Organic food production started in the late 1940s, and since then more and more people have rushed to fill their shopping carts with whatever is labeled “organic”. As a result of heightened demand, recent years have witnessed a growing interest in learning how to start an organic food business, especially as consumers look to find ways around global inflation in food prices and try to shift to more healthy-eating habits.
According to Grand View Research, a US-based research and consulting center, health concerns have caused the organic food industry to boom globally, with a market size of over $180 billion in 2021 and a predicted (CAGR) of 13%in 2022.
The popularity of organic farming also shows that people want to reconnect with nature through their food.
Mahatma Gandhi once said that we would forget ourselves the moment we forget how to dig the earth and tend the soil. Luckily, it seems we're not coming anywhere close to forgetting that.
Today, the thriving organic food agricultural segment now offers a wide range of food business ideas throughout the supply chain. However, like any other business, it requires planning, knowledge, arduous work, and solid documentation.
This article offers a step-by-step tutorial on starting an organic food business and, most importantly, tips you’ll need to get off the ground and about obtaining the necessary funding. We’ll cover the following:
Do you remember the villainous apple that Snow White ate? Was it organic? It's safe to say the answer is no because it was poisoned. Similarly today, many consumers now consider many fruits to be overly exposed to pesticides, insecticides, herbicides, etc.
Before wondering how to start an organic food business, it's important to understand its main component, "organic food."
Organic food is any type of fresh or processed food coming through organic produce without the use of synthetic chemicals, such as chemical fertilizers, herbicides, and pesticides. It also does not contain genetically modified organisms (GMOs).
To be labeled as "organic," all organic food items must meet the United States Department of Agriculture standards and be inspected by a government-approved certifier. Furthermore, all companies involved in processing organic food before it reaches the local market store or restaurant must be certified.
These are the most popular available organic foods on the market. According to the Organic Trade Association, which represents over 9,500 organic businesses across 50 states, organic vegetables and fruits comprised about 15% of the total product market last year, with more than $21 billion in revenue
Due to their higher content of omega-3 fatty acids and the lack of any use of hormones or antibiotics, organic dairy products have become popular in recent years. The annual sales of organic dairy in the US were about $2 billion in 2021, based on the survey conducted by the Organic Trade Association.
Organic meat is a considered a healthy food option and comes from animals that were raised without receiving antibiotics, hormones, or growth stimulants.
Organic fish are farmed fish such as salmon, trout, cod, halibut, and sea bass. However, the caught fish from rivers, lakes, and the open sea aren't considered organic as it's uncertain what the fish have eaten.
Due to the high demand and rapid exponential growth, the organic food market is extremely profitable. Ever since people started to pay more attention to what they eat and now increasingly choose to adopt healthier lifestyles, organic food’s popularity has grown for its wide range of advantages:
Likewise, the demand for organic food in the US is rising and offers great investment opportunities for business owners. The following statistics might change your mind if you still haven’t decided if it’ll be worth it to learn how to how to start an organic food business:
The organic food business looks profitable, sustainable, growing, and competitive based on the above. However, there is still plenty of room for a new business to join such a fresh market.
Before starting an organic food business, learning the ins and outs of the industry is essential.
First things first, try answering the following questions about your anticipated organic food business:
Thorough market research, competitor review, and targeted customer analysis will answer these questions while mitigating the risks associated with starting an organic food business.
Remember that establishing an organic food business may be difficult for many reasons, such as the use of farming procedures that can be more expensive than non-organic alternatives.
The organic food industry is vast, with numerous business models, ranging from opening an organic food store or a food truck to selling organic farming supplements and equipment for specific products (such as avocados).
As a result, after gathering information about the target market, the next step on your list of how to start an organic food business is to decide what you want to do.
To make things easier for you, answer the following questions:
Choosing a suitable physical location for your organic food business is important. It should be a time-consuming step that is not made lightly because you’ll need to pick a place where there's a better chance of meeting your target audience.
For example, you may consider choosing a prime location for your organic food store business in a high-density area accessible by all means of transportation with few to no competitors.
Or you may choose a rural area that receives a lot of tourist visitors.
Whether you intend to rent or purchase the property, act quickly to secure it after finding the ideal location.
Organic food business needs a name and brand identity like any other. Choosing a name for your company can be challenging, so be careful.
As an organic food company, you’ll need to invest more time than normal in this step considering that marketing plays such an important role in the competitive landscape of the industry.
Even people who have long names tend to abbreviate them to something memorable. It must be short and simple with no more than one or two words—and obviously still reflect the nature of the business.
Use Google and social media platforms to search competitors' names and avoid using one already in use. Try to pick a name that is completely original that does not already have traffic going to different sources.
Uniqueness is the secret to grabbing attention.
A logo is the foundation of the brand identity, which will introduce the company to the public after deciding on the name. Ensure the logo design is flawless by selecting the appropriate colors, logotype, and typography.
As an initial step for business registration, it impacts the business ownership level, personal liability, taxing process, etc. Find out more information about each business type on the IRS's official website. For now, here is a short description:
In this type, you and your business are considered one entity and will be taxed and labeled accordingly. It is the default type and will be used for companies that didn't set up any structure.
The same as a sole proprietorship, but the entity is divided among the partners and similarly for legal issues such as taxation and lawsuits.
It's the chameleon of business entities created by the state statute to work with any type of entity. Solo business owners will be classified as sole proprietorships by default, and for more than one owner, it will be classified as a partnership. However, the business owners can apply to be considered as a corporation.
With the corporation type, the business will be an independent entity with its own taxation, stocks, etc.
The next step is registering the business and getting the required license and permits, which varies depending on the state where the company will be established and its line of work.
The basic documents needed for registration, according to the Small Business Administration (SBA), are:
Additional requirements vary depending on the business type.
Advertising is essential for all kinds of businesses, especially new ones.
And good marketing tends to be even more important for organic food businesses, which heavily depend on their unique brand to attract customers.
Fortunately, in the digital age, there are many advertising channels available to adopt in your marketing strategy. It's only a matter of choosing and prioritizing the right ones.
With its ease of use and availability, social media has become an essential part of modern life, and it now provides channels to reach the targeted organic food audience wherever they are.
However, the most common mistake is using the incorrect channel, so first you should conduct research to determine where the target audience is located.
Are they on Facebook, Instagram, Snapchat, or other social media platforms? Concentrate on the most effective channel then focus lots of resources on building an audience there.
Emails are a traditional tool that can be very effective depending on the type of organic business. Build an email list by collecting emails from social media, personal meetings, and other sources. Then nurture the relationship with potential customers through regular and motivational emails, such as blogs on healthy living habits and seasonal organic product offers.
Although online marketing is important, reaching out to your audience directly through festivals, exhibitions, and so on will increase brand awareness online and offline, as will the positive reviews the local community will share about the business.
Starting an organic food business website may incur additional costs, but if you can afford it, do it as soon as possible. E-commerce has vastly changed people's purchasing behavior, and many now tend to buy everything online. Failing to provide such an option may result in the loss of many customers.
The most important thing is to work on providing an eye-catching design within the brand guidelines, creating a good user experience for checkout, and working on search engine optimization to ensure that you rank high on the Google search results pages.
Financial management is a difficult task for any startup, and many brilliant projects never come to fruition due to a lack of funding.
Starting an organic food business will require funding to cover various expenses, including buying or renting a location, equipment, products, decorations, salaries, and other operational costs.
Unfortunately, the operational costs for the organic food industry are expensive and will almost certainly require outside funding. While each niche will have its own set of restrictions and requirements, they all have one thing in common: the need for a solid business plan, which is one of the most common reasons for loan denial.
Once you’re ready with plan in hand, you can then begin to identify which funding options may be right for you, including these:
Banks can provide organic food businesses with loans but they are usually very limited because the loan will require a proven track record of profitable business, guarantees, and good credit scores. Furthermore, the process necessitates a significant amount of time and documentation, which most startups cannot provide. These kinds of loans are usually repaid in fixed time and monthly installments.
The SBA provides a governmental guarantee for entrepreneurs and facilitates loaning for the SBA's partners, such as banks. However, it is subject to some constraints. In terms of repayments and interest, it is similar to a traditional loan.
Investors include angel investors and venture capitalists, who aim to invest money in good ideas and successful businesses. With such loans, the investors will provide financial support and professional guidance in exchange for a share of the business equity. In this case, the main job is to be creative and persuasive enough to impress the investors.
Crowdfunding is the process of raising money through specialized platforms. Entrepreneurs post funding requests, which include a business description, goals, and how the money will be used. Later, online backers will start supporting the project through donations or preorders to provide enough capital to launch the business.
Online loans are gaining popularity among entrepreneurs as a new type of quick and effective loan for small businesses. They provide an easy-to-apply and fast online application process, and they usually get back to applicants within 24 hours. Moreover, they rely on future business potential rather than credit card scores, past profits, or losses.
Curious about how to fund your organic food business? Duckfund provides affordable financing for small businesses with higher approval rates, lower interest rates, and easy applications.
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