Let's say you want to go commercial... what considerations are needed?

What sorts of things are needed for taking a hot sauce to the commercial market in the USA? Besides a business license obviously.

Do you need FDA stamps of approval? I found this... http://www.fda.gov/F...ies/default.htm

Where do the Nutritional Information stickers come from?

What about health inspections of prep area, how is that conducted?

Are there procedural guidelines that must be followed from a regulatory standpoint?

What about Patents?

I have a few recipes that I'd like to take to the commercial market, but I definitely want to make sure I'm minding my p's and q's.
 
I can offer a couple of tips.

For all of the food safety and certification you should use the FDA and only the FDA - there's a heap of bad info out there (presumably not here, but on the Internet in general) and the FDA is really the authority. It also depends on whether it's something you intend to manufacture or if you're working with a co-packer as I am.

I can tell you a LOT about the trademarking since I just went through it - first, you cannot trademark a recipe. What you can do is to have your co-packer (if you have one) or your employees/helpers (if you're the manufacturer) sign an MNDA, or Mutual NonDisclosure Agreement. That protects you from someone you trusted to work with you from absconding with your recipe. Co-packers are much less of a risk. Often these are folks who make a product themselves and are maximizing the investment in their production line, which may have cost $100,000+++. They aren't going to jeopardize their good name to poach from you, and hypothetically they'd be shooting themselves in the foot to do such a thing as it would ruin their rep and no one would want to work with them on future products, which is a big part of their business if not their core business.

What you can trademark is your product name. I am quite excited to say that after a long and somewhat costly process, TODAY in the mail I received my finalized Federal Trademark for Lucky Dog Hot Sauce. :onfire:

It was not easy, and I recommend getting an attorney - first, if you have a very unique name you're probably ok and may be able to get away with less effort/cost, but you want to be careful as you don't want to encroach on anyone. For me it was difficult, as there are about 6 billion products with Lucky Dog in their name. You'll want to start by checking the US Patent & Trademark Office website - they have a free search engine that works pretty well here --> http://www.uspto.gov/

Then you'll need to make sure you aren't encroaching on anyone else's trademark, which includes internationally. That's a bit more difficult and more expensive. But here's a tip to save you some $$$: Your intellectual property attorney will charge you for a few hours work while he has a 2nd party do the trademark search. You can bypass that expense ($400-600) by going right to them and having them conduct the search for you. I believe I paid $800 directly to Thompson Compumark for this. http://compumark.thomson.com/

Once you're in the clear for that, and provided you meet the standards for trademark, you can proceed - but even after the period elapses (I think it's 2-3 months) where others can contest your mark successfully, you will only receive an "intent to use" mark. Which you must extend (at $250 a pop, plus attorney filing fees) every 6 months. I believe you may extend this up to 4 times (2 years) before your mark is considered abandoned. To finalize the process, you must submit evidence to the feds that shows that you have sold a product with your mark in its intended use across state lines. I had to submit receipts, links & photos. Now I have to send in another $375 for "processing fees", but that's it - I'm done. It was an 18 month process for me and cost about $2000 all told. And that's with a family friend as an attorney.

All that just for the trademark.

On to the co-packer vs manufacturing. It's a huge question to tackle - and in my humble opinion it comes down to this: what business do you want to be in, sales or manufacturing. For me it was an easy decision - I prefer creating sauces, and representing them at Farmer's markets, web sales, promotions, etc and letting someone else own the really expensive production line, labor, employee nightmares, sourcing, insurance and all associated liability that comes with those things. That also includes being liable for the label contents, accuracy, nutrition, etc. Again, that's me - I don't have the capital needed to secure a production facility and production equipment like kettles, mascerator, bottle washer, accumulation tables, bottle filler labeller, capper, caser and bundler, nor do I want the overhead of employees, workman's comp insurance, FDA inspections and certs, etc. It's a huge undertaking. The notion of starting up a romantic little business where you make and sell sauce is really kind of a fantasy - a single bottle of hot sauce doesn't pay the rent so you need to sell a lot of it. To me that means you need to focus on sales. But that's your call and depends on your capital and willingness to invest it of course. If your last name is Rockafeller, have at it (and can I borrow a couple million?) :D

Nutrition, as mentioned, is the responsibility of the manufacturer. There are services that test your product and analyze it to come up with the nutritional content. If you're working with a co-packer, it's on them but they may charge you. If you're making it, it's on you to submit it for testing. The manufacturer is ultimately responsible/liable for all label contents. That includes the ingredient list, nutritional content, contact info, etc.

I hope this is helpful - I've spent the last 18 months learning a lot of this stuff, so I'm happy to help if I can. If you have any other questions I'll give you the best I've got!

Good luck! :cheers:
 
My pleasure - if you're considering co-packer, I have a lot of advice there too. Minimum order sizes, types of production line for your product and a lot more go into the selection. I'm on my 3rd and final - hopefully I can spare you some pain. Let me know!
icon_smile.gif
 
Most definitely. I'll have to see what market demand looks like and find out if a co-packer makes sense for me to use. Likely it's the route I'll end up going down, we'll have to wait and see.
 
Well I had a really good reply, and then erased it by mistake....so.... short version- deal with your local or state health people first. If you use a co-packer, they will deal with all the appropriate agencies and you will pay them for that service. If you want to process your own foods, you will deal with local and state people before you even see the FDA. The FDA is not the end-all authority and is usually never seen by most small processors For nutritional labeling, it is NOT required, but you must file an exemption. It's free, Go to the FDA website and search. You'll figure out how, for what, and when.

A lot more info is there for the reading-
 
Well I had a really good reply, and then erased it by mistake....so.... short version- deal with your local or state health people first. If you use a co-packer, they will deal with all the appropriate agencies and you will pay them for that service. If you want to process your own foods, you will deal with local and state people before you even see the FDA. The FDA is not the end-all authority and is usually never seen by most small processors For nutritional labeling, it is NOT required, but you must file an exemption. It's free, Go to the FDA website and search. You'll figure out how, for what, and when.

A lot more info is there for the reading-

I was under then impression that nutritional content was dependent on sales? Under $XX.xx is exempt, but ingredients are required for allergy considerations. I forget what that threshold is but I recall it being a pretty high dollar amt.

Anyway, I'm no expert on that aspect, so thanks for the info - good to know, as right now with my hobby-batches I don't have nutrition.
:D
 
My pleasure - if you're considering co-packer, I have a lot of advice there too. Minimum order sizes, types of production line for your product and a lot more go into the selection. I'm on my 3rd and final - hopefully I can spare you some pain. Let me know!
:)

I'm really grateful for your long post, but I think you just burst my bubble a little. LOL $2000 just for the name! And then you say, "The notion of starting up a romantic little business where you make and sell sauce is really kind of a fantasy". Oh man... I was really enjoying my little pipe dream there for a minute. You know, a little website, some good home-made sauces... I think a lot of people here have this fantasy. Even though it's a little depressing to see how involved the process of starting a business is, I think it's great that folks like you post information about the costs associated with such an enterprise. It's a much-needed reality check (at least it is for me).

Would you be willing to post just a bit of co-packing advice, particularly that which is applicable to entry-level hobbyists. It seems like it might be the most cost-efficient and safest way to go. I'm interested in minimum order sizes & estimated costs.

Thank you!
 
@ Lucky Dog- you are correct, ingredients are required as well as some address/contact information, which your AHJ will stipulate. FDA nutritional labeling (the little box with calories, sodium etc) is not required, but you must file the expemtion I talked about before.


Stemwinder- It is possible to have your pipe dream and sell it too. Lots of us on here do it. I come from a food service background which helped me considerably along the way. I was aready familiar with health regulations and small business/self employed stuff. But it's not impossible.

Just start small and start local. Don't get all bogged down with trademark stuff right now. After you get your product out to the farmers market and maybe a grocery store or two, then start looking at all that other stuff.

It's January right now, so you have a few months before FM season's start. I'd strongly suggest you get your product out in front of a lot of people who aren't your friends and family to make sure you have a good product before sinking $2500 in a co-packer. There are several threads in the business section about finding a kitchen to use and making your own sauces.

Contact your local health district. They can point you in the right direction and may even know of some kitchen resources available for individuals to rent.

I've said it before and will probably say it many more times....think outside the box. You don't need to spend $20,000 building or furnishing your own processing kitchen. Next time you drive through town, look at every building and notice how many have kitchen facilities that could be rented. Eagles/Moose/Elks lodges, grange hall, church, private school, community center, restaurants that are closed in the mornings or days of the week.....

good luck,
SL
 
Excellent. Thanks, Salsalady. That makes me feel better. I mean, I'm not trying to run out of the door and start a business tomorrow or anything. I've still got at least a year or so of testing recipes on friends and family ahead of me. They love what I've given them so far. As I'm sure many of you know, once someone else tells you that your sauce is "awesome" it's a short mental leap to hot sauce stardom. Oh, how thy mind wanders!!!
 
I'm really grateful for your long post, but I think you just burst my bubble a little. LOL $2000 just for the name! And then you say, "The notion of starting up a romantic little business where you make and sell sauce is really kind of a fantasy". Oh man... I was really enjoying my little pipe dream there for a minute. You know, a little website, some good home-made sauces... I think a lot of people here have this fantasy. Even though it's a little depressing to see how involved the process of starting a business is, I think it's great that folks like you post information about the costs associated with such an enterprise. It's a much-needed reality check (at least it is for me).

Would you be willing to post just a bit of co-packing advice, particularly that which is applicable to entry-level hobbyists. It seems like it might be the most cost-efficient and safest way to go. I'm interested in minimum order sizes & estimated costs.

Thank you!

Sorry - I didn't mean to imply that it's impossible.

It's all about scale, really. Salsalady is spot on - if you're scale is small, and you can find a kitchen to rent it is absolutely possible to do something on that scale.

That said, it's a lot of work. I know - I've been doing it for about 1.5 years that way. Batch size will be limited to the size of your pots. Blending, bottling, capping & labeling are manual processes without a production line. Sealing with an overwrap or wax is manual. It takes mea good 8-10 hours to produce 100 bottles of sauce.

A co-packer can do 100 cases in that time. They also source ingredients in bulk as you're not their only customer so likely much cheaper than you could ever get them.They also buy bottles in the thousands. Economies of scale tend to off-set some of the co-packer costs. In fact me paying retail for all ingredients/materials Vs co-packer is within $0.10 a bottle.

For hobby-level scale you can absolutely do everything. The post topic was about "going pro" so I'd assumed commercial scale.

My experience with co-packers has been that the big ones who have the best equipment & robust production lines capable of producing anything want you to be Heinz ketchup and have 10,000 cases of a single flavor. On the opposite end of the spectrum are the folks who want your business and have start-up friendly minimums (~100 cases/flavor) but don't always have the equipment needed to do it - I wasted a year with 2 of these folks. Nothing disparaging to say about them - it was partly my fault for not asking enough (or the right) questions.

My scale is going to be web sales, direct sales and farmer's markets + I have a distributor who believes he's got roughly 80 gourmet/boutiquearkets that will want it. So for me, at that particular scale, it's way more than I could supply producing it myself. My current co-packer makes spaghetti sauce as his primary business, so his production line is robust, but he does a 400 case min order (4800 bottles) and will mix & match if the varieties have similar ingredients. That's perfect for me, as I can do 133/133/134 cases of 12.

If you're entry level hobbiest that obviously changes the scale substantially. It's all about your target goal - I was raised to believe in the "go big or go home" philosophy. My expenses have not been too bad in terms of starting a business - but it is starting a business, not a hobby. I expect to spend about $4000 on test batches to get the production scale recipes right, then another $6000 on the first production run. By that point I need to have my site up, farmers market space reserved, and my distributor primed. Luckily I have a friend to help with the site (ordinarily another $2500-5000 for a professional website with database, customer info, order history, payment feeds, etc) - but I'll still incur a cost for the SSL, and about $300 a year for hosting. Later down the road I'll need a vehicle capable of transporting 400 cases of sauce - so that's yet more $$$ to invest. Fortunately much of this will be tax deductible...

Sorry again if I scared ya...but its all about the scale you're looking to achieve. Salsalady is spot on with her post and I agree with her that you can do it small and be successful. It just depends on your definition.
:D


Excellent. Thanks, Salsalady. That makes me feel better. I mean, I'm not trying to run out of the door and start a business tomorrow or anything. I've still got at least a year or so of testing recipes on friends and family ahead of me. They love what I've given them so far. As I'm sure many of you know, once someone else tells you that your sauce is "awesome" it's a short mental leap to hot sauce stardom. Oh, how thy mind wanders!!!

Exactly how I started. Good luck and let me know if I can be of further assistance - I'm goin through your exact process, 2 years down the road.
:)
 
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Ps - more on co-packers:

Once the MDNAs are signed the next step is costing your product.

The co-packers I've worked with perform this necessary step for free. While I did waste about a year with the 1st two failed attempts, neither of them charged me a penny, so all I lost was time.

Another note that will help you: gram weight. Most people, like me, probably you and just about everyone else in their kitchens uses measuring cups and lb scales. Unlike salsalady, I did not come from a food background, so I learned the hard way that a co-packer uses gram weight. Which is fine - except all of my "final" recipes were in cups (liquids) & lbs (solids) - so to get to the 1st step of costing the sauce on a price per bottle level, my co-packer needed every recipe in gram weight.

Which of course meant that I had to spend a weekend making 3 batches of sauce, and carefully weighing ingredients on a gram scale as I prepared it. It was time well spent, as now when I scale my hobby batches it's really easy as everything's a straight multiple - I can make 1.3 batches simply by multiplying everything by 1.3

That said, as i understand it not all ingredients scale equally - maybe salsalady can help here as I'm no food scientist, but I guess some ingredients have exponentially more impact on a recipe when increased, so they need to be scaled back to get the same flavor when making 60 gallons at a time as opposed to 2.5 gallons at a time.

Anyway, the point is if you're considering a co-packer, if that's the scale you want to approach, you can typically get a cost to manufacture from them for free. That's a value-add from every co-packer I've worked with or spoken to. But be sure to do the advanced work to convert your home-brew recipes to gram weight now. Something I wish I'd known early!

It sounds like you're passionate about it and that's the best start right there. Maybe we can do a trade sometime.
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I'd love to Lucky Dog! I've just sent out a few bottles of sauce to people that aren't friends/family (Thanks Google Plus!) so we'll see how those people like them. There's a few suspicions I have about them that I want other people to confirm for me in a blind test before I get my recipe(s) solidified.

I think I'm going to approach from a large scale production mindset from the get-go. My day job is building Google's datacenter infrastructure, so my brain is already locked-in to a large-scale mindset... nothing I can do about that now! Haha.

Using a co-packer, do you simply give them the raw ingredients, ratios, procedures, etc... and they do the entire sauce assembly? Or do you have to do some "pre-fab" work and send them the inputs for bottling? How does that work? Also, what about shipping food items, etc...? Do you typically order the supplies and send them directly to the co-packer? What happens if one shipment runs behind and the co-packer has to store food items instead of JIT assembly?

Let's see how far this rabbit hole goes. :fireball:
 
I'd love to Lucky Dog! I've just sent out a few bottles of sauce to people that aren't friends/family (Thanks Google Plus!) so we'll see how those people like them. There's a few suspicions I have about them that I want other people to confirm for me in a blind test before I get my recipe(s) solidified.

I think I'm going to approach from a large scale production mindset from the get-go. My day job is building Google's datacenter infrastructure, so my brain is already locked-in to a large-scale mindset... nothing I can do about that now! Haha.

Using a co-packer, do you simply give them the raw ingredients, ratios, procedures, etc... and they do the entire sauce assembly? Or do you have to do some "pre-fab" work and send them the inputs for bottling? How does that work? Also, what about shipping food items, etc...? Do you typically order the supplies and send them directly to the co-packer? What happens if one shipment runs behind and the co-packer has to store food items instead of JIT assembly?

Let's see how far this rabbit hole goes. :fireball:

lol - it's DEEP.

Ok, first if you'd like to do a trade and have a bottle now, I'd be glad to do a 1/1 with ya. Email me at luckydoghotsauce@gmail.com - I have my "production" Orange-Label right now (about 10 bottles left - selling out in 24 hours is common these days, especially with ~50 bottle batches) - so let me know. If you don't have any on-hand we can always coordinate at a later time.

On to your comments/questions:

Scale: while I am planning on 'launching' with a product line (3 flavors, more to follow), distributor (friend of a friend of a friend who's a LDHS fan and 30 year marketing vet volunteered to help) web-site (another LDHS fan contribution) and farmer's markets, bear in mind that all of those things took time and me building a following. I have 200+ fans and counting, mostly through word of mouth. I gave away bottles for free at my local coffee shop, at work, everywhere I went - like I said, Famous Amos is my hero. :D

A lot of those give-aways generated feedback that inspired recipe tweaks. Working with the co-packers and industry vets helped me to tweak the recipes further to achieve the same flavors with more "accessible" ingredients. Some of my early pepper choices (fresh & dried) were seasonal, or costly, or both. I was using 5% vinegar - a commercial kitchen uses 50% and waters it down. Things like that.

Also the give-aways kept me focused - and the feedback was key. Too thick, too watery, too salty, too sweet, too hot (unpossible!) etc. Putting the ego in check and making adjustments is critical. Never fall too in love with a recipe if enough people tell you something's off with it. But once it starts to come together and you get into the 100+ people you don't know telling you they'd buy it? That's when you can start to think about scaling it out big. I didn't even consider doing it as a business until I got to that point - mostly because it was bankrupting me to give it away once I got into the "more than 100 people asking for it". I'm still having trouble with friends and family since they still want it for free. hahaha

More on the co-packer - it's an iterative process. If you have a particular ingredient and source, you can certainly help them to save time. The good ones will give you their $.02 on whether it's a commercially viable ingredient. For example: I LOVE chile tepin - the little pillbug looking round dried pepper. The "Bird's Eye" pepper I think it's called, and it's considered a cultivar from whence many many peppers originated. It's got an explosive heat that fades quickly. It's also $46/lb for them, and they're not always available. So at one point I had to scrap it on the advice of my co-packer and substitute with a pepper of similar heat that was more widely available. Little tweaks like that will happen a lot. The co-packer should do all sourcing, handling and processing for you - that was the problem with my 1st two (and many I'd spoken with on the phone) - they didn't have the right equipment to process my sauce like I need. Since I don't use a pepper mash and do use roasted garlic, and don't use powdered peppers and don't use liquid smoke or liquid capsaicin my sauce requires a mascerator to grind it down to the right consistency. It's not an uncommon piece of equipment, but it seems to be among smaller co-packers. So yeah - you shouldn't have to deal with any of that stuff - it's what you're paying the co-packer to do.

There will be a time when you have to deal with transporting lots and lots of sauce, which will be entirely on you. Though you can likely pay the co-packer to drop-ship it from the place of manufacture to your distributor, if/when you have one.

let me know if you've got a bottle on-hand and we'll do a swap. I'd love to try it and of course I'll solicit feedback from you ('cuz that's how I roll). haha - if you're in the silicon valley a swap should be easy since I'm in the east bay and frequently go to the Peninsula.
:)

By the way - I *really* don't want to come off like a "knowitall" - far from it. I am a student of this process like you, just a little further along. I am passing along the best advice I have based entirely on my personal experiences with this process.

A lot of sauce makers helped me to get to this point - it's a very friendly industry, which is a really cool thing. So I'm happy to pass along what I know. If someone comes in here and posts that I'm wrong and there are better ways to do things I'll be all ears myself.
:D

Another bit of advice - if you're in the SF bay area (since you're at Google I think you are?) and even if you're not, you should consider attending the SF Fancy Foods show (e.g. Winter Foods Show) at the Moscone Center. It's relatively inexpensive ($25-35) and you'll get to meet and speak with many many many people in the food industry and more than a few hot sauce pros - some of whom are co-packers. They're extremely helpful folks for the most part and I cannot say how appreciative I am for their guidance and advice.

I'm far from done with this process and I may fall flat on my face trying - but I'm damn sure gonna try!
:cheers:
 
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This is great info., and I'm eager to hear all about it. Unfortunately I'm nowhere near SF bay area, I'm actually on the east coast.

I'm nowhere near married to any of my recipes just yet, and there's always room for improvement in both process and product I think. So far I've been lucky in that the sauces I've made seem to use ingredients which are simple and cheap to source. No need to get carried away to make a good sauce IMO.

Unfortunately I just sent my last few bottles out to random strangers so as soon as I get more bottles in, I'll drop you a line and we'll do a swap. :)
 
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