Consumers are showing increasing interest in sustainable and healthy food. No wonder that start-ups see opportunities in this area. But, warns Martijn Rol, it takes a lot more than an appealing product to be successful.
Martijn Rol is Sector Specialist Food at Rabobank. He has seen huge growth in sustainable niche sectors recently. “Every week we are approached by new entrepreneurs wanting to make products healthier and more sustainable, and by others who want to reduce waste and food loss.”
Where are the best opportunities?
“Consumers are becoming more food conscious, resulting in a demand for healthy products with, for example, a lower sugar content and fewer additives. They also want products that are animal- and environmentally friendly.
“At the same time, consumers are more responsive to products with a unique backstory. We see large corporates struggling to provide that, which makes it a real opportunity for start-ups.”
What might stand in the way of success?
“Food is relatively cheap in the Netherlands and throwing food away doesn’t leave us out of pocket. So it’s not easy to bring home the benefit of food waste reduction. That in turn makes it difficult to convert measures against food waste into a successful business model.
“Start-ups that develop healthy products generally have high purchasing costs. They use more expensive ingredients and partly avoid cheap ones such as sugar, which is often used as a filler and flavor enhancer. However, a healthy or sustainable product in itself is not distinctive enough to merit a higher price, because everything on the supermarket shelves is becoming healthier and more sustainable.
“So a good product must be matched with an exceptional story, a unique concept or an unparalleled flavor. Take Tony’s Chocolonely. They have a strong story about responsibly sourced chocolate and they make different flavors in a uniquely shaped bar. The whole package has to fit, though flavor is the most important element.”
“First build your brand among a diverse customer base”- Martijn Rol, Sector Specialist Food, Rabobank
Where does it most often go wrong?
“The biggest pitfall is growing too fast. It can be an incredibly powerful impetus if a supermarket with 300 branches wants to sell your product. But if the product is unpopular, it will be taken off the shelves just as quickly. Over-dependence on one party can prove disastrous. That’s why I recommend first building the brand among a sufficiently diverse customer base.
“A start-up needs to be stable before it can start to scale up. It’s a tricky balancing act – not being too dependent on one client while also needing that client to grow. On the other hand, that makes it exciting. In fact, it is often the reason people choose to go into business in the first place, to test where risk and reward meet.”
What steps would you advise start-ups to take?
“Start with crowd funding and business angels. They won’t just help financially, they’ll also promote the product. Then build up sales through local cafés and specialty shops. Once a brand is strong enough, it can be a good idea to open a shop or hospitality concept to enhance product experience for consumers. Finally, when your cash flow is stable, you can increase production to national coverage in supermarkets, or even start cross-border trading.”
This interview is part of the Growing Ideas series, in which we take a look at the future of food and agriculture and offer a platform to innovative companies in these sectors. It is a translation of an article that was previously published on RTL Z, the website of a Dutch business and financial news channel.