk and selling them to cruise lines, universities and Disney.

Kaplan said she and her partner have lessons to share: Do your research well, operate your business as nimbly as you can, don’t be afraid to ask for favors or seek advice from friends with legal or financial expertise.

Their big mistake, Kaplan concluded, was marketing the cupcakes at a trade show: “It was expensive and we went too soon with printed marketing material we didn’t need... People like everything electronic these days.”

Another big realization has been the pace of growth: The two women initially wanted to go big. “We realized you can’t sell to giant retailers like Costco and Walmart right out of the gate,” Kaplan said. “You have to start small and solidify your business with marketing and financing. You have to have your ducks in row before you grow too big too fast.” Yet another error, Kaplan admits, was branding under the Ready Set Cupcake! name. It limited them as they extended their line into other products, like the whoopee pies and other items to come. Now they market their items under “The Piping Gourmets’ name.

Each month, Juan Nuñez, president of Whole Foods Florida region, sorts through about 100 pitches from entrepreneurs who, like the Piping Gourmets, want to launch their products in Whole Foods Florida stores. There are 20 Whole Foods in the state and six under development.

Nuñez said those products that make it have common attributes: They meet the chain’s quality standards, they are locally produced, and they offer something unique. To compete with the 35,000 products already for sale in an average Whole Foods store, a food entrepreneur must convince Nuñez, then customers, that the item is worthy of attention and purchase. Often the entrepreneurs do that by being on-site, giving out samples and telling their individual stories.

“We can tell in 30 days if a product isn’t doing well,” Nuñez said. “In some cases, we will give it an additional three months.”

If a product sells, Nuñez said, the goal is for it to expand both within existing stores and to other regional markets. He often makes suggestions and introductions to help the process. Nationally, Whole Foods’ low-interest loan program has made more than $10 million in loans to 147 companies for expansion.

Supermarket Superstar’s Cornyn noted: “Nine out of 10 new food products fail. You have a better chance in Vegas or picking someone up in bar than being successful in the food business.” While it may seem daunting, he pointed out that anyone can beat the odds: “It doesn’t matter whether it’s a big corporation that spends millions on research or a local mom with a great idea for spaghetti sauce — the success rate is the same.”

Cornyn offered this advice to would-be food entrepreneurs: Ask yourself, what makes my product different, and why are people going to care about it? Taste is just part of the equation, he noted. “The product must seduce their emotional needs, functional needs and nutritional needs. Years ago you could get away with providing one or two of these things, but now you have to hit all three.”

A product can stand out through branding, packaging or by representing a whole new category. For example, Julie Busha, a Charlotte, N.C.-area entrepreneur, appeared on Shark Tank last month with her new category of food product: slawsa, a cross between coleslaw and salsa. Busha told the “sharks”/investors that she has sold more than $212,000 worth of Slawsa in 4,200 grocery stores nationwide. Although she didn’t receive an investment, Busha vowed to make the “sharks” regret their decision. She said she expects to double sales this year to nearly $500,000. She currently sells four flavors of Slawsa in Kroger, Publix and other groceries for $2.25 a jar.

If being unique is key, Miami’s Lucy Calamari thinks her twist on chocolates will set her apart.

Her Lucky Lucy’s Chocolate Confections are truffles with South Florida flair — key lime, mango and dulce de leche flavors. “They are colorful and exciting instead of brown and boring,” she said.

With the backing of a local investor, Calamari introduced her chocolates for $25 a box at a local trunk show and then at the Homestead Farmer’s Market, where sales proved strong enough that she felt she could follow her ambition. As a recent graduate of University of Miami, Calamari turned to the school’s launch pad for help with a business plan. Now, executing the business plan, she is rolling out her chocolates at boutiques shops and will go that route before appealing to larger retailers. She has rented kitchen space from a Homestead restaurant and has a deal to sell the chocolates in a gift shop at the Miami International Airport.

A single mom, Calamari said she wants to build her business slowly and balance it with her childcare responsibilities: “For now, there’s a limit to how much I can produce a day. As I go farther, I will hire more hands. It will be a process.”

Coryn emphasized there are myriad paths to becoming a food entrepreneur and says that one path is to start in a home kitchen and test demand at local farmers’ markets. Like Calamari, Zak Stern took that route to introduce his scrumptious bread to South Florida.

Stern created an oven in his garage and began baking artisan sourdough bread, a craft he learned while traveling and apprenticing in Europe and Israel. Before long, a line formed at his stand at the Pinecrest Farmer’s Market on the weekends, and he became known as Zak the Baker. Within six months, the demand grew too big for production from the oven in the garage, so Zak put all his earnings into renting commercial kitchen space. Greater production and word of mouth created a wholesale demand from local restaurants. A year later, he has hit capacity again, baking for 12 hours a day to fulfill daily wholesale orders of 300 breads.

Stern described his venture into the food business this way: no sleep, no money, lots of baking. “We didn’t have money to do this but we had product and that’s what carried us,” he said. With low initial overhead, Stern said he turned a profit from his first day at the farmer’s market but continues to put profits back into the business.

Now, Stern is building retail space combined with a commercial kitchen in Wynwood where he will have a wholesale kosher bakery and a café: “The idea is for people to experience the baking production and connect to what they are eating.” The opening is scheduled for April: “Our goal is 1,000 loaves a day. We are growing fast and learning how to scale up.” He said it is likely consumers will soon see his breads for sale at the local Whole Foods markets.

While he enjoys his relatively rapid success, Stern said food entrepreneurs need to know the harsh reality: It may be years before they take home a decent salary. “I have never made more money and been more poor at the same time,” he said.

Stern said he has learned that building a food business requires funds for more than just ingredients. “As we grow and change from a craft to a business, the more money it takes to keep the business alive,” he said. “Before you know it, you have payroll, insurance, loan payments, and you can’t miss a beat. It’s very stressful.”

Yet, despite the stress, Stern said he is encouraged. His new wife, Batsheva Wulfsohn, now bakes by his side. “I like to think what we’re doing has strength to pull us through,” he said.

Nationally, the Food Entrepreneur Assistance Program is a source for assistance through all phases of establishing a food business. And with the popularity of food entrepreneurship, websites and workshops abound with help to learn how to proactively manage risks.

In South Florida, shared commercial kitchens, sometimes called kitchen incubators, are in demand. These spaces, flourishing in cities such as San Francisco and New York, provide a place to prepare and process products that meet regulatory sanitation standards. Of course, an entrepreneur may have to work around someone else’s schedule.

“Everyone here is looking for shared kitchen spaces, and they are hard to find,” Stern said. “It’s a great business opportunity.”

Cornyn advised start-up food entrepreneurs to look for a category that hasn’t seen innovation in a while. For example, Chobani, the Greek yogurt line that started in 2005 with five employees, came along and started a new trend in the yogurt category.

“A good idea can come from anywhere,” said Cornyn. “All you need is wonderful imagination or a family recipe and way to delight the consumer.” Where entrepreneurs fall short, he has found, is seeing no room for evolution or improvements to their products. Staying nimble and open-minded, listening to consumers and advisors pays off, he said.

Initially, food entrepreneurs may want to keep their day jobs, although at some point, turning chocolate, bread or whoopee pies into a businesses will become all-consuming — financially, emotionally and physically. But Cornyn said by taking baby steps, it is possible for the local entrepreneur to stay financially afloat and create an increasing consumer demand.

“I’ve seen a lot of national brands start with a humble beginning,” he said.