TABLE OF CONTENTS

Introduction ...

.. 1

Should You Start Your Own Business? ...

.. 1

Getting Help ...

. 1

Marketing, Promotion, and Advertising ...

. 2

The Marketing Plan ...

... 3

Figuring Expenses/Developing a Budget ...

.. 3

Food Costs ...

.. 3

Labor ...

.. 4

Transportation ...

... 4

Insurance ...

.. 4

Other Expenses ...

. 5

Setting Prices for Products and Services ...

... 5

Cost-Based Pricing ...

. 6

Estimating Profits ...

... 6

Retail Pricing ...

. 6

Price Sheet and Policies ...

... 7

Preparing Your Product/Standardizing Recipes ...

. 7

Planning and Approval of Food Processing Facilities ...

. 8

Food Safety ...

... 9

Good Manufacturing Practices ...

.. 10

Hazard Analysis Critical Control Points (HACCP) ...

... 10

Product Testing and Safety ...

.. 11

Packaging and Labeling Your Product ...

. 11

Product Labeling ...

.. 12

Product Codes ...

. 12

Trademarks ...

.. 13

Weights and Measures ...

... 13

Keeping Written Records ...

... 14

Creating a Professional Image ...

.. 14

Summary ...

.. 15

Resources ...

. 15

Acknowledgments ...

.. 15

Starting a Food Processing Business

Introduction

6. Redefine and improve your idea

7. Examine market conditions

“ That’s the greatest salsa I have ever eaten!

You should consider marketing it. ” Have you

8. Design the smallest possible, viable business

ever had a friend or relative comment about a

unit

special steak sauce you make or a cookie recipe

9. Act on your idea

that was handed down from your great-grand-

mother? If so, this publication was written for

you and provides the most current information

Getting Help

about starting a food processing business in

Many resources are available to help you plan

Virginia.

and start your food business. Virginia Coopera-

tive Extension personnel at the state and local

You may be surprised to find that starting a

levels are eager to help you and are available at

food business is not as simple as it may sound.

no charge. Specialists can be used as resources

Like any small business, food enterprises require

in a wide array of areas, from information on

careful planning, dedication, and skilled manage-

preparing a business plan to technical advice on

ment to be successful. But the food business is

how to formulate a specific food product and

unique when compared to most other types of

having your product tested for safety. Extension

businesses. The food you produce can have a

agents and specialists in Family and Consumer

direct effect on your customers’ health and

Sciences (Nutrition and Wellness, and Manage-

safety. In fact, a food product that has been

ment, Housing and Consumer Education special-

improperly processed could cause serious illness

ties) and Agriculture and Natural Resources

or even death. Consequently, a business that

(Food Science and Technology, Horticulture, and

makes or sells food products must comply with a

Agricultural and Applied Economics) can be

number of complex and often confusing federal,

valuable assets to a beginning food business.

state, and local regulations.

Check your local Extension office for more

In addition, competition is intense in the food

details.

business. Having a product accepted by a major

The Virginia Department of Agriculture and

grocery chain or nationwide food establishment

Consumer Services (VDACS) is another excel-

is extremely difficult. Owning your own busi-

lent resource. The VDACS Office of Dairy and

ness also requires a lot of commitment, hard

Foods assists in facility planning and layout,

work, time, and technical knowledge about food.

authorizes the facility for food processing, and

enforces food safety laws and regulations for

production, distribution, and sale of food in

Should You Start Your Own

Virginia.

Business?

The VDACS Agribusiness Development

Services can help you find a location for your

The following steps can help you turn your

business, provide assistance with permitting and/

great idea into a successful business:

or environmental issues, and can help link you to

sources of financial assistance. The VDACS

1. Evaluate your personal characteristics

Division of Marketing can assist you with prod-

2. Develop a business idea

uct marketing and help you become certified

under the Virginia’s Finest Program.

3. Write a business plan

4. Translate the idea into distinct consumer

benefits

5. Evaluate the competition

2 Starting a Food Processing Business

arketing,

Promotion, and



Advertising

The words marketing,

promotion, and advertising have

different meanings.

Marketing involves these steps:

VIRGINIA AGRICULTURE

1. determining the customers to be served and

Virginia’s Finest

what they want or need,

2. supplying customers with goods or services

to satisfy their wants and needs, and

3. doing so at a price that shows a profit to the

The Virginia Small Business Development

business.

Centers serve as focal points for the coordination

of federal, state, local, university, and private

Promotion is the communications aspect of

resources to aid small businesses. These services

marketing that includes whatever is done to tell

are delivered through regional and affiliate

the public or potential customers about the

centers located at state universities, community

product. This might include written publicity,

colleges, and technical institutes. Contact the

news releases, demonstrations or talks to local

nearest office for assistance in various business

groups, posters, free samples, displays, bro-

areas such as drafting business plans or seeking

chures or catalogs, and advertising. Take advan-

answers for financial assistance.

tage of promotion opportunities. For example, if

you are asked to donate products for community

The Virginia Department of Health (VDH)

charity events, ask for recognition on the pro-

issues permits and provides expertise and guid-

gram or identification of your products in some

ance concerning proper disposal of food process-

way. As the business grows, however, you may

ing waste. Also, VDH inspects and approves

be asked to donate products frequently. Don’t

foodservice establishments, including catering

feel you must always donate; politely decline

operations, for sanitation and safety.

those you do not wish to support or do not feel

The U.S. Food and Drug Administration

will advance your business interests.

(FDA) provides information on established and

Advertising is paid promotion. A newspaper

required food safety regulations pertaining to safe

or radio station may be interested in a feature

preparation, manufacture, and distribution of

story on your new business or your unusual

food products.

product, but after that, you will most likely have

Most small businesses start with personal

to pay for publicity in the news media. When

investments, loans from family or friends, and

you pay for newspaper space or radio time, you

business loans from banks and other commercial

can say exactly what you want about your

sources. Contact banks or lending institutions in

product, provided what you say is allowed by

your area for further information.

law. However, advertising is not the first thing

you should think about. The overall marketing

plan should come first.

Starting a Food Processing Business

The Marketing Plan

Figuring Expenses/

Marketing includes all the decisions involved

Developing a Budget

in the business effort, i.e. the product itself,

production, pricing, promotion, selling, service,

A business will have both fixed and variable

and customer satisfaction. Consider the product

expenses. Fixed expenses are those that do not

in relation to the potential customers. Think

change, such as rent. Also in this category are

about who the customers are, where they go,

the “one-time” or annual expenses, such as

what they do, what they like and dislike, their

equipment, remodeling, license fees, etc. Vari-

income, and education.

able expenses change from month to month.

What needs do your customers have (real or

Examples are utility bills, ingredient costs, trans-

perceived) that will make your product appeal to

portation, supplies, promotion, and advertising.

them? These may include:

It is important to keep business expenses

1. saving money, time, work or energy,

separate from personal and family expenses. To

accomplish this, keep a separate checking ac-

2. achieving or maintaining status,

count for record keeping and tax preparation.

3. purchasing exceptionally high quality items,

4. receiving special services. Your business

should meet either a real or a perceived

Supplies

Utilities

need.

Labor

Advertising

How will you reach people to tell them about

your product? That is where promotion and

Rent

advertising come in. What are your customers’

social, leisure, and reading habits? Where do

they go? What kinds of promotion and advertis-

ing are most likely to reach them? For example,

it probably is a waste of money to advertise

expensive catered dinners in a shopper guide

that features garage sale ads.

Develop a portfolio or album with photographs

Food Costs

of your products to use when talking to potential

customers, especially retail outlets. If possible,

Estimate the cost of ingredients on a per unit

have a professional photographer take the picture

basis (or per dozen, if small items such as cook-

in order to present the food in the most appealing

ies are involved). List the ingredients needed;

way. There are techniques to food photography

then compare prices in both retail groceries and

that only a professional will know.

wholesale outlets. Try to find the most inexpen-

sive ingredients, but do not sacrifice quality in

A marketing plan begins with some realistic

order to cut cost. In general, larger quantities of

goals, with enough time for the goals to be

ingredients have lower unit cost. But wholesale

reached. Think about what you expect to accom-

buying of large quantities may not save money

plish in six months, in a year, and in five years.

for a beginning business, particularly if food is

Next, think about how to reach the goals. A

perishable. The major advantage of wholesale

good marketing plan won’t necessarily make a

buying is to maintain consistent product quality.

product successful, but it will help you under-

It also may enable you to purchase ingredients

stand buying habits and behaviors of potential

that are difficult to obtain in small quantities.

customers. It will help you understand where the

product fits into the target market.

4 Starting a Food Processing Business

Prepared foods, such as dehydrated soup bases or

Insurance

chopped nuts, may reduce food costs by cutting

Insurance helps safeguard your business

preparation time.

against losses from fire, illness, and injury. You

cannot afford to operate without it. Talk with

your insurance agent about your business needs.

Labor

You will need a commercial policy for full

protection when you have a business. Discuss

Although you may be willing to work initially

these other possible needs with your agent:

without a salary, assistants, delivery people, and

✔ ❒

others expect to be paid. Always include a labor

Liability Insurance protects against financial

cost, even if you do not intend to pay yourself a

losses suffered by others for whom you are

salary. This is a good business practice that will

responsible. This may be the result of negli-

help establish a fair price. A method to establish

gence or when a contract, law, or court

labor cost is to decide what your time is worth.

judgment requires you to pay for the losses of

You may think your time is worth $6 per hour or

another.

maybe $20. It’s up to you. Labor cost is more

General Liability Insurance protects the business

than preparation time. A certain amount of time

from financial loss because of bodily injury or

will be required for developing the business,

property damage to employees or customers

transportation, purchasing, and record keeping.

caused by negligence.

If others will be working as well (family mem-

bers for delivery, for example), include their

Product Liability Coverage provides protection if

labor costs also. Will they work as quickly or

your product causes injury to the user.

efficiently as you do?

Auto Liability Insurance and “non-owned” auto

liability insurance if a car is used to support the

business. If you use your personal vehicle to

Transportation

make deliveries and products are stolen, or if you

get into an accident while on a business call, your

Consider the following questions. Will you

insurance may not cover the claim if the vehicle

deliver your products? If so, include gasoline

is not covered for business use.

and other automobile costs as an expense. Is a

special vehicle necessary? Will you need equip-

A rider to your current policies may be all that is

ment to keep foods at recommended tempera-

necessary or you may have to purchase a separate

tures while in transit? Some foods need to be

business policy.

kept cold during delivery. Let’s use the example

✔ ❒

Health Insurance protects against financial

of ice cream. Ice cream must be kept frozen at

losses resulting from illness, injury, and

all times or the quality of the product is lost.

disability. High uninsured medical costs

Therefore, if you plan to sell ice cream, you must

could jeopardize the business.

purchase, rent, or lease a refrigerated truck to

transport it. To determine which is appropriate

✔

❒

Medical Payments Insurance provides protec-

for your business you must ask another question:

tion if someone is injured in your business,

Can you recover a prorated cost of the delivery

whether or not it was your fault.

vehicle, including fuel and maintenance?

✔ ❒

Income Insurance including:

Unemployment Insurance is paid to employees

who qualify, but no longer work for you.

Worker’s Compensation is paid to employees

who are injured on the job.

Business Interruption Insurance compensates for

Starting a Food Processing Business

income loss and provides protection against not

✔ ❒

Licenses required by local, state, and federal

being able to honor contracts in the event of

governments

disability, or if the business is damaged by fire

✔

❒

Overhead for kitchen, equipment, and deliv-

or some other cause and you must totally or

ery vehicle

partially suspend operations.

✔

❒

Record keeping and required sales reports

Disability Income Protection is a form of health

✔

insurance in case you become disabled.

❒

Rent

✔

❒ ✔

Property Insurance on the building to cover

❒

Utilities (fuel) used in food preparation

losses from fire, lightning, wind, tornadoes,

etc. If leasing space, check with the building

If you have major initial expenses, such as

owner to see who is responsible for insur-

building a kitchen or buying appliances, ask an

ance.

accountant to establish a monthly figure to

✔

❒

Personal Property Insurance to cover equip-

include in expenses. You might consider using a

ment, fixtures, inventory, accounts receiv-

commercial kitchen at a local restaurant, church,

able, and valuable papers. Check into re-

or club.

placement coverage insurance.

✔ ❒

Business Life Insurance to provide funds for

transition upon your death. Be sure to keep

Setting

all your insurance records and policies in a

Prices for

safe place—either with your accountant or in

a safe deposit box. If you keep them at home

Products and

for convenience, give policy numbers and

Services

insurance company names to your accountant

or lawyer or put a list in your safe deposit

The price of a product can make the difference

box. Final advice for the wise

between success and failure. Good prices make

businessperson is to read and understand the

customers think they are getting their money’s

fine print in all policies and to reevaluate

worth and make you think you are getting a fair

business insurance needs frequently.

return on your investment of time and money.

How much can you charge? Consider compa-

Other Expenses

rable commercial products, prices charged by

Although not all the following expenses are

others in your community for similar products,

applicable to your business in the beginning, they

and “what the traffic will bear.” Consult business

may become significant as the business grows:

people in the community. Prices should reflect

all fixed and variable expenses in the business

and provide what you consider a reasonable

✔ ❒

Accounting or legal fees

profit. Keep prices competitive and in a range

✔ ❒

Advertising and promotion; postage and

that customers are willing to pay. The following

telephone

pricing methods are guides that you can adjust to

your situation. Through experience, you will

✔ ❒

Customers who do not pay

learn to set up your own pricing formula. Don’t

✔ ❒

Excess production (leftovers), pilferage,

worry if the prices you set are a little higher than

returns, and “mistakes”

your competitors if you are sure your product is

better in some way. Be prepared to explain your

✔ ❒

Food wrap, napkins, and condiments

price, if asked: “I use real butter and fresh eggs—

✔ ❒

Interest

not powdered—in my pound cake.” Be careful

not to criticize your competition!

✔ ❒

Kitchen modifications

6 Starting a Food Processing Business

Cost-Based Pricing

Estimating Profits

Profit is the income left after all direct costs,

This method uses unit costs of ingredients,

labor, and overhead expenses have been paid.

expenses, and labor to determine the price (Direct

To have money left over, a profit factor or profit

Costs + Labor + Overhead Expenses = Total

margin must be calculated in initial pricing.

Costs). Here’s an example. As a maker of home-

After the total costs are calculated, the profit

made bread, you have fixed expenses of $50 per

factor is added to get the final price.

month; you plan to work one day each week, or

32 hours per month; your ingredient cost is $0.50

Total Costs + Profit = Price

per loaf; and you can make five loaves in an

hour. How much should you charge for each

loaf?

(Direct Costs + Labor + Overhead Expenses)

+ Profit = Price

Step 1: Figure the productive working hours

(total hours spent in actually making the

The amount to add for profit is based on the

product). Seven hours of the 32 are

standard for the type of business. Generally, this

spent in marketing, bookkeeping, shop-

amount ranges from 10 to 25 percent. An initial

ping, and delivery, so they are not

mistake that many businesses make is not adding

productive hours. Therefore, your total

in a profit margin to their pricing strategy. If this

productive hours per month are 25

is not done, there will be no money for growth or

(32 - 7 = 25).

expansion of the business.

Step 2: Figure expenses per hour. Divide the

monthly fixed expenses by the produc-

tive working hours in one month

Retail Pricing

($50 ÷ 25 hours = $2 fixed expenses per

While the principles for pricing a product or

hour).

service are essentially the same, there are some

differences that need to be considered when

Step 3: Figure ingredient cost per hour. Multi-

wholesaling a product to a retailer. The price

ply the ingredient cost of one loaf

figured above is the wholesale price. To arrive

($0.50) by the number of loaves you can

at the retail price for a product or service, a retail

make in an hour ($0.50 x 5 = $2.50).

margin is added. This is usually two to three

Step 4: Set labor cost. In this example, you

times the wholesale price and is called the

decide you are willing to work for $6

markup.

per hour.

Step 5: Add your totals:

Wholesale Price x Retail Margin = Retail Price

Fixed Expenses

$2.00

Ingredients

$2.50

(Direct Costs + Labor + Overhead Expenses +

Labor

$6.00

Profit) x Retail Margin = Retail Price

Total per hour cost

$10.50

After determining the price, compare this price

with similar products. Will customers pay $4.20

Step 6: Divide the total per hour cost by the

to $6.30 retail for a loaf of your bread? If the

number of loaves you can make per hour

price is considerably higher than a similar item

($10.50 ÷ 5 = $2.10).

made by the competition, consider these options:

•

Starting a Food Processing Business

✔

❒

Reduce ingredient cost

❒

• Other rules you will follow

✔ ❒

• Reduce labor cost

Remember, pricing is as much an art as it is a

science. Your customer has to be willing to pay

✔

❒

• Increase per hour production

your price or your business will not be a success.

✔ ❒

• Decrease expenses

✔

❒

• Improve work methods, which may accom-

plish all four of the above

Preparing Your Produc

✔

❒

• Reconsider the business venture

Standardizing Recipes

A wholesaler may crossover and be a retailer at

Before preparing your product, you should

times. When this happens, the wholesaler must

contact the Virginia Department of Agriculture

be careful not to compete with or undercut

and Consumer Services (VDACS) Office of

wholesale customers. For example, bread may

Dairy and Foods to discuss the feasibility of your

be sold to a retailer for $2.10 knowing that the

product preparation. Standardized quantity

retailer is going to markup the price to cover

recipes are necessary to ensure uniform product

costs. In this case, the wholesaler who also sells

results and keep preparation costs steady. If you

directly to the retail customer needs to sell at

plan to adapt a favorite recipe, remember that

retail prices. If the foods business wholesaler

simply multiplying all quantities may cause

sells directly to the retail customer at a lower

reactions that will affect the final product. But

price than the retailer, the business will lose

this is the first step in taking a small-serving

wholesale accounts.

recipe and making it serve many more. If the

If wholesaling to retailers or selling to retailers

original recipe serves 12 and you want to serve

through a distributor or “sales rep,” the retailer

60, multiply all the ingredients by 5. If the food

may ask for discounts when buying in bulk and

no longer tastes right, continue to experiment.

distributors may ask for a percentage of what

Brands of ingredients can make a difference too;

they sell. Both of these are overhead “costs” that

so don’t change brands without testing the result.

must be incorporated into the original pricing

Experiment with cost-cutting measures that don’t

formula.

affect the final product. For example, discover

the minimum amount of each ingredient that can

be used without affecting the quality. Arrange

equipment for most efficient production, and

Price Sheet and Policies

streamline work methods. To complete the

Have a price sheet that is available to custom-

standardization, practice making the recipe again

ers. On this sheet, list your basic policies. Post

and again until the result is the same every time.

both prices and policies in your office as well.

The recipe should include the following:

Some basic policies could include:

✔ ❒

• Appropriate descriptive title

✔ ❒

• Minimum order size

✔ ❒

• Time needed to fill order

pieces

❒ ✔

• Delivery schedule

✔ ❒

• Yield number of servings and/or volume or

weight

❒ ✔

• Advance payment and billing procedures

✔ ❒

• Returns

❒ ✔

congealed items, or if important to the

❒ ✔

• Cancellations

quality of the finished product or portion

sizes

• Price changes

❒ ✔

8 Starting a Food Processing Business

✔ ❒

Protection, for review and approval. These plans

metal

should include:

✔ ❒

Ingredients in order used and brand name

✔ ❒

A complete diagram of your processing area

including location of storage areas, processing

✔ ❒

Type or form of ingredients, such as all-

equipment, sinks, and location of wells and/or

purpose flour, melted fat, finely chopped

drainfield if applicable

onions, etc.

✔ ❒

A process flow sheet (description of the steps

✔

❒

Quantity of ingredients in both weight and

in your process from sequential order from

volume

raw material to finished product)

✔ ❒

Clear, precise instructions for preparing and

✔ ❒

Product formulation (recipe)

combining ingredients; cooking method, time

and temperature; size or portion and method

✔ ❒

Water sample for bacterial analysis (if on a

of service; possible substitutions, if desirable

private water supply such as a well)

Stress to helpers the importance of following

When VDACS approves these plans, you may

the recipe exactly. Make sure they know what is

begin construction. If you change the originally

meant by terms such as mix, beat, and fold. Be

approved plans, they must be approved by

specific about how many strokes to beat or how

VDACS. After the construction, remodeling, or

long to mix. These things can make a difference.

conversion is completed, a VDACS representa-

tive must inspect your facility and determine

compliance with the approved plans and specifi-

cations.

Planning and Approval of

All foods prepared at any location and offered

Food Processing Facilities

for sale to consumers for distribution to retailers

fall under the responsibility of the Virginia

Department of Agriculture and Consumer Ser-

In the initial planning stages, you should check

vices, Office of Dairy and Foods. VDACS is

the legal zoning ordinances to determine if you

responsible for regulating and enforcing food

can carry out your food business in the chosen

safety as it pertains to food processing, handling,

geographic location. Local zoning regulations

storage, and sale in Virginia. VDACS must

may restrict the kinds of businesses allowed or

inspect your premises and issue an inspection

prohibit food businesses entirely. If zoning laws

report before you are authorized to manufacture

are confusing to you, or if you have any ques-

or process food.

tions about them, ask local officials to clarify the

rules. Do not make any plans until you are

The Virginia Department of Agriculture and

satisfied that your business will abide by current

Consumer Services, Meat and Poultry Services

law. If you plan a business with the idea that you

Division of Consumer Protection must approve

will get local zoning ordinances and laws

meat and poultry processing facilities that manu-

changed, you may be in for an unpleasant sur-

facture products that contain more than 3% raw

prise.

meat or poultry, or more than 2% cooked meat.

VDACS and the U.S. Department of Agriculture

You may need to rent or build a suitable

(USDA) will inspect your facility if meat and

facility. If you build or remodel a facility, submit

poultry products are to be sold outside of Vir-

a prepared set of plans and specifications (blue-

ginia (interstate commerce).

prints) of the construction, remodeling, or con-

version to the local Virginia Department of

If your product is sold across state lines, it

Agriculture and Consumer Services (VDACS)

will be subject to regulations of the Federal

Office of Dairy and Foods, Division of Consumer

Food, Drug and Cosmetic Act and Fair Packag-

Starting a Food Processing Business

ing and Labeling Act. These include labeling,

Food Safety

ingredients, preparation, and handling require-

ments.

The Centers For

Commercial facilities that process heat-pro-

Disease Control and

cessed, low-acid canned foods and acidified

Prevention (CDC)

foods are required to be registered with the Food

estimate foodborne

and Drug Administration, which regulates low-

disease causes 76 million

acid (pH 4.6 and above) and acidified canned

illnesses and 5,000 deaths in the

foods. In addition, low-acid canned food and

United States annually. The majority of the

acidified food processors must have their pro-

illnesses occur in foodservice establishments and

cesses approved by a recognized processing

in the home. However, food processing plants

authority. Full text of the low-acid canned food

are not exempt from foodborne outbreaks and

and acidified food regulations is in the Code of

product recalls. Examples of product recalls

Federal Regulations (CFR), Title 21 Parts 108,

include semi-soft cheeses and hot dogs contami-

113, and 114. To obtain these regulations,

nated with Listeria monocytogenes, ground beef

contact the Superintendent of Documents, Gov-

products contaminated with E. coli O157:H7,

ernment Printing Office (GPO) Attn: New

and ice cream contaminated with Salmonella

Orders, P.O. Box 371954, Pittsburgh, PA 15250-

enteritidis .

7954. Also, the regulations may be obtained

from VDACS, Office of Dairy and Foods or

A foodborne outbreak and

from FDA.

product recall can destroy the

reputation of your business. Poten-

Federal regulations require supervisors of low-

tially hazardous foods (PHFs) such

acid food thermal processing systems to attend a

as fresh meat, poultry, fish, eggs,

Better Process Control School. Virginia Tech’s

and dairy products may be contami-

Department of Food Science and Technology

140˚F

nated with foodborne pathogens.

provide courses throughout the year.

Also, food ingredients, such as dry

Because most food processing facilities

milk powder, are considered to be

generate waste, you need to consider its disposal

potentially hazardous because

when planning and constructing your facility.

reconstituted (water added) milk

State and local laws prohibit the discharge of any

powder will support microbial

biological waste into public waterways or local

41˚F

growth. Fresh fruits and vegetables

sanitary sewers without proper permits. If the

may be surface contaminated with

waste is liquid and is being discharged into a

bacteria, viruses, parasites, and/or

local sanitary sewer system, these permits are

molds. Good manufacturing prac-

usually based on the biological oxygen demand

tices (GMPs) and Hazard Analysis

(BOD) and suspended solids content of the liquid

Critical Control Point (HACCP)

waste. If the food processing waste is solid

systems will ensure a safe, high

waste, you may need to pay a solid waster dis-

quality food product.

posal company for its removal. The waste from

Time and temperature control is

some processes is valuable, and it may be sold to

essential for processing food. Food and food

another processor or producer. For guidelines on

ingredients received should meet quality stan-

the proper handling of specific process wastes,

dards (appropriate temperature and exhibit no

contact your local health department.

signs of spoilage); be stored at the proper tem-

perature (minimize growth of microorganisms);

be processed to the recommended time and

temperature if heat treated (reduce spoilage

10 Starting a Food Processing Business

bacteria, destroy foodborne pathogens, and

Hazard Analysis Critical Control

inactive enzymes); be packaged (packed in clean

Points

containers and under conditions that minimize

product contamination) and adequately stored to

Hazard Analysis Critical Control Points

preserve product quality (extend shelf-life).

(HACCP) is a systematic approach to food

During food processing, personnel must incorpo-

safety. HACCP involves identifying and assess-

rate good hygienic practices. Processing equip-

ing hazards associated with food production.

ment must be cleaned and sanitized after use.

Once the food safety hazards are identified,

controls are implemented to reduce or eliminate

Most bacteria that cause illness thrive in the

the identified hazards. Processors of potentially

temperature Danger Zone between 41 o F (5 o C)

hazardous foods (PHFs), or foods that contain

and 140 o F (60 o C). “Keep hot foods hot and cold

potentially hazardous ingredients, such as meat,

foods cold” is a good rule of thumb for food

poultry, fish, eggs, and dairy products, would

safety.

benefit greatly from HACCP systems.

Hazards may be biological, chemical, or

physical. A biological hazard exists when

Good Manufacturing Practices

potentially hazardous foods (PHFs) are inad-

equately processed or prepared. For example,

To produce and sell food for human consump-

chicken cooked to an internal temperature below

tion, your food business must conform to Good

165 o F (74 o C) may allow for survival and growth

Manufacturing Practices (GMPs). GMPs were

of harmful Salmonella. A chemical hazard

designed and instituted by the federal govern-

would include storage of cleaning agents or

ment, and adopted by VDACS Office of Dairy

pesticides in a food processing area, increasing

and Foods to ensure that foods are manufactured,

the risk of accidental contamination of food.

processed, and handled in a safe and sanitary

Physical hazards may include extraneous

manner. To operate and maintain your business,

material, such as grease from pumps, contami-

you must meet the conditions as set forth in the

nating food in a processing plant to metal shav-

GMPs. If a complaint is filed against you or

ings contaminating menu items in a foodservice

your product, a GMP inspection by the FDA or

establishment.

state is likely to occur. The GMPs include the

following areas:

In order to identify hazards associated with

food production, a flow diagram of food prepara-

✔ ❒

Equipment and procedures

tion from receiving food and food ingredients to

✔

the finished product must be constructed. Each

❒

Personnel

hazard identified must be assessed to determine

✔ ❒

Plants and grounds

the potential for causing illness. Points in the

✔ ❒

Processes and controls

process that control, eliminate, or reduce hazards

to an acceptable level are called critical control

✔ ❒

Sanitary facilities and controls

points (CCPs), whereas a control point (CP) is

✔

Sanitary operations

❒

a standard or procedure such as regularly clean-

ing the storeroom or warehouse.

Good Manufacturing Practices Regulations for

Establishing CCPs during food processing will

food processing plants can be obtained from The

eliminate foodborne disease causing bacteria

Code of Federal Regulations, 21CFR, and Parts

and/or prevent growth of surviving bacteria.

100-169 (specifically Part 110).

Examples would include adequate cooking and

cooling. Normally, CCPs include the cooking/

heating step followed by adequate cooling and

storage of food to prevent growth of micro-

Starting a Food Processing Business

organisms. In addition, steps to prevent cross-

Product Testing and Safety

contamination of cooked or heat-processed foods

would be considered critical control points.

It is important to have your finished food

Once the hazards and critical control points have

product tested for safety. The product should be

been identified, critical control limits are estab-

representative of each batch manufactured or

lished. An example would be the correct tem-

continuously produced.

perature range for the heat processing of food.

Product testing should never be considered a

Operating temperatures for processing foods

substitute for good food safety control proce-

vary depending on the food product. For in-

dures. Virginia Tech’s Department of Food

stance, current FDA temperature recommenda-

Science and Technology can analyze your prod-

tions for cooking ground beef and poultry are at a

uct for safety and provide technical expertise

minimum internal temperature of 155 o F (68 o C)

(http://www.fst. vt.edu/smbuss). Also, several

and 165 o F (74 o C) for 15 seconds, respectively. It

state and national food testing laboratories are

is your responsibility to know the temperature

available to analyze your product. Food analyses

requirements for storing, preparing, and

may include pH (acidity or alkalinity), water

processing food products! Each critical control

activity (moisture), shelf-life (product life under

point must be monitored and corrective action

conditions of storage), microbial testing, and

established when a deviation is identified. An

chemical composition. Also, several laboratories

undercooked food product would need to be

provide nutrient labeling information. This is

reprocessed to meet minimum temperature

important if you are required to provide a “Nutri-

requirements.

tion Facts” label on the product. Compare

services and costs of food testing laboratories.

As with any system, verification is needed to

Your local Extension office and the VDACS

ensure that the HACCP system is working. If the

Office of Dairy and Foods maintain a listing of

system is not working, a review of HACCP plans

food testing laboratories.

must be conducted to identify and solve problems.

Record keeping is essential in food

production. Records must be kept for each critical

control point. Periodic temperature checks and

Packaging and Labeling

continuous monitoring, such as recording charts

Your Product

on cooking equipment, are highly recommended.

Attractive products sell better. Attractiveness

Currently, HACCP is mandated in the seafood,

refers to both the appearance of the food and how

poultry, and meat processing industries.

it is packaged or displayed. Strive for innovative

However, all food processors and foodservice

and appropriate food arrangements. Prepare the

establishments will likely be required by federal

product the way you want it to look, and take

and state regulatory agencies to implement

color photographs. Post these in the processing

HACCP programs.

unit so that both you and your helpers can

Information about HACCP is available.

achieve a consistent appearance in the product.

Check your local library and the internet for

Packaging also contributes to the attractiveness

information. In addition, Virginia Cooperative

of a product, so choose a packaging method that

Extension, the Virginia Department of Agricul-

enhances what you sell. Today’s customers are

ture and Consumers Services, Virginia Depart-

concerned about sanitation and safety. Securely

ment of Health, and HACCP consultants can

wrapped and sealed packages are vital if food is

provide additional information.

sold through retail outlets. While package

appearance can affect how a product sells,

packaging and labeling are also regulated by law.

12 Starting a Food Processing Business

Product Labeling

Product Codes

All food and nonfood items packaged by your

Each package or container of food produced in

business must be properly labeled before they are

your establishment should have a legible product

sold. The law requires the following to be on all

code. The product code allows record keeping

food items:

and tracking of products in case of a recall (Refer

to FDA Regulations 21CFR, Part 7 for recall

The name, street address, city, state, and zip

guidelines and procedures). A product code

code of either the manufacturer, packer, or

should identify the product, production facility,

distributor

date and year packed, and batch number. Any

An accurate statement of the quantity of

method of coding that is recognizable by the

contents in terms of weight, measure, or

processor is acceptable.

numerical count of food in the package in

An example of a product code incorporating the

metric as well as English units

Julian Date Coding system:

The common or usual name of the food

198G0115

The ingredients in the food must be listed by

198

represents the day of the year

common and usual name in descending

G represents the month (July)

order of predominance by weight

represents the year packed (2001)

For further details, a copy of FDA Regulations

production facility (If more than

21CFR101 may be obtained from the VDACS

one facility)

Office of Dairy and Foods. After you have

represents hour period or batch

designed and written your label, submit it for

number

review and comments to VDACS. Although not

required by law, it can save you time and money.

If you wish to sell your product in retail grocery

Your food product may require compliance

chain stores, you should obtain a Universal Prod-

with Nutritional Labeling (“Nutrition Facts”).

uct Code (UPC) for your product. This code is a

See Code of Federal Regulations (21CFR101.9).

series of bar codes that allows your product to be

Consult VDACS, your local health department,

checked out at the grocery stores’ automated cash

or your local extension office for details.

UPC CODE

4 Ingredients

INGREDIENTS:

TOMATOES,

PEPPERS, WATER,

VINEGAR, GARLIC

El Marco Salsa is a

SALT, ONIONS,

combination of the freshest

12345 67890

PARSLEY.

ingredients offered in a

Salsa, seasoned with

Refrigerate after

jalapeno peppers.

Nutrition Facts

opening

Serving size 4 0z.

Servings Per Jar 4

This zesty salsa goes great

Calories 30

Calories form Fat 0

El Marco salsa offers the finest

with chips, sandwiches,

% Daily Value

and most wholesome product

available. No pesticides or

tortillas, and adds pizzaz

Total Fat 0 g

preservatives are used in our

Dietary Fiber 5g

23%

products.

to pasta sauces and

Cholerterol 0mg

salads.

Sodium 90mg

Questions or comments please

Total Carbohydrates 10g

call 1 800-555-ELMARCO

Vitamine A

25%



Vitamine C

El Marco SALSA

Protein 5g

VIRGINIA AGRICULTURE

Iron

43 Main Street,

Virginia’s Finest

Calcium

Anytown, VA, USA,

*Percentage Daily Values are based on a

55500

3 Product Name

2,000 calorie diet

Net Wt. 16oz. (448g)

Serve Chilled!

2 Net. Weight

Nutrition Fact label

1 Company Information

Starting a Food Processing Business

registers. There is a minimum of $750 to obtain

Trademarks (™)

the code. To obtain a UPC code for your prod-

Trademarks are distinctive names or symbols

uct, contact the following office for the appropri-

used by a company to distinguish its products

ate application: Uniform Code Council, Inc.,

from those produced by any other company. The

7887 Washington Village Drive, Suite 300,

creation and use of a trademark is the first step to

Dayton, OH 45459. Phone: 937-435-3870.

making it exclusively yours. If the trademark is

used in interstate commerce, you can register it

with the U.S. Patent and Trademark Office. This

registration costs $325 and gives you the legal

rights to the trademark for 10 years. However,

after five years you must file an affidavit con-

firming use to keep the trademark active. Trade-

12345 67890

marks may be renewed every 10 years.

Universal Product Code

(UPC)

The booklet, Basic Facts About Trademarks ,

may be useful if you are considering registering

First five digits (12345) assigned by Uniform

your trademark. Contact the Patent and Trade-

Code Council. Second five digits (67890)

mark Office, U.S. Department of Commerce,

assigned by manufacturer.

Crystal Plaza No.3, Suite 2CO2, 2021 South

Clark Place, Arlington, VA 22202. Phone: 800-

786-9199.

Nutrition Facts

Serving size 4 0z.

Servings Per Jar 4

Weights and

Amount Per serving

Measures

Calories 30

Calories form Fat 0

% Daily Value

State law regulates net

weights and the computation of tares. Net weight

Total Fat 0 g

is the exact weight of a commodity in a package

Dietary Fiber 5g

23%

at the time it is offered for sale. Tare is the

weight of a container or wrapper that is deducted

Cholerterol 0mg

from the gross weight to obtain net weight. Net

Sodium 90mg

weight must allow for product shrinkage. In

other words, the law requires that the commodity

Total Carbohydrates 10g

itself weigh at least as much as the label declara-

Vitamine A

25%

tion at the time it is offered for sale. Colder

Vitamine C

temperatures during processing, packaging, and

display will reduce product shrinkage, extend

Protein 5g

shelf-life, and achieve maximum profits.

Iron

Information on weight and measure laws can

Calcium

be obtained by contacting the Virginia Depart-

ment of Agriculture and Consumer Services,

*Percentage Daily Values are based on a 2,000

Division of Consumer Protection, Office of

calorie diet

Product and Industry Standards, P.O. Box 1163,

Room 402, Richmond, VA 23218. Phone 804-

786-2476. Additional information concerning

federal and state laws for weights and measures

including packaging and labeling regulations can

14 Starting a Food Processing Business

be obtained by accessing NISI Handbook 130 -

✔ ❒

Be sure food looks professionally prepared

2001 Edition (http://ts.nist.gov/ts/htdocs/230/

and is attractively displayed

235/h130-01.htm) from the National Institute of

✔ ❒

Make sure you, your workplace, and your

Standards and Technology (NIST).

equipment are neat and clean

✔

❒

Meet agreed-upon deadlines

Keeping Written Records

If you use the family telephone for your

business, insist that family members answer

Obtaining written orders or contracts will

correctly and know how to take orders and

make your food business more professional. If

messages.

possible, get written orders or contracts from

buyers, especially if you are producing for resale

through retail outlets. Written orders help

prevent errors and misunderstandings. The order

form should have space to write the price, order

type, and amount, time of delivery, last date

ordered may be canceled, and payment schedule.

If food is for resale, be sure the order form

specifies the policy on return of unsold merchan-

dise, especially if it is perishable. Record keep-

ing is also very important. Records tell you

where you have been, where you are, and where

you are going. Business experts say there is a

close relationship between inadequate record

keeping and business failures. State and federal

governments require certain records, and de-

tailed records help pinpoint deductions at tax

time. Set up a simple bookkeeping system to

keep track of expenditures.

Creating a Professional

Image

One important part of business success is

image. If you are professional in your work and

in your dealing with customers, they will have

confidence in you and feel good about using

your product or service. It costs very little to

create a professional image. Here are a few tips:

❒ ✔

Be available during your advertised busi-

ness hours; if you must go away, leave

messages where you can be reached

❒ ✔

Return phone calls promptly

❒ ✔

Respond to inquiries and requests for price

quotes immediately

Starting a Food Processing Business

Virginia Department of Health (VDH)

Summary

http://www.vdh.state.va.us/

People starting their own food businesses come

Virginia Small Business Development

from diverse backgrounds. The qualities they

Centers

share include independence, initiative, and good

http://www.bplans.com/sbdc/virginia.htm

ideas. These, combined with some business

Virginia Tech Department of Food

sense and the willingness to seek outside help in

Science and Technology

areas where you are not knowledgeable, will give

http://www.fst.vt.edu

you a better chance of success. Anyone consider-

http://www.fst.vt.edu/smbuss

ing a new business should be aware that definite

Virginia Tech Department of Human

risks are involved. Some people find out too late

Nutrition, Foods and Exercise

that they do not have the discipline it takes to run

http//www.chre.vt.edu/HNFE

a successful business; others may put up a lot of

money or quit a good job only to find out too late

that there is much more to running a business

than what they expected. Before making any

ACKNOWLEDGMENTS

permanent commitments, examine your personal

The authors wish to thank the following individuals

qualities and have a detailed business plan. Then

who reviewed this publication:

you will be ready to start on this exciting venture.

Feel free to call on Virginia Cooperative Exten-

Doug Saunders, Ryan Davis, and Pamela Miles,

sion for future assistance. We wish you the

Virginia Department of Agriculture and Consumer

greatest success.

Services, Office of Dairy and Foods; Tory M.

McGowan, Virginia Department of Agriculture and

Consumer Services, Agribusiness Development

RESOURCES

Services; Gary Hagy, Virginia Department of Health,

Division of Food and Environmental Services; Phyllis

National Institute Of Standards and Tech-

Deel and Johanna Hahn, Virginia Cooperative

nology (NIST)

Extension, Family and Consumer Sciences; Brian R.

http://www.nist.gov

Yaun, Virginia Tech Department of Food Science and

Uniform Code Council, Inc.

Technology.

http://www.uc-council.org

Adapted from: Starting A Food Processing Busi-

United States Department of Commerce

ness? What You Should Know Before You Get

Patent And Trademark Office

Started, Alabama Cooperative Extension System,

http://www.uspto.gov

Alabama A&M and Auburn Universities. Starting a

United States Food and Drug Administra-

Food Manufacturing Business In Tennessee, Tennes-

tion (FDA)

see Cooperative Extension Service, University of

http://vm.cfsan.fda.gov/~comm/foodbiz.html

Tennessee Cooperative Extension Service. Getting

Virginia Cooperative Extension

Started In The Specialty Food Business , Cooperative

http://ext.vt.edu

Extension Service, University of Georgia College of

Virginia Department of Agriculture and

Agriculture. Selling Food Products: A Business From

Consumer Services (VDACS)

Your Home, North Central Regional Extension

Agribusiness Development Services

Consortium (Cooperative Extension Services for

http://www.vdacs.state.va.us/agribusiness/

University of Illinois, Purdue University, Iowa State

index.html

University, Kansas State University, Michigan State

Marketing Services

University, University of Missouri, Ohio State

http://www.vdacs.state.va.us/marketing/

University, and South Dakota State University.

index.html

Regulatory Services

http://www.vdacs.state.va.us/regulatory/

index.html