More Than Half of Dairy Product Startups Fail
New research shows that food and beverage start-ups that bring on-the-go snacks or beverages with a “free-from” positioning are more likely to succeed than new dairy products. Research from New Nutrition Business analyzed 151 businesses founded between 2002 and 2013 in the UK, U.S. and Australia to determine what makes a healthy food start-up fail or succeed.
Snacks had the highest success rate of 64 percent, and when “free-from” was added to the message the figure rose to 88 percent. Beverages came in second, with 56 percent of ventures successful.
Dairy products were the only category where failure exceeded success, with 57 percent of start-ups no longer on the market. Joana Maricato, senior market analyst at New Nutrition Business, gave two reasons for a higher failure rate. First, she says, many of the dairy start-ups in the period studied were connected to benefits that were “not logical fits in the category.” For example, omega-3 fortified dairy products that had a heart health positioning.
Second, she pointed out that dairy products can also be more challenging to retail. “Chilled chains cause a higher rate of wastage, which can be a big problem for start-ups,” she says. “Then there is the applicability of ingredients and product adaptations, such as different flavors and formats, which is more challenging when compared to other categories like beverages or snacks.”
Besides the category, the choice of benefits and other properties appear to influence how well a product will fare, says Maricato. For example, in beverages energy was one of the benefits with the highest success rate. Conversely, in dairy the high protein claims performed well.