How to start a food business in the UK
The UK’s food and drink industry is the countries largest manufacturing sector, with an annual turnover of £97.3bn. Despite the short-term challenges and uncertainty in the wake of Brexit, firms are predicting a growth of 21% over the next five years. With 97% of businesses classified as an SME, there are signs that agile, innovative businesses are moving on from the referendum, developing new products and proactively seeking opportunities overseas in order to drive growth.
With iconic chains such as Jamie’s Italian and Byron Burger recently closing sites, startups and manufacturers are also moving away from the mass market appeal, focussing instead on authentic and unique offerings that appeal to niche audiences and changing societal trends. From new and innovative ways to dine, to vegan and locally sourced produce, customers are becoming increasingly concerned about what they eat, how they eat it, and where it comes from.
Experimental dining, such as eating in the dark, has also seen a steady rise in the last decade, and according to The Vegan Society half of UK adults are adopting a ‘vegan buying behaviour’. With more niche food businesses seeing success, the UK is still viewed as a prime location to open a food or drinks company. However before you do, here are some considerations that could help ensure that your business is a resounding success.
Finding your niche
In recent years, a number of different concepts have evolved within the food industry. Delivery startups such as Deliveroo, HelloFresh and Graze, have revolutionised the way we buy and consume meals, and a huge variety of healthy food products are stocked in supermarkets. To make a successful business, it’s worth noting the areas that are ‘missing’ on supermarket shelves, or a new delivery service that will benefit the consumer.
There are many niche concepts to explore, whether that’s focusing on the clean eating trend with a vegan range of products, opening a food-specific cafe like the popular Avocado cafe, or heading down the line of luxurious and indulgent desserts – think of the success of GÜ puddings, for instance.
Vegan startups are also experiencing a particularly sharp rise, with research from January 2017 finding that 14% of people were cutting meat out of their diet, including 25% of millennials.
How to fund it
There are many private investors available, or funding programmes such as the Grocery Accelerator, which offers investment exclusively for food and drink brands, and training for startups in the food sector. There are also many other crowdfunding websites, including Kickstarter, IndieGo, Barnraiser and Fundable. Kickstarter for instance has successfully funded many food businesses such as Pico C and Prepd Pack.
Loans are another route to take for your business, and like crowdfunding companies, there are plenty of loan websites. These include Kabbage.com, which offers up to 250K credit, Prosper, Startup Loans, Lending Club, Gust and more.
Every high street bank also offers a selection of different loans, including those specialised for small businesses or startups. These loans can be a good route to funding your small business as they offer low interest rates and flexible terms. To apply for a loan, visit your local bank to find out which types of loans are available and if you’re eligible.
Protecting your business
Food or drink products selling in stores, at trading events or online can apply to the EU to have your brand name protected under EU law. The benefit of this is that no other producer can market their product under your brand name.
There are three different types of EU protection you can apply for: protected geographical indication (PGI), protected designation of origin (PDO) and traditional speciality guaranteed (TSG).
Protected geographical indication
To get protection for your product under PGI it must be produced, prepared or processed in the geographical area you want to associate the business with, for example Yorkshire Wensleydale Cheese or Cornish sardines. You will only receive this protection if the EU decide the food product has reputation, characteristics or qualities that are a result of the area you want to associate it with.
Protected designation of origin
The PDO is slightly different from PGI. The product must be produced, processed and prepared in one area, and have distinct characteristics from this area, such as Jersey royal potatoes. PDO also means the food production stages must take place in the area you want to associate the product with.
Traditional speciality guaranteed
Your product can be TSG protected when it has a traditional name and characteristics that distinguish it from other similar products. These characteristics cannot be due to the area it was made, nor the technical advances used in production. Examples include traditional farm fresh turkey and traditionally farmed Gloucester old spots pork. Post Brexit, these EU protection laws still apply for UK food and drink businesses.
Registering the trademark of your brand is another thing to consider. First register the company at Companies House, and then register the name and logo of your brand with the Intellectual Property Office (IPO). The trademark name can’t be too literal or descriptive, and should not include a name of an existing brand.
Essentially, the brand needs to have an original name – and the IPO has its own search engine to search for any trademarks of the duplicate name, to avoid any repetition. If there is already a trademark with the same name, it isn’t an idea situation and can be hard to resolve. However, there is the potential to request a letter of consent from the owner of the existing trademark, or apply to revoke the trade mark, assuming that it’s more than five years old and no longer in use.
It’s important to note that a trademark registered in the UK will only be protected in the UK. If your business is planning on trading in different countries, you have to file a trademark in each country separately, unless all countries are part of the European Union. The EU offers the EU Trade Mark which is a single trademark registration for all member countries.
Licenses to consider
Food businesses may require a license, depending on the activities of the company. For any active food businesses with meat, fish or dairy being prepared on the premises in England, the area must be inspected and approved by your local council. With any food truck or market stall, your business will need to obtain a market stall license from your local trader; to trade in the street, contact the local council to see if you’ll require a street trading license.
There are also licenses to sell alcohol, premises licenses, and more to consider for your food business. Use the license finder tool to discover which of these licenses are required for your food business.
Whether your business is home-based or extends to a restaurant front, you’ll need to find an appropriate premise. Before setting up, cafes and restaurants should undertake competitor research on the local and surrounding areas to see which premises are appropriate. Catering businesses should also do something similar – finding a kitchen or secure preparation area, to prepare food spreads for events.
There are many food laws you need to be aware of for your food premise including general hygiene, along with import and export legislation.
Testing your products
Before you can consider putting your food products on the market, you need to test them. Say for instance that the business sells a range of vegan snacks, and you absolutely love them – others, whether that is family, friends of community peers will have an opinion. Talk to your local supermarket to have a testing booth, attend craft fairs or generally send them around your social circles to receive feedback.
Once the product has been tested with consumers, take it to a higher level and get in touch with culinary professionals and potential purchasers. Then, contact distributors to launch the product in supermarkets and department stores.
Consider import and export tax
It’s also worth considering import and export tax, and how it will affect your food business. UK food companies can currently sell their goods freely to customers in the EU without additional export taxes. They can also import from any other EU country without tariffs. Despite the easy EU trade for UK companies today, once Brexit occurs, the UK will need to strike new free trade deals with the EU.
Brexit has left many UK food companies concerned about additional taxes, but there are a couple of business considerations you can make. Your business could use local food sources to create produce, such as the locally grown UK vegetables, instead of importing ingredients or factory-produced products from the EU. A local poll has revealed post Brexit that one in five consumers are more likely to buy British foods, and three quarters of people would rather buy British to support local farmers. Another option is to find a local manufacturer to create your products, and search for local distributors to deliver them into UK supermarkets.
Alternatively, there is always the option to expand the business to the EU. Unless your food business is exclusively tied to the UK, it may be worth moving to a location in the EU where your product or business is likely to be well-received. If your business is tied to the UK, there is also always the option to import produce from other areas of the world such as America or Asia.
Europe’s food & beverage industry is one of the major contributors to its economy, ahead of the automobile industry. It’s estimated turnover is 1 trillion, and the industry employs over 4 million people. In the last decade food and drink exports have doubled, reaching over EUR 90 billion.
To expand your food business overseas, there are many countries which offer low tax rates and financial benefits. It’s also worth considering which country has the target market for your niche business, and the food produce distribution opportunities.
Many British companies have seen success abroad by using the ‘Made in British’ label, as it is revered by consumers globally, and could potentially give your business advantage overseas. Warner Edwards, an artisanal gin distillery for instance sells its craft gins to Switzerland and has seen a growing interest in Belgium, Luxembourg and the Netherlands.
Countries including Germany, France, Italy and Spain are the largest EU food producers, and can make for popular destinations to expand your business overseas. Spain, especially for a food business, can be a good European location for expansion. The country has the largest food and beverage market in Europe, with the consumer spending on ‘eating out’ reaching USD 133 billion in 2016.
For businesses focussing on a vegan market, Germany launched more vegan products than any other country in 2017, and would be a worthy consideration for businesses seeking an educated and receptive audience
For more help and advice on opening your food business in the UK, please contact us.