Starting any new business or taking it to the next stage is a gamble where expert advice and practical help can prevent an entrepreneur making unnecessary mistakes. With the failure rate for new food businesses particularly high, Produce Business UK looks at why business incubators are proving to be a valuable asset
Tara Mei, founder of UK based Kitchen Table Projects points out: “Around 15,000 food start ups emerge into the market every year and 90% of them don’t make it past their first birthday. Some 87% of incubated businesses are still going strong in their fifth year.”
The concept of business incubators began in the new technology industry. It was a way for new businesses to work with mentors often in locations shared by other young companies. These incubators helped take ideas to market and speed up business growth.
Not surprisingly, the success of this concept has now spread to the food industry, resulting in the creation of specialist food incubators. The type of facilities, services and the level of assistance varies considerably. It can include investment, equity shares, marketing support, kitchen availability, access to mentors and/or specialist advice, trial retail facilities and links to established companies.
The activities of US food incubators shows just how significant such help can be. Union Kitchen is one of the biggest US food incubators and now has an income of over $450million plus a membership of 250 companies. There is a long waiting list to join the incubator and since 2012, Union Kitchen has seen just two participating businesses fail.
Tara Mei is the founder of Kitchen Table Projects
UK incubator aim
Among those in the UK acting as mentors within food incubators are Fahim Hussain, founder of Market Munch; Carlos Montes, founder of Food Academy, Nick Lander founder of L’Escargot, Dan Germain of Innocent Smoothies, and Sinclair Beecham, co-founder of Pret A Manger. All the incubators are driven by the same aim – to help young businesses thrive and reduce the failure rate.
There are already a number of food incubators working in the UK such as Cinnamon Bridge, The Food Foundry, Bathtub2Boardroom, and Kitchenette. Each incubator has its own specific target market, with some focusing on socially driven food enterprises, others on business start-ups or residencies.
Now a mentor, Fahim Hussain speaks from experience of first-hand experience in a food incubator. “It was extremely useful,” he says. “With no partners, I needed access to experience and advice. The programme gave me that help. A structured incubator helps you look at new ideas, find help, and discover how to bring in money to make it a viable business.”
Demand for the services of a food incubator is very high. Every food incubator receives countless enquiries and applications each week. The Food Foundry has had 150 applications to be involved, and 25 are already working with it. Very little advertising has been undertaken to promote such services, instead companies and people are approaching food incubators as a result of internet searches, word of mouth recommendations and visiting events such as the pop-up shops run by Kitchen Table Projects.
Tara Mei says, “Our events are regularly oversubscribed and we have worked on expanding them to meet demand. We started our journey in June 2015 when we launched a pop-up shop at Old Street Station and ran the first round of the Artisan Springboard…Since then we’ve organised a number of training and networking sessions, all geared towards supporting food business growth.”
Kitchen Table Projects’ incubator offer includes the opportunity to take part in special events such as speed-mentoring sessions, which are boot camps designed to enable companies to get ready to start selling, and during which some participants give a Dragon’s-Den-style pitch. There are also networking sessions with food producers, consultants, media, retailers and distributors.
Mei says: “The Artisan Springboard is a unique 12-week retail incubator for artisan food and drink producers. Producers tap into a wealth of experience from our team of experts, from pr, branding and negotiation to strategy, finance and photography. It is an incredible opportunity for new food and drink businesses, with a retail-ready product, to take their brand to the next level.
“There are thousands of emerging artisan food producers across the UK. They have amazing ideas and an incredible passion for what they do. What they need is help with the tough stuff – figuring out a clear strategy and finding the people who can help them bring it to life. Growing a food business isn’t like growing any business. They face really specific issues to do with their shelf life, packaging, pleasing consumers and time-pressed retailers, distribution, production…the list goes on! Having a great idea or a great product is just the beginning of a successful food business.”
Capital, contacts, connections
Indre Kulakauskaite of Cinnamon Bridge says: “At the moment it seems that we are entering the era of food start-ups. This is great as the industry needs innovation. Most of them are consumer-packaged goods, healthy foods or food retail, but we see more and more food-tech businesses emerging.
“We don’t provide seed funding, we connect with capital when the business is ready, for that reason we attract ones who need support in growing or launching the business, not just validating the idea.”
Food incubators provide contacts and access to buyers that new companies might not otherwise achieve in a short period. Kitchen Table Projects has just linked up with Marks & Spencer, running special events allowing food producers to talk to buyers and find out what it would be like to have products on M&S’s shelve. Kirsty Grieve, deli product developer for M&S says:“Partnerships like this are invaluable, not just for those looking to grow their food and drink business – but also for M&S in helping us to discover the next big thing for our shelves.”
Developing retail channels that entrepreneurs can access to develop markets for their products is a popular option within the food incubator business. Kitchen Table Projects runs pop-up shops that appear for short periods in specific locations such as the Christmas shop, which traded for three months near Oxford Circus. Cinnamon Bridge is developing a retail channel for market validation. Kitchenette has pop up street-food carts and residencies designed to encourage young people to develop catering businesses.
Kitchen Table Project's Christmas shop popped up in 2015
Some of the top street-food operators have emerged through the ranks of food incubators. Typical of these operators is Kimchinary and Mei Mei’s Street Cart, both of which were supported by Kitchenette. “It was a great experience for us because we were taken through every aspect of running a food business and were able to meet people in the industry, who gave us a real insight into the reality of operating a small food business,” says Melissa Fu from Mei Mei’s Street Cart. “Hearing the experiences of these individuals was the most useful part of the programme for us, because it gave us the confidence to go ahead with our ideas and learn from our mistakes.”
New on the block
One of the most recent food incubators to emerge is the London-based Food Foundry. Mason Fantasia says: “Jay Nguyen and I are the co-founders. We were originally considering various food ventures of our own and sought help from food incubators but no one was offering the kitchen and business help we needed. Callum from Union Kitchen happened to be in the UK and we met him for a chat. We then went to see his operation in the US and liked the concept. Rather than open food businesses, we decided this offered more opportunities in the UK. Union Kitchen has become a minority shareholder.”
Within months of making the decision, the Food Foundry had set up two kitchens in two different areas of London – Farringdon and Brockley – offering shared workspace, co-working kitchens, sales opportunities and business support. Members include catering organisations, vegan businesses and ready-meals companies. The Farringdon kitchen is located within The Zetter Hotel and plans are underway for a third kitchen at Surrey Quays. It does not take an equity share in participating companies, instead the fledgling businesses pay a membership fee to use the kitchens, facilities, workshops and resources.
Fantasia says: “We want to create sustainable businesses and we vet companies carefully, offering advice where necessary. Setting up a business can be a lonely road, and this helps create contacts and provide support. Everyone is in the same boat. We are not really for straight start ups, but for businesses wanting to move on. Sometimes companies need specific help on packaging or sales distribution, or find ways to grow. Companies pay a membership fee to use our facilities. The kitchen space may be used by companies wanting to scale up what they are doing, undertake small-scale batch manufacturing or to test products.”
“We have a Michelin-star chef who has worked with the Roux brothers who offers services to companies that want someone to supervise food manufacture or scale up recipes. We match a need – companies may find they are asked for 5,000 products within a week, but do not want to commit to the levels required by commercial kitchens.”
The Food Foundry was started by Nguyen (left) and Fantasia
The Food Foundry is also investigating how it can assist members with supply chains. A black book of contacts is being established enabling entrepreneurs to have the advantage of larger buying facilities with bulk ordering of fresh produce.
This approach is proving invaluable to participants such as Stuart Macdonald founder of ManiLife. “Going through things such as non-disclosure agreements, alternative methods of production and sales avenues has been really useful,” he says. “Especially as I haven’t had a partner to discuss it with.
“We spent the best part of a year searching for a production solution, having started Manilife in my old school kitchen. Mason put us in touch with our current production house – essentially a big, staffed kitchen. The UK has a gaping hole between home kitchen production and big manufacturers. Mason fills that gap.
“I think the reason that space exists is because producers know that their time with you is pretty limited – if you grow quickly [you move] on to larger production sites in a year or six months. One of the reasons Food Foundry is so great is that they genuinely want you to outgrow them because they have another 100 small food producers in line to take your place.”
Food incubators are proving to be one of the key methods, together with crowdfunding, for young businesses to obtain backing and finance. Participation in such schemes helps provide credibility when talking to potential backers. “We have seen food startups go for small business loans, but most companies go lean and fund development out of their own pockets,” says Fantasia. “Some have found small-business grants, but most grants are aimed at tech companies. There are very few solely for food businesses. Part of our plan for the future is to start a ‘Foundry Fund’ to give affordable loans to start ups we have a belief in, or at the very least subsidise some of their membership fees for a period of time.” And Food Foundry is itself taking the crowdfunding approach to fund its third kitchen.
The future of food incubators looks optimistic as they are all looking at ways their facilities can be expanded. Mei says: “We’re really interested in broadening our support for emerging food producers and one of the things we pride ourselves on is delivering industry-specific guidance. We’d like to develop incubator programmes that are even more targeted, such as looking at exports or food businesses with social missions.”
Over at the Food Foundry, Fantasia has a long term vision: “We see this as a concept that could be moved to other cities. We would not do this ourselves and would probably franchise it out to give others the opportunity to develop businesses. We would like to create a sustainable business community with retail outlets in different cities enabling members to trial products around the UK. This would give them small scale national coverage where they can grow until they are ready to expand on their own.”