A food research and development company: foiled by factors far beyond our control

A food research and development company: foiled by factors far beyond our control
Estimated reading time: 4 minutes

The idea was to research, develop, market, and sell new and novel health food products into the Nepali market. Our target audience was the health-conscious upper-middle class and foreign “returnees” familiar with Western health-food culture. The idea failed because we didn’t realize the non-food aspects of business growth, the the factors influencing customer trends.

Project Goals and Funding

Between mid-2016 and late-2020, I funded a small food research and development startup. We hired a few part-time food technology graduates from a local college who were working part-time elsewhere and eventually wanted to enter food research and development. The idea was to research, develop, market, and sell new and novel health food products into the Nepali market. Our target audience was the health-conscious upper-middle class and foreign “returnees” familiar with Western health-food culture and willing to pay a slight premium for our offerings.

My vision was to adopt an “agile” software development approach for food research. The plan was to conduct quick, small-scale experiments at a relatively low cost, introduce the product to the market, and focus on the most successful ones. This rapid validation, we believed, would save money on marketing and allow for easier buy-in from distribution networks if we hit upon a popular product.

The project was funded for a two-year runway, covering personnel, equipment costs, and lab/development space (generously provided by an existing incubator in the city). While not large-scale production, our facilities allowed for small, artisanal runs.

Initial Development and Testing

We hired food technology graduates, held weekly management meetings (with me), and dedicated the first six months to core research. Following this initial phase, we were ready to launch our pilot products.

We identified eight or nine products from around the globe that we believed would be a good fit for the Nepali market. We then produced experimental batches of those products. One of our hires had connections in the food packaging industry, allowing us to secure reasonable packaging rates even for our small volumes. This was possible because we were utilizing their overflow production, which they would have otherwise discarded or sold at a low price.

For roughly two years, we distributed these experimental batches to farmers’ markets and other health food stores as a test.

Challenges and Market Realities

As you might guess from its inclusion in this list of failed ventures, the project ultimately did not succeed. We discovered that “small-scale” experiments are difficult to sustain in the food industry. Successful product development requires testing over extended periods, across different markets and geographical sections, with a deep understanding of marketing factors.

Marketing is particularly crucial for novel food items. Without effective marketing, a product can struggle to gain traction, regardless of its quality. Our sales were low and highly variable, offering no clear indication of what was working or what needed improvement. Ultimately, our sales partners became unwilling to continue taking risks on our products.

Lessons Learned

This experience highlighted the importance of market research – understanding the habits and preferences of the local market is more critical than simply producing the food item itself. Success hinges on adapting offerings, through design and marketing, to local tastes.

Marketing proved to be a significant challenge in this industry. Established players have a significant advantage in terms of brand recognition and marketing budget. Even if we had managed to carve out a niche within the market, achieving substantial growth would have been extremely difficult.

A friend who started a health-focused juice company in Kathmandu a few years after us encountered similar challenges. Targeting the same market as ours, he offered products with minimal added sugar. His ultimate goal, the best-case scenario, was to achieve “2% of what Coke does.” Even with this modest ambition, he faced significant obstacles. Existing conglomerates used their immense marketing power to undermine his company and product. One competitor even threatened to create a direct competitor and force him out of the market if he didn’t “cooperate.” While reaching that level of success would have been a significant achievement, our company was nowhere near that level.

The Market Today

Several businesses have opened in recent years, offering products similar to what we were developing. A small cottage industry now exists, with companies offering kombucha, sugar-free soda, kimchi, and other healthy alternatives with global branding. Similar to our experience, these businesses are operating at a small, hand-made batch level and have limited prospects for expansion. They are all competing for the same limited market, which doesn’t appear to be growing significantly.

A few of our former employees opened chocolate re-processing and branding facilities in the following years, but most of these ventures were ultimately unsuccessful.

Sirish
Sirish

This is where all my quirky comments will go.