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What is the secret of start-up success in healthier foods and beverages?

New ventures that launch an on-the-go snack or beverage with a “free-from” positioning have the best chance of success, a new research project by New Nutrition Business shows.

An analysis of 151 businesses founded between 2002 and 2013 in the UK, USA and Australia explores what makes a healthier food start-up fail – or prevail.

Food and beverage start-ups with a focus on health have a reputation of having low success rate. The main purpose of the project was to verify such assumptions against good data, and provide a tool for developing data-driven business strategies.

NNB has been studying start-ups for almost 20 years, and now holds a vast database about them. NNB’s main finding is that snack and beverage start-ups are the most resilient in the healthier foods market.

“Beverages and snacks are products that are easier to adapt to constant changes in demand and preferences,” says Joana Maricato, senior market analyst at NNB.

Snacks are an entrepreneur’s best bet with a 64% success rate, and if they add a “free–from” message, the success rate rises to 88%. These results reflect the presence of two consumer trends – “snackification” and “free-from” – which consistently feature in NNB’s annual10 Key Trends reports.

Although beverages come in at a modest second with 56% of the ventures still on the market, they are the category most successful at breaking into the mass-market.

However, a look at the distribution of successful start-ups according to the benefit platforms is revealing: the kids’ beverages are bringing down the average. When these are stripped out, the beverage category in fact achieves higher success rates than snacks.

Dairy is a high-risk category, and the only group where failure exceeds success, with 57% of start-ups no longer present on the market.

Launching a kids’ product also faces particular obstacles according to Maricato: “Anyone venturing into the kids’ segment needs to bear in mind the double consumer challenge they face: to please the ‘consumption’ consumer, the children, as well as the ‘buying’ consumer, the parents.”

The results indicated that the combination of benefit and product category has an influence on the success rate. “For example, in beverages, energy was one of the benefits with the highest success rates, while for dairy this was the case for the high-protein platform,” Maricato says.

Certain benefits alone make a product stand out. “There seem to exist benefits that are related with success across categories, such as ‘free-from’, which was associated with high success in both snack and beverages,” Maricato adds.

Managing expectations regarding success is another important tip entrepreneurs can draw from the analysis. “Only 60% of successful start-ups made it to mass market. But mass market presence is not the only way to succeed. Start-ups can thrive while remaining in smaller, niche segments, where premium prices are often easier to obtain,” Maricato says.

About New Nutrition Business

New Nutrition Business is a research and consultancy company with an expert focus on the business of food and health since 1995. It has offices in the United States, Europe, and New Zealand and affiliates in Japan and South Korea.

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