Food entrepreneurs find niche in Triangle markets to remain competitive

vbridges@newsobserver.comSeptember 16, 2013 

— Carmella Alvaro watched as a metal machine rolled two sheets of raw pasta, tapped out a dozen square raviolis and inserted a three-cheese and roasted-garlic filling.

“I can decide how fat or thin the ravioli are,” said Alvaro, 37, who runs Melina’s Fresh Pasta in her garage-turned-commercial kitchen that hums with 11 freezers in a neighborhood off Horton Road in northern Durham. “We want them to be full. It is really about the filling.”

Since 2010, Alvaro has been building her natural pasta company, which sells its goods with simple ingredients at farmers markets in three counties, through community supported agriculture programs, in the Orange County Weaver Street Markets, in smaller specialty shops and three restaurants.

Now, Alvaro is working to get into Whole Foods Market and more restaurants.

If Alvaro and others want to make it in the competitive food industry, they have do a lot more than meet the required due diligence, which includes following handling regulations, finding packaging and preparation space, incorporating a recall system, identifying proper bar codes and obtaining product insurance, people in the industry said.

Calling the food industry extremely competitive “would be an understatement,” said Annette Dunlap, an agribusiness developer with the N.C. Department of Agriculture and Consumer Services, which has programs to help food growers and producers move their businesses forward.

Dunlap estimated that less than 10 percent, possibly as few as 1 percent to 2 percent, of food businesses make it past the five-year point.

“And it’s not unusual for a food business to take eight to nine years before you are actually profitable,” she said. “It’s a very intensive investment with a lot of upfront commitment.”

The ones who succeed master basic business principals and understand how to control costs, produce consistently and execute a quality marketing plan, Dunlap said.

“And then there is always a certain amount of right time, right place and luck,” she said.

Know the shelf

Entrepreneurs need to understand the food retail landscape, Dunlap said. About 60 percent of the country buys its groceries at Walmart, she said, leaving everyone else fighting for the other 40 percent.

“That means you have to think of the supermarket shelf as real estate, and that piece of real estate has got to make the store money,” she said.

The good news is that the specialty food industry, which centers on small-batch and artisanal products, has hit record sales highs for three straight years.

U.S. sales of specialty foods and beverages rose 14.3 percent to $86 billion in 2012, which is more than double the 6.8 percent increase recorded in 2011, according to the State of the Specialty Food Industry 2013, an annual report from the Specialty Food Association. The report tracks sales of specialty foods through supermarkets, natural food stores and specialty food retailers, but doesn’t include Wal-Mart’s sales.

Each path to sustainability is unique depending on the product and the company, said Jeff Thomas, manager of Goodness Grows in North Carolina, a state marketing program centered on the Got to Be N.C. campaign.

Businesses can work with wholesale distributors, sell directly to specialty and other stores, or sell roadside, at farmers markets or to restaurants and other food service companies.

“We work with over 3,000 different companies, and each one them has a slightly different model than the one before,” Thomas said.

Dunlap recommends introducing products at farmers markets and community-supported agriculture programs to build volume before approaching larger stores such as Whole Foods.

When a product is close to shelf-ready, entrepreneurs should approach their local Whole Foods, which has a liaison who works with local producers and growers, said Stephen Corradini, vice president of purchasing, merchandising and distribution for grocer’s South region.

Goods that end up on shelves at Whole Foods have to meet minimum requirements, such no artificial flavors, colors or preservatives, but owners also need to have a mix of a great product, an intense passion and an understanding of where they fit in their market’s spectrum.

Owners should also pay attention to customers’ wants such as price, flavor and product texture, Corradini said.

Entrepreneurs need to demonstrate their product in stores once it’s on shelves and understand its retail performance.

“The process of getting new items added and being a successful product is pretty Darwinian at times, particularly in the grocery categories,” he said.

Every day like his last

Page Skelton, president of the Chapel Hill spiced sauce company Cackalacky, said he treats each day as if he were going out of business.

Skelton started the company in 2001 by selling the sauce with all-natural ingredients, including North Carolina sweet potatoes, at Southern Season, but just started making a profit a couple of years ago.

The sauce is sold nationwide at Fresh Market and at Costco and Whole Foods in the Carolinas and Georgia, and in other grocery stores and mom-and-pop businesses.

Small shops and related grass-roots support in the Triangle have been key to survival, Skelton said.

“That really has been our bread and butter,” said Page about the company.

After building a base from Triangle sales, Cackalacky worked with the Got to Be N.C. campaign, which broke down the barrier to mainstream grocery stores.

“It was huge,” he said.

Success with pasta

Alvaro learned how to make pasta by hand on a September 2010 vacation to northern Italy.

“I thought maybe I’d do it as a hobby on the side,” the former software salesperson said.

At first, Alvaro made the pasta by hand but switched to machines in 2011 after an increase in demand for her product. She spent a year learning how to use five machines, which allowed her to triple her production capacity to up to 300 dozen ravioli a day.

In 2012, Alvaro left her job and started working with a marketing firm that helped her rebrand and establish packaging.

Alvaro is now focused on expanding revenue and celebrating the little successes.

“So many families buy my food, and that makes me feel good,” she said. “They are getting a really convenient meal with real food and real ingredients.”

Bridges: 919-829-8917

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