The cottage food industry picked up momentum in 2006, even though it’s been around since the early 1930s. In 2005 there were only a handful of states with cottage food laws and products were sold at local farmers’ markets. Today, 46 states offer some form of cottage food regulation, allowing food products to be prepared in the home kitchen and sold to the consumer.
Cottage food rules vary from state to state. Some states allow wholesale, retail and online sales, while others allow direct sales to the consumer. There are states that allow no cap on the amount of money earned from cottage food sales, while other states limit earnings, making it barely worth the effort. Do you want to learn a bit more? Can you handle the truth about the Cottage Food Industry? Here’s the good, bad and ugly.
- Cottage food operations are often started by culinary creatives, who sell their family recipe, or specialty product if it meets the state requirement.
- Approved homemade products can be an easy sell if the product is something the consumer craves; i.e. chocolates, baked goods, hot sauces, dried spice blends and other condiments that enhance existing food pantries.
- Cottage foods are good for food crafters who specialize in a niche market. For example, gluten-free, diabetic food products, salt-free, sugar-free, and products that cater to the health conscious.
- Cottage foods can be a great micro business for anyone who wants to make extra income without investing considerable time and money. This is often the case for cake/cookie decorators/designers and other bakers.
- The Cottage Food Operators are the sole decision maker and laborer. You are the only person running the business.
- Competitive industry. You are competing with grocery stores, specialty stores and other Cottage Food Operators in the community.
- Lack of business experience or knowledge. This is most challenging since rarely do CFOs have the marketing, advertising, financial, or business skills to create an ideal business model.
- Monitoring ingredient cost and operational cost is essential to keeping costs down.
- Finding the proper target audience enables cottage food operators the chance their profile and find customers.
- Finding the best sales location allows CFOs to gain product exposure and increase earnings.
- Designing a sustainable business model helps develop a business that creates, delivers and captures value, increasing company earnings.
- Scaling your business to increase earnings. Expanding your business, bringing on employees, new products and possibly opening a brick and mortar location.
- Most cottage food businesses are underfinanced. Lack of money kills progress.
- A cottage food business may put a strain on personal relationships.
- Starting a cottage food business will be stressful and drain your emotional reserves.
- The amount of money, time, planning and preparation is enormous and can insight feelings of hopelessness. According to Suzi Prevedel, Utah State University Family and Consumer Science Extension agent for Duchesne and Uintah Counties; “only 10 percent of those in the cottage food industry remain in business 5 years later. “
Despite the work and commitment needed to start a cottage food business, it’s a wonderful opportunity for food creatives. When planning your cottage food business, do your homework, don’t work in a vacuum, find supportive small business organizations and get a mentor. Success is not a one-man operation.