Running a food startup isn't easy. You must find a balance between your passion and a solid understanding of the good food industry. We've learned that no amount of research can compare to simply asking your burning question to someone who helps food startups grow their businesses for a living.
At Local Food Lab, we’ve assembled a team of experts from the industry to answer your questions about the new food and urban farm industries online via our discussion platform Food Lab News. On January 23rd, we hosted a two hour "Ask Me Anything" (AMA) session with food business consultant Shivani Ganguly.
Shivani is the Founder of Friday Consulting, where she works with clients like Tomato Sherpa, Stag Dining, Find Wellness, Hub Oakland, Windowfarms, the Napa County HHSA, Torii Labs, and The New Teacher Center. She also serves as an advisor at Kitchen Table Advisors, La Cocina, and Local Food Lab. She received a BA in Science, Technology, and Society from Stanford University and an MBA in Sustainable Management with a focus on food systems from Presidio Graduate School.
In the AMA, Shivani answered a range of business questions, from crafting the perfect mission statement to identifying the up and coming food trends for 2014.
Having been lucky enough to hear you speak in person, I know you have a great take on crafting a mission statement. What advice can you give us about mission statements versus vision statements and beyond?
Mission statements are an important part of early strategic planning for any food business. The mission statement should define the fundamental purpose of an organization or an enterprise, succinctly describing why it exists and what it does to achieve its vision. A couple of examples I like:
Peet’s: “To enable and inspire customers to enjoy the daily pleasure of Peet’s coffees and teas by providing distinctive, superior products, superior coffee and tea knowledge, and superior service to every customer, every day.”
Tomato Sherpa: “Our mission is improved health for people, communities and our ecology – through cooking.”
A vision statement should outline what the organization wants to be, or how it wants the world in which it operates to be (an “idealised” view of the world). It’s a long-term view and concentrates on the future. It can be emotive and is a source of inspiration.
Peet’s vision statement is “To be the gold-standard specialty coffee and tea company in the world with brands that attract a highly dedicated and loyal customer following.”
Generally speaking, develop vision statements first, and then mission statements following that. Core values are an important aspect of this too!
Any tips on crafting core values?
Core values are beliefs that are shared among the stakeholders of an organization. Values drive an organization’s culture and priorities and provide a framework in which decisions are made.
Here’s an exercise I use to help to think through core values:
(1) Write down values on sticky notes (2) Group values together into categories (3) If there are too many, ask yourself: What makes you unique? What is most important to you personally? (4) Decide on 5-7 values, expressed in your preferred format
Peet’s Example: Mastery – We care deeply about our craft, pursuing excellence in everything we do, with the highest quality and integrity. Curiosity – We look beyond today to discover new possibilities, challenge the status quo, explore, innovate and lead in our industry. Responsibility – We are personally accountable to each other, our customers and the community. Prosperity – We believe in the principle of abundance; as we grow, we create exciting careers for our people, thriving local communities, and healthy, fulfilling lives for our global partners.
Whole Foods Example: Selling the Highest Quality Natural and Organic Products Available Satisfying and Delighting Our Customers Supporting Team Member Happiness and Excellence Creating Wealth Through Profits & Growth Caring about our Communities & Our Environment Creating ongoing win-win partnerships with our suppliers Promoting the health of our stakeholders through healthy eating education.
In your experience, what would you say are the biggest challenges for entrepreneurs in the food and farm space, as opposed to other industries?
I think the biggest challenge is the economics of it. Margins for food and farms are extremely tight. Once you think about all of the things that have to go into getting your product to a customer, it’s hard to make a really profitable business at a small scale. This includes raw materials and ingredients, production or assembly labor, packaging, and delivery. A healthy gross margin for a food company is 40%, while in a software company it’s closer to 80%. And while net margins vary widely, a grocery store usually operates at around ½-1% net margin. Software companies are more like 20%. This leads to a need to get everything right operationally, and to very little margin for error. And of course, in the food business, a lot of error is out of your control—weather happens, your refrigerator breaks down and a bunch of inventory spoils, prices fluctuate dramatically, etc.
Not to depress you or anything! I think the flip side of this is that people are working on businesses that they love with a passion I didn’t often see in technology. And a lot of us are not necessarily looking for the highest financial returns—certainly enough to live happy lives, but balanced by a desire to return something of value to our communities.
I’d also add to this—raising money can be very difficult. There’s a lot of great organizations and people working on this problem, but because of the economic realties outlined above it continues to be a challenge.
What are the “trends” or “best practices” in terms of how good food businesses position themselves in the market? I want to differentiate myself in my mission statement, but I also want to be 2014 relevant.
Relevant trends for 2014:
Delivery and convenience—how do customers get healthy, delicious, sustainable food without spending a lot of time and money to do so? See Sprig, Postmates, Munchery, Plated, Tomato Sherpa, etc.
Concern for animal welfare also seems to be growing and really getting into the mainstream. More people are eating vegetarian for some meals, so there is some increased demand for meat substitutes and other vegetarian and vegan options. But of course, the majority of people are still meat eaters, and for them, it’s manifesting as a willingness to pay a little more for humanely raised meat.
I think gluten free and paleo are continuing as trends in 2014, but there is fatigue growing around these terms. The most important thing in my opinion is that consumers have the options to eat the way they want, and are being educated about it.
Another trend is food as medicine—the idea is ancient, but brands are really starting to use that language and that idea to both create products and market them. I think interest in fermented foods like kimchi, beer, sauerkraut etc. is an offshoot of this trend as well.
For those solopreneurs finally looking to build a team around their food business, what are the key steps I need to know or do going forward?
The first thing to think about when building a team is what do you need to be the best at? For many food companies, this often focuses around product development, operations and/or marketing. Go into as much detail as you can when thinking about this—what are the key activities of your business and what skills do you need to have on your team to make that happen? And what experiences and skills do you need other team members to bring to compliment your own? I suggest writing position descriptions for key positions/activities early on—you’ll probably continue to iterate them, but forcing yourself to write down what you need and what qualifications your team members need to have will help you to focus in the right places.
For example, at Tomato Sherpa (http://www.tomatosherpa.com), we need to be best at developing recipes that people can cook in their homes (which is quite different than a chef managing a large restaurant) and at operations—making sure that we have high quality ingredients and that we’re getting them to the end customer without any degradation. So while we do have culinary experts on board, we’ve generally steered away from restaurant chefs who have large kitchens and staffs to execute on multi-course meals. And we’ve put a lot of time and attention (and dollars) into building our operations team.
A couple of other important aspects:
Outreach is key—you never know where you’re going to find a great partner or team member with the skills you’re looking for. Post on your website, through social media, email your lists of contacts who might know people, reach out through linked in, etc. I also like posting on goodfoodjobs.com and idealist.org.
Performance management is also really important once you have great team members on board. They need to know what their goals are, and have support from you as their manager and the companies leader to getting there.
As consumer demand for “natural” and organic foods continues to grow, how can social enterprises that were built on a social mission stand out from the many others trying to cash in on the trend by simply adding buzz words to their products?
Authenticity is the word that comes to mind. And your example from the Fancy Food Show demonstrates that—they couldn’t really tell you HOW, so you doubted them. I think most consumers actually are savvy enough to know that when major companies like General Mills say that their Cheerios don’t have GMO ingredients in them, it’s a marketing ploy. I think that where this can go awry for small companies is when they try to over-engineer the message. I’m a big fan of saying what your values are, sticking to it, and being willing and able to talk about how you are living them.
I think it’s key, both in terms of classes and such, and in terms of integrating education into marketing. A label should be pretty and appealing, and it should also inform the customer of any important aspects of the product that they need to know about (which is why I’m a big supporter of GMO labeling, regardless of what you believe about GMOs themselves).
I also think that the social aspects are becoming a key differentiator. Even as McDonald’s is moving towards more environmentally sustainable ingredients, there track record on labor is pretty terrible. Paying attention to all aspects of sustainability—environmental, social, and personal—will be a differentiator I think, and something that is complicated enough that if you don’t have a real commitment to it you will probably make noticeable mistakes and not be able to deliver authentically.
For food startups who are starting out, operations can be daunting and overwhelming. What type of resources have you come across that help entrepreneurs create a plan, especially when they are usually doing it alone and with limited funds?
Here are some thoughts on how to approach operations planning:
(1) Research your options. Lay out your options for distribution, packaging, supply chain and vendor management. Talk to other people who do something similar—for example, if you want to start a grocery store, talk to a lot of people who have done that. Come to these discussions prepared with questions. Choose the path that is simplest (give constraints of cost and time of course), and know that you will have to tweak it over time. (2) Ask for help—at Presidio Graduate School for example (and many other schools have this as well), you can apply to get a team of MBA students help you to put together an operations plan. Also check into incubator programs like La Cocina that have developed resources on and classes on operations. And Small Business Development Center’s (SBDCs) may also be able to help you find a business consultant at no or very low cost to provide planning support. (3) We have some resources on our website,http://www.fridayconsultingsf.com, and are in the process of developing more that our operationally focused. The next one, likely coming out in February, is going to focus on cost of goods sold tracking and inventory management.
I’d love to get your thoughts on the growing vertical farm trend. For example, looking at endeavors like The Plant in Chicago, how do you seen this changing the views of urban farming in cities like Oakland? And the obvious follow-up to that is – what do you feel is the best avenue for funding? Private/angel, VC, grants?
I’m a big fan of urban agriculture in general. But in my opinion, the urban parts of the Bay Area aren’t necessarily the best place for it. There’s a couple of reasons for this—one is that we have a lot of really good farmland very close by that is much less expensive than either buildings or land in SF. The other is that we have a very long growing season here, so we don’t have as much of a need for indoor or green-housed growing environments.
What I have seen be pretty successful is using older, less expensive warehouse space further out in the east bay or in the south bay to do hydroponic or aquaponic installations for things like greens and herbs. I could also imagine having something like The Plant that is not really for production purposes, but more for education or food tourism kind of purposes.
I think private funding is the best avenue as a starting point. If there is an educational aspect or some other community benefit, then looking at grants would make sense. I would stay away from VCs unless you’re developing some kind of proprietary technology or other aspect that would make it feasible to scale it.
I did a study with SF Environment a couple of years ago on the viability of urban agriculture as production farms in San Francisco—you can find it on their website if you’re interested (or if you can’t let me know here).
We’re in our 3rd year as a local, all-organic food market with an online platform (very similar to Good Eggs as a reference). Our model has revenue from a small percentage from grower’s total sales and annual membership fees from customers for use of the website. In your experience, do you see customers more attracted to services with a little higher prices and no membership fee or do you think the membership model is still attractive to folks to get lower prices (similar to a co-op)?
I really like membership models, but not necessarily because of lower prices. I think giving something extra to members is a better way to approach it—a bottle of olive oil or wine or access to a special limited product that only members can get. And there’s just something to be said for the feeling of community you get from being a member rather than a customer—semantics but important ones.
Another great approach is subscriptions—you can offer products on subscription at a slightly lower price because it helps you to predict your inventory needs, and its a benefit to the customer because they don’t have to remember to order every week or month. Think about allowing your customers to set up subscriptions for common items like milk, bread, eggs, etc. that they probably need every week, and maybe even monthly subscriptions for cleaning goods and pet food and such.
As my rural farm incubator startup, Sandbox Cooperative, grows I want to know more about how to gather market data. We have shared a survey around our community to learn more about what community members are looking for in an incubator, but how can we more effectively share the survey? And once we begin our growing season, how can we measure our impact on our community in such a way that will let us know the value of our services?
Would love to hear more about your incubator. I’m doing some volunteer work with Kitchen Table Advisors as well.
In terms of getting the word out about your survey, a few things come to mind (and you may have done some of these already). I’m assuming it’s electronic, so if it’s not some of this might not apply! (1) Post to comfoods (listserve out of tufts, a must for every food entrepreneur in my opinion). (2) Connect with colleges who might have access to famers—for example that UC Davis has a great agriculture program. (3) Connect with organizations who have sizeable social media followings in the area you’re focusing on—Roots of Change comes to mind as an example—and ask them to post the survey on your behalf.
In terms of measuring your impact, that’s a tough one in the business you’re going into. Some metrics that occur to me are around revenue for the farms, and production yields. Can you set any benchmarks for what these should be based on other research for similar farms? And can you gather that data from your participants on an annual basis? I think it will be hard to measure the impact in the first years, but over time as you build your data set you should be able to better understand it.
I operate a small gourmet cheesecake business and would like advice on increasing market exposure. Word of mouth and Yelp have both worked wonders, but if I intend on opening a brick and mortar I will need three to four times my current sales, are there any tricks you could recommend to reach “foodies” that wouldn’t involve traditional farmer’s markets?
Sounds delicious. One thing is to make sure you are making the best possible use of social media channels, like Facebook, Instagram and twitter. Check out Farm Girl Flowers on Facebook—I know they’ve really built their business using Facebook as the main platform, and I’m a fan of their marketing approach.
Another thought is to think about distribution options and networking. Go to local food or craft fairs, connect with party planners and caterers, donate treats for your favorite nonprofits' fundraiser, etc.
Also think about ways to get some press—is there a local blog that might be interested in featuring your product?
I’m interested in the beverage industry, specifically cocktail mixers. If I was interested in developing a beverage in this space what technical skill set would I need to obtain (in terms of partner) to develop a base formula. Once developing a formula, what would be next steps in terms of doing a sample run. Also, any regulatory issues to watch out for before jumping in. Thanks!
I’m actually working on a couple of beverage projects right now. It’s fairly complex. You’ll want to connect with a formulator—some co-packers offer this service as well. The formulator should help you to figure out the recipe, and may also help to you figure out where to source your ingredients and what kind of pasteurization methods you need depending on the ingredients.
Once you have the formulation and understand the pasteurization options, you would need to decide on packaging (and think about what distribution approach you would take to getting the product to retailers or end customers, which can impact packaging as well). Finding the right co-packer can be tough too—you need to have a tight spec of what you want and then dive into online research and research through connections in the same space. And you may need to be a little flexible to deviate from your spec if can’t quite find the right fit in a co-packer.
As an aside—one thing I think would be awesome from a sustainability perspective is dry mixes—so much better to not ship around the water element, and ultimately could be less expensive for both you and the end customer.
I love learning about the Bay Area good food movement. What kinds of ideas in the food space have you seen come out of Hub Oakland that have sparked your interest recently?
I’m actually not aware of any specific food businesses at Hub Oakland yet—I’m sure there are but I haven’t heard about them. I’m going to be doing a business planning workshop there in late February, so I may be better able to answer your question after that!
One of the Hub Oakland founders, Ashara Ekundayo, does a lecture series called grits and greens, where she brings together a broad selection of people who are interested in food, technology, and building an ecosystem in Oakland around to support these kind of businesses.
A few other things I’m seeing in the Bay Area that are interesting to me:
A lot of work and startup energy around delivery—solving the last mile problem. For example, I’ve tried Sprig, Munchery, and Postmates in the past couple of months. They are all interesting—and in particular I like the simplicity of Sprig’s approach. And as I’ve mentioned in other comments, I work with a company called Tomato Sherpa that addresses this by bringing recipe kits to your workplace.
There’s also a lot of work being done around substitutes for animal products and meat. A couple of interesting companies in that space are Beyond Meat and Hampton Creeks Food. Khosla Ventures is investing a lot of money in that arena as well. As a recovering vegetarian, I’m really interested in seeing how this kind of approach may change the way we think about sustainable food (which for a lot of people equates with local, organic, etc.—what Michael Pollan would call real food).
Do you have any thoughts for career switchers making the jump from a company to freelance in the food space, or vice versa? What have you learned from your experience?
Are you asking about switching from a different industry into food, or from working in a food company to freelancing in the space?
If the first, I moved from the technology industry into the food industry about five years ago. I chose to focus on similar functions to what I had been doing at a hardware company (finance, operations, human capital), bringing transferrable skills into a new career. I also went to business school at that time, and chose a program (at Presidio Graduate School) that would really allow me to explore my interest in food. While I was there I did a variety of food focused projects that helped me to learn more about food businesses. And I volunteered with organizations working in the space as a way to expand my network.
In terms of moving from working in a company to freelancing, I have to say I’m a big fan of freelancing. It allows me to be an entrepreneur as well as a consultant (both through partnerships with clients, starting a consulting business, and allowing me enough flexibility to work on launching my own food business). And I love the variety of projects and new things to work on and learn about!
What inspired your career of helping social enterprises grow their business, food businesses in particular? Do you have any personal stances on the importance of food and sustainability?
I’ve been interested in food for most of my life. I grew up in a bit of a hippy family in Connecticut—we were vegetarian and lived on a non-working farm. We gardened a lot, had goats and such, etc. And then I moved away from that during college and afterwards, but always found myself drawn back to food as an important (and fun) part of connecting with people. About five years ago, I was thinking about what I wanted to do as the next step in my career, and found myself investigating culinary programs and such. Though I ultimately decided to stick to the business side of the equation, I feel deeply connected to the importance of food for healthy individuals, families, communities, and for the environment.
My parents were also entrepreneurs when I was growing up, and then I found myself in Silicon Valley, where startups are everywhere, and I wanted to take what I had learned working in tech startups and apply it to food. And I really enjoy helping other entrepreneurs to help make their visions real.
I try to shop, cook, and eat in a healthy, sustainable way, and I really enjoy the amazing food culture we have in the Bay Area (and of course whenever I travel, trying other cuisines and things we can’t get here). I feel like it’s important both for my own body and spirit, and for the communities I’m part of to be thoughtful about what I consume—which doesn’t mean I’m above eating In-n-Out occasionally!
About Shivani Ganguly
Shivani works with social enterprises to create effective business models, teams, and infrastructure. She is Principal and Founder at Friday Consulting, where she works with clients like Tomato Sherpa, Find Wellness, Hub Oakland, Windowfarms, the Napa County HHSA, Torii Labs, and The New Teacher Center. Between 2009 and 2013, she was also a founding Consultant with AchieveMission, a nonprofit management consulting firm. From 2004 to 2009, Shivani was Sr. Director of Human Resources and Business Operations at OQO, where she was a member of the Executive Team that created the world’s smallest personal computer. Before joining OQO, she held similar positions leading human resources, operations, and finance for startup technology companies and nonprofits. Shivani received a BA in Science, Technology, and Society from Stanford University, and an MBA in Sustainable Management from Presidio Graduate School. Check out Shivani's Local Food Lab Portfolio.