How to start a health food store

What is a health store?

Propelled by the modern-day focus on healthy, natural foods and widespread public unease over products genetically modified or sprayed with pesticides, the UK organic food industry is worth  billions; alongside this there has been a steady rise in customers seeking ‘free from’ foods where for allergy or health reasons.

“The GM (genetically modified) situation has certainly given organic food a massive boost,” says Richard Bosly, of the Organic Food Federation. “But now the steam has run out of that slightly, we’re seeing that environmental protection and sustainability are becoming big concerns for consumers.”

Many modern heath food shops offer more services and products than you would imagine, allowing them to tap into other areas of the vast health market other than just food.

Organic products

Organic products have been created naturally, without the use of pesticides or chemicals additives. The term ‘organic’ also means the environment hasn’t been harmed during production.

Organic farms are certified after two years of being chemical- and pesticide-free. Retailers can acquire organic products from the farmer directly, or at markets and trade shows.

However, organic products aren’t cheap – they often cost twice as much as their mass-produced alternatives. This can make it difficult to competitively price your stock when going head to head with high street chains – so health food stores have to be inventive by exploiting their niche market.

Other products and services

The modern health food store is now a viable, varied enterprise – the image of drab, musty-smelling shops full of endless shelves of inedible chewy bars is now a thing of the past. Spurred on by the rising popularity of alternative food and medicines, many health food stores have added various services to their range, such as allergy testing and aromatheraphy, as well as stocking herbs and supplements.

Depressed by the state of the NHS, and often looking for an alternative cure, consumers are increasingly turning to natural remedies such as St John’s wort and ginseng to combat anything from depression to cold sores.

“We supply vitamins, herbals and ‘body foods’,” explains Selma Ford, manager of Healthfoods Unlimited in Exeter. “We also have a therapy room and I employ a medical herbalist, allergy tester and osteoporosis specialist to come in several times a week. We also offer aromatheraphy.

“I would say the business we get is split about 50-50 between the health foods and the treatments. They complement each other well,” she says.

Who is it suited to?

So, who can run a health food store? “Someone who is dedicated to helping others and has an interest in alternative medicine, special diet foods and the environment,” says Richard Hawes, of Kallo Foods, a health food store based in Godalming, Surrey.

Although almost any entrepreneur with good business sense and foresight can successfully run a health food store, it does help if you believe in what you are promoting. An awareness of green issues, a concern for food producers and a natural weariness of pesticides and GM foods will help you convincingly sell the idea of healthy, natural produce.

Qualifications in nutrition and other related field are very useful, and add authority to your sales pitch, if nothing else.

“You need to be someone outgoing, ideally with product or nutritional knowledge,” explains Paul Wick of Southville Deli, in Bristol. “You need the ability to deal with the paperwork, lots of stamina to cope with the physical side of constantly moving stock, and the long hours.”

Setting up a health store

Although several health food traders are finding it profitable to sell their stock over the internet, the organic business is based on relationships with the local community at grass roots level, so it’s probably best to go down the traditional path and start thinking about getting premises and stock to form the basis of your new store.

Getting stock

There are several different ways of getting your natural produce – you can go to the farmer directly, have stock sold to you via a third party or go through a wholesaler.

To cut out the middleman entirely (and therefore potentially save yourself some money) you can get involved in a ‘box scheme’ with your local farmer or produce supplier. From between £5 to £20 a week you can get a grinning farmer on your doorstep, clutching a box full of carrots, potatoes and other various fruit and vegetables plucked fresh from the field.

You’ll probably need more than one delivery a week to keep your stock at a healthy level, but such schemes are valuable and have expanded rapidly over the past few years as local farmers cash in on the boom in natural and organic foodstuffs. Where once you could get a box containing a mouldy cauliflower and a droopy leek, many suppliers now offer a wide range of products, including dairy produce and wine, delivered directly to you at an affordable rate.

Farmers’ markets are another good source of natural, affordable products and, like box schemes, have seen a surge in popularity. The markets, which usually take place once a week in a community hall or field, are often great places for a bargain, with farmers selling their produce directly to you, thereby cutting out the middleman.

Be careful not to be blinded by the potential profits these markets can lead to – it is not guaranteed that all the produce on sale will be organic. Like with many organic products, farmers must be certified and have the proper documentation before they can legally call their fruit and vegetables ‘organic’. Make sure you query this with the farmer, as you could be hauled up in front of the authorities if you start selling non-organic food under false pretenses.

For details of local box schemes or farmers markets, consult the Soil Association by visiting their website.

Make sure when you buy your supplies, you don’t over-stretch your fledgling business. As a new firm, creditors will be reluctant to give you huge amounts of capital to get your produce – particularly in the current economic climate.

As supermarkets and high street firms offer a considerable challenge to attract customers wanting something different, make sure you make cautious purchases so you can gauge what is popular to the general public.

According to Richard Hawes of Kallo Foods in Godalming, the most sought-after products are Soya milk, rice, and gluten free foods.

“Visit as many other health food stores as possible, see what they stock,” advises Paul Wick, of Southville Deli in Bristol. “Flesh the bones of the store with that knowledge and the help of a good wholesaler.

“After that, be guided by your customers’ requests. Sometimes I’ve bought something in for a customer and it turned out everybody was looking for it – they just didn’t say so,” he explains.

Major health food suppliers include Suma Wholefoods, Essential Trading, and Community Foods.

Business premises

As with many businesses, the location of your store and your rent can make a huge difference to whether you succeed or not.

“What you need to keep in mind is whether you are in the right demographic area,” explains Wick. “Will shops nearby complement your business, is there anything to draw people to your locality?”

Of course, sites near the high street or in popular shopping centres are expensive. If you want to compete with a big chain store or supermarket, make sure you’re offering something different, or at a better value – or you could lose out.

How much does it cost to launch a health store business?

It is impossible to pin down an exact figure for how much your health food shop will cost to set up, as this depends on several factors such as location, amount of stock and services provided.

The cost of buying freehold premises varies in much the same way as house prices vary throughout the country. In the current climate, property prices are dropping, but small premises in a less expensive region will still set you back from £60,000 to over £300,000 plus for a large property in a prime location. Yearly rental costs on leasehold sites, meanwhile, could cost from £8,000 upwards.

You will need to fit out and decorate your shop – a cash till, credit card facilities and a storeroom are essential.

Obviously, you also need stock to sell and workers to employ. Always keep in mind regulations such as the minimum wage and the Working Hours Directive when employing your staff. A small health food shop will just need one or two assistants, but as your store grows, you may wish to add allergy testing and other services to your customers, and this will involve employing a professional – and that means paying a professional wage.

Although this can be done on a part-time basis rather than having a full-blown treatment room for ailing customers, you may want to wait until your firm is on a steady footing before you go down this path.

With stock, there is a wide range of suppliers to choose from. Shop around before coming to a decision, and keep in mind that as a new business you won’t be extended massive amounts of credit, so exercise caution in your initial period of trading.

Paul Wick, manager of Southville Deli in Bristol says: “It cost us around £16,000, including £4,000 on an initial outlay of stock. This included flooring, decoration and shelving.

“In addition we hired chillers, and our coffee supplier lent us a coffee-grinder.”

The rules and regulations of the health store industry

As with all shop-based businesses, it is important to contact your local council so you can make sure you’re following the correct health and safety regulations while you start your business.

However, there are specific rules that you must keep in mind when you start trading – not least certification for the selling of organic products.

By law, retailers must hold a certificate to sell on organic produce supplied to them. The word ‘organic’ is actually a legally defined term, regulated by the European Union. It’s against the law for an uncertified retailer to sell on goods marked as organic.

Food must be produced on a farm which has been pesticide- and chemical-free for two years for it to qualify as ‘organic’. Similarly, an organic product can only contain 5% or less non-organic material.

The certification of retailers is regulated in Britain by the United Kingdom Register of Organic Food (UKROFS). Bodies such as the Soil Association and the Organic Food Federation award certification, with the products generally bearing the name of the awarding agency, although this is not required by law.

Under these licensing laws, health food stores are able to ‘break bulk’ of supplies. This means retailers without a certificate cannot sell on part of a batch of goods from a supplier – which includes the self-service scoops of rice, pulses and other foods you often find in health food stores.

“There is certainly a sketchy knowledge among businesses about certification,” says Richard Bosly, of the Organic Food Federation. “It’s important health food stores know all about this as they could have the Trading Standards Authority on their back if they’re selling organic food which isn’t certified.”

Interestingly, although all organic food has to be regulated in this way, the same does not apply to other organic products, such as shampoo and cosmetics.

“It is advisable to get these items certified, if only to prove to everyone that they are, in fact, organic products,” advises Bosly.

How to make a profit

Competition from high street stores can put a dent in your profits, so you should focus on offering something different and new. The British public are becoming increasingly interested in natural, organic food, and it’s a niche market you should try hard to exploit.

“Because of the high prices of organic produce, you can’t really compete with other stores in terms of cost,” explains Richard Bosly of the Organic Food Federation. “Although supermarkets offer some organic produce, they haven’t become entrenched with the idea of selling natural products, so you have to make this niche area your own.”

It’s important to be aware of your surroundings and how they can affect your business. For example, are there any other businesses around that provide products that complement your own? If so, why not form an alliance to boost both of your profits.

Also, are you reasonably close to farmers’ markets and other sources of natural produce? The quicker and easier you can get your stock in, the fresher it will be.

Employing therapists and offering services such as allergy testing may cost you in the short term, but your increased custom will generate profits over a longer period of time – with good planning and foresight you can corner the market on almost all alternative health services in your local area.

If the extra services are too expensive to run full time, why not ditch the specialised therapy room and offer customers a part-time surgery-style service, or even a call-out option?

“Health food store can be profitable if your location and product range is good,” says Paul Wick of the Southville Deli in Bristol. “I wish I had bigger storage facilities, because it would give me a better discount with suppliers.

“Also, packing your own wholefoods to sell, even a very basic range, will give you a much bigger profit margin.”

Farmers’ markets are a good source of natural, affordable products.