SARNIA, Ont. – Food processing can be profitable, but success isn’t guaranteed.
That’s where the Toronto Food Business Incubator comes in.
The federally supported program helps budding entrepreneurs introduce their food to consumers while avoiding business pitfalls.
Michael Wolfson, food and beverage specialist with Toronto Economic Development, says too many new businesses fail when they attempt to move from direct sales to a distribution network.
“This stumps a lot of people because they have no idea of what they need to charge,” Wolfson told a meeting in Sarnia last month.
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“That’s a big problem with this industry. The people involved with companies end up working for nothing and basically they decide to get out after a few months.… With the incubator approach, there are statistics that show that 85 percent of the businesses that participate in their programs are still in business after five years.”
Incubator manager Albert Peres said his facility has such a high success rate because entrepreneurs can initially use the incubator to produce their products, which allows them to move from an idea to sales with a smaller initial investment.
The program also provides expert advice and support. Processors learn how the food distribution chain works and who will demand a piece of the profits.
As well, incubators open their doors only to those who are able to present an acceptable business plan, which weeds out many who may have been destined to fail.
Once in the door, prospective new business owners are expected to contribute.
“We would be doing a disservice for our clients if we didn’t bring reality to the situation. At the end of the three years, they’ll be paying the full market rate for space at the incubator,” Wolfson said.
Peres said it’s a staged approach.
Incubator clients are expected within the first six months to take their product to the point where it can be commercialized.
After 12 months, they pay $1,200 a month for facility space and should have marketing options in place. After two years, they’re paying a commercial rate for space and the business should be moving forward in a substantive way.
Success stories include Marta Preston and her husband, Sam, who launched SMP Foods Inc.
The couple began by selling traditional Colombian meat empanadas but soon altered their plans to produce apple and potato-and-cheese empanadas.
The apple version, which includes Ontario spelt and apples, is particularly successful with sales through farmers’ markets, the University of Toronto and public schools. The couple have recently invested in their fourth production unit.
“They used to only make two trays a day and now they’re turning out a thousand empanadas a week,” Peres said.
Susan Ho of Tea Aura Inc. learned that her cookies sold more profitably when they were marketed as gifts. Packed in tins, they’re carried at the checkout counters at Holt Renfrew clothing stores in Toronto.
They’re also selling in coffee shops in Ontario, Quebec and the United States in chocolate bar-like wrappers.
Jonathon McDonnough of ChefJono.ca continues working as a caterer but has launched his own line of specialty salad dressings. He’s working with a co-packer and sells through a Toronto grocery chain.
Peres said sales are growing at such a rate that McDonnough may soon need his own facility.
Wolfson said a key consideration in starting any food business is to realize consumers are driving the direction of the industry.
Entrepreneurs need to be able to offer something unique, even if it’s as simple as packaging.
They also need to have a realistic understanding of the costs and potential for profit, be able to enlist support where they need it, understand the challenge of large-batch recipes and commercial equipment, develop effective branding, be able to reach their target audience through promotion and marketing and understand that their product needs to stand out from others.
Twelve companies now use the original, 2,000 sq. foot Toronto Food Business Incubator, which plans to expand into a 13,000 sq. foot facility if it can raise $750,000 for a retrofit.
Next to the auto industry, food processing is the largest economic driver in Ontario, accounting for $16 billion in sales and 50,000 in jobs in Toronto.
