Starting a Food Processing Business In Virginia

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Starting a Food Processing Business              21




             Starting a Food
           Processing Business
                InVirginia




                                 Virginia Cooperative Extension
                                         PUBLICATION 348-963
                                                2001
VIRGINIA POLYTECHNIC INSTITUTE
     AND STATE UNIVERSITY                                                  VIRGINIA STATE UNIVERSITY
22 Starting a Food Processing Business




                            Tim Roberts, Ann Lastovica, and Susan Sumner*


                       *Extension Specialist, Food Safety, Virginia Tech; Extension Specialist, Family
                      Management, Virginia State University; and Department Head, Associate Professor,
                                 Food Science and Technology, Virginia Tech; respectively
                                                           TABLE OF CONTENTS
                                                                       Starting a Food Processing Business                                                      17

Introduction ............................................................................................................................................ 1
   Should You Start Your Own Business? ............................................................................................ 1

Getting Help ........................................................................................................................................... 1

Marketing, Promotion, and Advertising ................................................................................................. 2
  The Marketing Plan ........................................................................................................................... 3

Figuring Expenses/Developing a Budget ............................................................................................... 3
   Food Costs ......................................................................................................................................... 3
   Labor .................................................................................................................................................. 4
   Transportation .................................................................................................................................... 4
   Insurance ............................................................................................................................................ 4
   Other Expenses .................................................................................................................................. 5

Setting Prices for Products and Services ................................................................................................ 5
   Cost-Based Pricing ............................................................................................................................ 6
   Estimating Profits .............................................................................................................................. 6
   Retail Pricing ..................................................................................................................................... 6
   Price Sheet and Policies ..................................................................................................................... 7

Preparing Your Product/Standardizing Recipes ..................................................................................... 7

Planning and Approval of Food Processing Facilities............................................................................ 8

Food Safety ............................................................................................................................................. 9
  Good Manufacturing Practices ........................................................................................................ 10
  Hazard Analysis Critical Control Points (HACCP) ........................................................................ 10
  Product Testing and Safety .............................................................................................................. 11


Packaging and Labeling Your Product ................................................................................................. 11
   Product Labeling ............................................................................................................................. 12
   Product Codes .................................................................................................................................. 12
   Trademarks ...................................................................................................................................... 13
   Weights and Measures ..................................................................................................................... 13

Keeping Written Records ..................................................................................................................... 14

Creating a Professional Image .............................................................................................................. 14

Summary ............................................................................................................................................... 15

Resources .............................................................................................................................................. 15

Acknowledgments ................................................................................................................................ 15
                                                       Starting a Food Processing Business               1

Introduction                                          6. Redefine and improve your idea
  "That's the greatest salsa I have ever eaten!       7. Examine market conditions
You should consider marketing it." Have you           8. Design the smallest possible, viable business
ever had a friend or relative comment about a            unit
special steak sauce you make or a cookie recipe       9. Act on your idea
that was handed down from your great-grand-
mother? If so, this publication was written for
you and provides the most current information        Getting Help
about starting a food processing business in            Many resources are available to help you plan
Virginia.                                            and start your food business. Virginia Coopera-
   You may be surprised to find that starting a      tive Extension personnel at the state and local
food business is not as simple as it may sound.      levels are eager to help you and are available at
Like any small business, food enterprises require    no charge. Specialists can be used as resources
careful planning, dedication, and skilled manage-    in a wide array of areas, from information on
ment to be successful. But the food business is      preparing a business plan to technical advice on
unique when compared to most other types of          how to formulate a specific food product and
businesses. The food you produce can have a          having your product tested for safety. Extension
direct effect on your customers' health and          agents and specialists in Family and Consumer
safety. In fact, a food product that has been        Sciences (Nutrition and Wellness, and Manage-
improperly processed could cause serious illness     ment, Housing and Consumer Education special-
or even death. Consequently, a business that         ties) and Agriculture and Natural Resources
makes or sells food products must comply with a      (Food Science and Technology, Horticulture, and
number of complex and often confusing federal,       Agricultural and Applied Economics) can be
state, and local regulations.                        valuable assets to a beginning food business.
                                                     Check your local Extension office for more
   In addition, competition is intense in the food   details.
business. Having a product accepted by a major
grocery chain or nationwide food establishment         The Virginia Department of Agriculture and
is extremely difficult. Owning your own busi-        Consumer Services (VDACS) is another excel-
ness also requires a lot of commitment, hard         lent resource. The VDACS Office of Dairy and
work, time, and technical knowledge about food.      Foods assists in facility planning and layout,
                                                     authorizes the facility for food processing, and
                                                     enforces food safety laws and regulations for
                                                     production, distribution, and sale of food in
Should You Start Your Own                            Virginia.
Business?                                               The VDACS Agribusiness Development
                                                     Services can help you find a location for your
  The following steps can help you turn your
                                                     business, provide assistance with permitting and/
great idea into a successful business:
                                                     or environmental issues, and can help link you to
                                                     sources of financial assistance. The VDACS
 1. Evaluate your personal characteristics           Division of Marketing can assist you with prod-
 2. Develop a business idea                          uct marketing and help you become certified
 3. Write a business plan                            under the Virginia's Finest Program.
 4. Translate the idea into distinct consumer
    benefits
 5. Evaluate the competition
2   Starting a Food Processing Business

                                                                          Marketing,
                                                                           Promotion, and
                                                                           Advertising
                                                                               The words marketing,
                                                                     promotion, and advertising have
                                                          different meanings.

                   VIRGINIA AGRICULTURE                   Marketing involves these steps:

           Virginia's Finest                              1. determining the customers to be served and
                                                             what they want or need,
                                                          2. supplying customers with goods or services
                                                             to satisfy their wants and needs, and
                                                          3. doing so at a price that shows a profit to the
      The Virginia Small Business Development                business.
    Centers serve as focal points for the coordination
    of federal, state, local, university, and private       Promotion is the communications aspect of
    resources to aid small businesses. These services     marketing that includes whatever is done to tell
    are delivered through regional and affiliate          the public or potential customers about the
    centers located at state universities, community      product. This might include written publicity,
    colleges, and technical institutes. Contact the       news releases, demonstrations or talks to local
    nearest office for assistance in various business     groups, posters, free samples, displays, bro-
    areas such as drafting business plans or seeking      chures or catalogs, and advertising. Take advan-
    answers for financial assistance.                     tage of promotion opportunities. For example, if
                                                          you are asked to donate products for community
       The Virginia Department of Health (VDH)            charity events, ask for recognition on the pro-
    issues permits and provides expertise and guid-       gram or identification of your products in some
    ance concerning proper disposal of food process-      way. As the business grows, however, you may
    ing waste. Also, VDH inspects and approves            be asked to donate products frequently. Don't
    foodservice establishments, including catering        feel you must always donate; politely decline
    operations, for sanitation and safety.                those you do not wish to support or do not feel
      The U.S. Food and Drug Administration               will advance your business interests.
    (FDA) provides information on established and           Advertising is paid promotion. A newspaper
    required food safety regulations pertaining to safe   or radio station may be interested in a feature
    preparation, manufacture, and distribution of         story on your new business or your unusual
    food products.                                        product, but after that, you will most likely have
       Most small businesses start with personal          to pay for publicity in the news media. When
    investments, loans from family or friends, and        you pay for newspaper space or radio time, you
    business loans from banks and other commercial        can say exactly what you want about your
    sources. Contact banks or lending institutions in     product, provided what you say is allowed by
    your area for further information.                    law. However, advertising is not the first thing
                                                          you should think about. The overall marketing
                                                          plan should come first.
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