Book Review: So You Wanna Start a Food or Beverage Business, by Douglas Raggio

Pitched as a guide to navigating the Consumer Packaged Goods (CPG) world, So You Wanna Start a Food or Beverage Business takes readers through the tough choices founders must make. Author Douglas Raggio starts by dispelling the simplistic view that all you need to succeed is a product your friends love. Drawing on his decades of experience in the CPG foods business, he shares the positives and negatives around the crucial decisions founders must make in launching and growing a business.

The book is a “pick your path” series of interconnected chapters where we are invited to choose one of four different “basic categories” of founders — from the single Mom with a line in allergy-free muffins and a day job to an MBA graduate with a supplement for ultra-marathoners. Each person differs by product idea, experience, background, and goals. Each short chapter ends with an option: to invest limited funds in supplies or to boost marketing, to use a co-packer or set up your own facility, to self-finance, or to look for outside investors. Depending on which option you choose, the path either leads to an “RIP” ending or some degree of success. Often, the decision to stay small and turn down opportunities is seen as the best option:

Have a happy life! You picked excellence and predictability over risks. You stay regional with a manageable business. The bonus is that you get really good at maintaining work/life balance. You didn’t get out over your skis.

Indeed, Raggio’s most succinct advice is to know your limits:

It’s incredibly irrational that the expectation is that all businesses should grow infinitely. Nothing grows infinitely. It’s an incredibly self-aware and disciplined thing to understand where your homeostatis lies. Everyone has different goals. If you’ve reached these goals, big kudos to you.

Novice founders

This book is a great reality check for a novice founder.

When you really get into this industry, just like any industry, it might look easy on the outside to someone who has never done it. You know how to make a product and sell a product, but you don’t know the complexities behind everything. Understanding all the intricacies takes time and patience

There’s specific advice on the need to “educate the consumer” about the value of your product and “if you’re going to charge a higher price for something, people have to understand why they would want to pay that price.” This is precisely the challenge faced by Juliana Casale, of Toronto-based Balloon Sparkling Water who posted about CPG costs on LinkedIn.

DTC vs. B2B

While selling at multiple farmers’ markets might generate a six-figure income for some, it comes with specific challenges. These were addressed by Denisse Padillo and Mustafa Karabiyik of Boochman Kombucha at KKON24 in Reno.

Some of the most nuanced advice discusses the challenges of working with distributors and retail outlets. Often, fulfilling a large order comes with its own headaches:

If a distributor is in the loop, that’s another 20 percent margin you have to give up. You better hope that you’ve priced your product right to allow for a retailer markup, a distributor markup, perhaps a broker fee, marketing budget, and the actual cost of production before you get your first payment.

Startup advisor Jordan Buckner of FoodBevy listed the hidden costs of working with national distributors in his LinkedIn post.

Funding

A limitation of the “pick your path” design of the book is that, while the personas of each type of founder add interest and engagement for the reader, information on topics is scattered. For example, there is advice on funding on pages 52 – 54 explaining the impossibility of securing a loan unless you’ve been in business for two years (addressed on page 198), the effect of dipping into your savings, and the value of small investments from friends and family. Jump to page 114 to learn about the need for written agreements when accepting friends and family money. On page 134 we hear about sizable investment from VCs. Finally, on page 160, Raggio addresses opportunities to sell a successful business:

As your ownership dwindles, you have less chance of exiting. This is because the more money you take in, the more money has to be returned. The more money your company generates, the less chance you can fail and just walk away. You get stuck on a hamster wheel.

Partnership pitfalls

The final chapter is a series of case studies about the pitfalls of partnerships.

Typically one of two things can go wrong…either you didn’t document things properly, or you never really set clear roles and responsibilities in the first place. In the beginning, this is fine. Things just get done. But it will come back to haunt you when the company starts to take off or when it starts to hemorrhage money.

Case in point: Health-Ade co-founder Vanessa Dew: “I hired my best friends and family to help us sell. I had to let a friend go from that job and we’re not friends today.”

Raggio’s book should be on the shelf of every kombucha brand founder. Everyone will likely recognize decisions that they wished they could re-do and choices they’ll face in the future, where this book will help illuminate bias and blind spots.

Pick up a copy before you have to make the next decision.