December 2, 2015
There has been a proliferation of food incubators over the last few years in response to the large growth in entrepreneurs launching their food brands, many of which are focused on the natural foods space. Top-rated reality television shows such as Shark Tank and The Profit have helped to make the CPG food industry ripe for a spike in growth.
An article by Food + Tech Connect in February reported that 15 food accelerators and food incubators launched in 2014. As financial investment begins to enter the natural foods CPG space at a faster pace, with funds and accelerators such as 301 Inc., Food-X, and V2V Associates joining in, the temptation is even bigger for first timers to jump into the field. Entrepreneur magazine published an article last month highlighting how $2.06 billion was invested in food start-ups in the first half of 2015—just under the total amount for all of 2014, and 2.5 times over 2013's investment numbers. Danielle Gould of Food + Tech Connect was quoted in the article saying there were 50 companies/investors in 2010 in the investment space, and today there are more than 4,000 active players.
Although there is no formal template related to services provided by food incubators, they generally support early stage retail, wholesale and catering food businesses. These business rent a licensed food service facility where entrepreneurs can manufacture and legally sell their products. The obvious reduction in start-up costs related to building out a kitchen space is a win for the boot-strapped entrepreneur.
Some food incubators offer additional services related to business planning, marketing support, provide access to finance, mentoring and other business related services. Many of these companies going through the non-VC funded "accelerators" have a real need for preparation around raising capital. There are pop-up pitch slams every week being hosted by investor groups or share-spaces like WeWork. Online education is also taking off to support this demand, with programs such as Entrepreneurist's Find Investors Now, hosted by Jennifer Love (a business advisor who has prepared and helped many companies get funded by investors and even a few "sharks" from the tank).
The natural foods space for consumer packaged goods is expanding at an ever-rapid pace. Last year's 35th Natural Products Expo West, the world's largest natural, organic and healthy products event, grew by over 7 percent with record-breaking attendance at the Anaheim Convention Center in California by 71,000 industry members and more than 2,700 exhibiting companies, including 634 first-time exhibitors. The big brands are losing ground, and many brands who started their companies in a food incubator are now flexing their muscles on retail shelves and taking market share. Carol Ortenberg at Project NOSH wrote a wonderful piece entitled Survey of Surveys: In Shadow of Big Brands' Declines, Entrepreneurs Grow on this subject.
We should expect more food incubators to open around the country more rapidly to fill the demand. My prediction is that food incubators will become more focused on certain segments of the marketplace related to food labeling (non-GMO, organic, gluten free), food type (bottled, dry, frozen), and production equipment required (HPP is on the rise). I also believe the food incubator of the future will offer more added value services in an interactive environment. These services will help start-ups go to market easier, faster and with cost savings gained by lessons learned from those that have succeeded.
Here is a list of a few food incubators in the Mid-Atlantic/North East.
The Brooklyn Foodworks — Brooklyn, NY (Opens December)
Organic Food Incubator — Long Island City, NY
The Entrepreneur Space — Queens, NY
Commonwealth Kitchen — Boston, MA
Hope & Main — Rhode Island
Union Kitchen — Washington, D.C.
What additional services could incubators and accelerators provide to help start-ups navigate the early stages of business?
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