How shelf-life issues can make or break a food start-up
Selling food with a short shelf-life presents a number of complexities, as Anna Mackenzie, founder of chilled breakfast brand Cuckoo Bircher discovered
Childhood friends Anna Mackenzie and Lucy Wright launched their tasty breakfast cereal brand Cuckoo Bircher muesli in 2013.
Recently, co-founder Anna looked at the qualities and character traits being a female entrepreneur brings to the business. Here, she discusses how shelf-life really can be the making or breaking of a food start-up.
Starting a business in the fast-moving consumer goods (FMCG) space can be far more complex than you’d have imagined possible.
As a result, we’re continuously learning about the food industry and there have been a few things that have been particularly surprising.
Chilled vs Ambient products
One major learning surrounds the challenges of having a chilled, short shelf-life product range vs those of making and selling ambient products.
There are major differences, and while we’re glad we were naïve to them at the time of starting up (or else we may have thought twice!), the earlier you consider these challenges and build them in to your business plans, the better.
The shelf-life of your products is a major consideration and could potentially make or break a food start-up like ours.
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FACT: Short shelf-life products need ‘extra time’ before they hit shelves
When first doing kitchen trials, we were happy when we observed that our samples were good for several days in the fridge.
However, this is not necessarily the case. By the time your products have been produced and gone through the various stages of the supply chain and arrived on shelf, this doesn’t leave any time at all to sell them.
When we then compared our shelf-life to other products in the category, it became apparent that a 30-day shelf-life was more along the lines of what was required. Shelf-life can be obtained by producing under the right conditions and with the right packaging.
So if you’re launching a chilled range, this may mean you need to outsource production from the get go rather than managing it yourself in a kitchen, which some ambient brands can take advantage of.
FACT: Production frequency for chilled foods means start-up costs are higher
Another difference between chilled and ambient products is production frequency. In the chilled sector, upon gaining your first customers, production has to be regular to maximise the shelf-life (daily or weekly).
But if you have an ambient product you can start off by doing monthly or ad hoc production as and when required. This has implications too with minimum production quantities you’re held to, as you might launch with just one customer and need to be doing tiny production batches to supply that customer while you gain further customers.
Doing smaller and more regular production has a knock on effect on other supply chain costs. With chilled transport for example, you don’t pay on the basis of how much you’re sending when you’re dealing with small quantities, you’re paying for a certain amount of space in a vehicle, whether you fill this space to capacity or not.
Therefore, the importance of scaling becomes very imminent as it has such a huge impact on your costs. You can make the most of this issue and use the pressure of high costs to work hard to grow your business more quickly and set higher growth targets.
Production frequency and small batch sizes also needs to be a consideration in searching for your production partner, as they will need to be willing to work with you at the beginning whilst you grow.
FACT: Forecasting for short-shelf life products will lead to more waste, thus more cost
Forecasting for a chilled product is also more sophisticated. While you may be able to propose an ordering and delivery schedule to your initial customers to fit in with your production schedule, if you grow in to the multiple sector (e.g. supermarkets), the customer will place an order on day one for delivery on day two so you’re required to anticipate orders and do production before the orders have been placed.
Regardless of how accurately you’re able to forecast (which will come with data you build up), as a chilled business you’ll need to build a higher wastage percentage in to your costing model. The same forecasting requirement applies to the other end of your supply chain, for any chilled or shorter shelf-life ingredients you use, for which you’re forecasting for an even longer time period ahead.
FACT: Customers measure you on wastage percentage – not just sales!
Finally, we’ve also learnt that as a chilled product, performance on shelf is measured in two ways; sales and also on wastage percentage. This isn’t something we considered initially and were just focused on the sales.
But with a chilled product, once you’re on the shelf, you don’t have a lot of time to prove your success, because if high wastage is occurring it will only erode your customer’s profit margin.
Initially, when you launch a new chilled product or brand, you can consider providing some wastage support while you activate the products in-store and get them off the ground.
You can see that the differences in having a chilled product range vs an ambient one will affect multiple aspects of your business. So being aware of and planning for the accompanying challenges will put you in a better position for success and mean fewer surprises down the line.
You can follow Cuckoo Bircher on Twitter or find out more about Anna, Lucy and their muesli on their website: cuckoofoods.co.uk