How to Start Frozen Food Business

Frozen Food Business is popular in cities and urban areas.

If you are looking for business ideas in food industry, frozen food business can be a good one to give a consideration especially if you live in a city. Why do I lay emphasis on living in a city? The reason is very obvious. In villages and rural areas, people have access to green and raw foods. Some of them are local farmers. They produce their vegetables. Some of them grow their own chickens, turkeys and other livestock. Therefore, the idea of starting a frozen food business in a village will not be welcomed. But in cities especially in populous urban areas like Mumbai, Delhi, Bangalore, Hyderabad, Chennai and Ahmadabad just to mention a few, starting a frozen food business in any of these cities will be ideal. Why? It is simply because of the population advantage. In cities, people are busy and they don’t have time to kill and prepare live chickens and turkeys for foods. Some people have time some but they just like cooking what is needed per time. Therefore, frozen foods come handy. People can dash in to frozen food store and pick the size of meat or fish required per time. With this, wastage is prevented or reduced to the barest minimum.

Another reason frozen food business thrives is the lack of stable power supply. If individuals want to stock fish or meat in their freezers, they need electricity. In the absence of regular power supply, people cannot afford to buy and kill live chickens to be stored in the freezers. Otherwise, they stand the risk of having their chickens get spoilt due to lack of electricity to power their freezers. These challenges are what create business opportunity for anyone that wants to start a frozen food business. Frozen food business is a good business idea that guarantees regular flow of income throughout the year. There is always good demand for frozen foods. If you are interested in the business, let’s go to how you can start a frozen food business.

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Step by step guide on how to start a frozen food business

Conduct market research

Frozen food business is wide. There are many things you can sell such as fruits, vegetables, meat, chickens, turkeys, fish and candy etc. You need to conduct a market research to determine what the people in your locality buy. The purpose you are starting a frozen food business is to meet the frozen food needs of your target market by selling to them at a profit. If you sell what they don’t need or buy, you may be the one to consume all your inventories. At best, you can dash them out and this will not be good for your business. Take for instance; there are some people that don’t eat a particular type of meat such as dog or pork. If you sell such meat in that type of locality, people may not patronise you. Generally, there is market for fish, chickens and turkeys. The outcome of your market research will help you determine if there are other items you can add to them such as shrimps. As part of your market research, you need to know the size of the market you want to serve and your competition. If there will be too many competitors, you may decide to move to another area where the competition will not be too stiff. Alternatively, you can look at how you can differentiate your service from your competitors. Offering a better service will attract customers to you. Another way you can attract customers is by ensuring that your products are well preserved. Selling other complementary items such as spices and soup ingredients can also attract customers to you. People like shopping where they can buy their things in one location.

Choose your target market

Having carried out market research, you can now determine who do you want to sell to? The ideal customers for frozen food business include the following:

  1. Individuals: These comprise bachelors who may like preparing their own food instead of going to restaurants to eat. We also have middle class families in this category.
  2. Grocery stores. There are grocery stores that sell frozen foods too. They may not need to buy in a large quantity the same way you will do. Some of these grocery stores depends on people like you to supply them frozen foods.
  3. If you have a good number of restaurants around you, that will be a plus to your frozen food business. You can sell directly to them.

How do you want to sell to your target market? Would you include delivery service? If you do, this will increase your market potential. But you should know how to factor delivery cost into your price.

Look for a good location

You need a good location to succeed in frozen food business. Frozen food business is not the type of business you can locate in a hidden place. You need a place with a good traffic of people. You need a place where people can easily dash in and pick what they need on their way going home. Of course, such place may be somehow expensive but it will pay off at the end of the day. A market where people buy food items and soup ingredients can be a good place to locate a frozen food business. This is just an example. Other places like estates and major bus stops are also okay. For emphasis, if you are starting a frozen food business, choosing a good location is very important.

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Look for suppliers

Having access to reliable suppliers is very key to the success of frozen food business. People will demand for your product daily. It will be very disappointing for customers to get to your shop only to discover that you are out of stock. Nothing can drive customers away from you like this. People will prefer going to a place where they are sure of getting what they want per time. I can use myself as an example here. I once had a bread seller whose shop was very close to where I was staying. Because of the proximity, I usually bought bread from her. If I was coming from work and I liked to buy bread against the following morning, I would not buy anywhere except from her, even though I must have walked pass many other bread sellers. Over time, I became a loyal customer to her. But it happened about two or three times that I would get to her place and behold, she would not be there. You can just imagine how frustrating this would be. Do you know what I did? I just decided within myself that, whether she was there or not, I would be buying bread anywhere I got good bread. And that was what I did.

Therefore, having a reliable source of supplies that can gurantee constant supply of stocks is very important. Not only that. You should buy from suppliers who can offer you good price. The competition in frozen food market can be high. The only way to ensure profitability is for you to be able to control your costs. If you have access to good suppliers who can be selling to you at discounted prices, this can give you cost advantage over your competitors. With this you can afford to give bonus to your loyal customers and this will make them happy.

Obtain Permits

You need to obtain permits before you can start selling frozen foods. Starting frozen foods business without obtaining permits makes your business illegal and vulnerable. This means that government authority can seal up your shop any time. Imagine you just stock your shop and then it is sealed up. You need to pray that there will be electricity throughout the period that you and your customers don’t have access to the shop. If not, all your stocks may become spoilt and that may mark the end of your frozen food business. Therefore, it is a wise decision to obtain necessary permits before you open shop for business.

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Buy equipment

The main equipment you need to start a frozen food business are listed below:

  • Freezers. This is the main equipment you need to keep your items frozen. You can buy new ones but if you don’t have enough money for this, you can buy a fairly used freezer. If you are not buying a new one, it is advisable that you allow a technician to go with you to help you access the state and working condition of the fairly used one you want to buy. This will ensure that you don’t buy a wrong one and you don’t keep spending money on repairs and maintenance of the freezer. How big you want to start will determine the number of freezers you will need to buy.
  • Generators. Access to constant power is a must for anyone that wants to start a frozen food business. In case of power failure, you need generators that have capacity to carry your freezers effectively. If the electricity power is reliable, one generator will be okay for you. But if you depend heavily on generators to power your freezers, it is advisable to have two generators. If any of them breaks down, you can use the second one pending the time it will be repaired.
  • Weighing scale. People sell frozen foods in kilogramme. Therefore, you need a weighing scale that you can use to measure the weight of what your customers are buying.
  • Delivery van. This is not compulsory for someone that is starting a frozen food business in a low key. But if you want to offer home delivery or you have grocery stores and restaurants as customers, then you need a delivery van.
  • Other equipment you will need include table, plank, cutlass and knife. This will help you serve the individuals who might request that you cut the fish, chickens and turkeys for them. This is part of your customer service.

Marketing

I mentioned earlier that you need a good location for your frozen food business. If you locate the business in a good place, you may not need to spend much money or efforts on marketing. A banner or signboard in front of your store may be enough. However, if you want to be involved in home delivery, you may need to put on a website for your frozen food business. You can make it an ecommerce website where people can place order directly from the site. With this, you may need to place adverts on newspapers and internet in order to direct traffics to the website.

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SWOT Analysis of Frozen Food Business

If you like to start a frozen food business, looking through the SWOT analysis below can provide a clue on how you can assess the suitability of the business for you.

Strengths

  • Regular electricity supply
  • Standby generator
  • Good cash flow
  • Good reputation
  • Quality products
  • Frozen foods are consumers’ basic needs
  • Bulk purchase
  • Good location
Weaknesses

  • Insufficient funds
  • Lack of access to credit facility
  • Irregular power supply
  • High overhead costs
  • Poor location
Opportunities

  • Growing demands
  • Large population
  • Insufficient local supplies
  • Low competition
  • High cost of fresh meat
Threats

  • Consumers’ preference
  • Government policy
  • Exchange rate
  • High interest rate
  • Competition
  • New entrants
  • Dwindling disposable income

Strengths/Weaknesses

One of the critical success factors for running a successful frozen food business is the access to regular supply of power. It will be advantageous to have a generator that can power your freezers in case of power outage. Having this in place will ensure that the frozen foods you sell remain fresh at all times. On the contrary, if you don’t have adequate power supply, this will be a major weakness. Your frozen foods may lose their taste. This alone will drive customers away from you. If you depend too much on generators, this means you need to spend too much money on buying fuel and maintenance of generator. These costs added together can erode your profits.

If you have good cash flow, it will find it easy to enjoy overdraft from your bank if the needs arise. You can take the advantage of bulk purchase to lower your costs. For someone who doesn’t have enough cash, you may be running the frozen food business in a scale that will make it uncompetitive. Some of your profits will be spent on transportation each time you buy new stock.

The location of your frozen food business is very important. A good location may cost more but the benefits of citing your business there will outweigh the costs.

Opportunities

Frozen food business thrives in a place where there is a large population of people. Frozen foods are basic human needs. This means that the more the number of people, the larger the market becomes. Generally, there is a growing demand for frozen foods. Unfortunately, our local farmers cannot meet the needs. Conducting a market research will let you determine whether the competition in your environment is low or high. If the competition is low, this will be an opportunity for you to start your frozen food business. But if the competition is high, this could be a threat. Fresh meat seems to be more expensive now. This can be connected to high costs of animal feeds. This is making some people to turn to buying frozen chickens and turkeys as alternatives.

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Threats

The main threat to frozen food business in Nigeria is government policy. In a bid to promote agriculture and self reliance, government does not favour the importation of frozen foods any longer. If there is a ban on importation of frozen foods, then this business becomes very risky to go into. Besides, the cost of imports is astronomically high because of the hike in exchange rates. Prices of imported items are more than double. For people in other countries, you need to monitor the trends of your exchange rate for you to determine whether the costs of importing will still allow the business to be profitable.

Consumers’ preference is another consideration. What is the attitude of the people in your environment towards frozen foods? Some people prefer fresh foods to frozen foods. There are arguments that some frozen foods are more nutritious. Personally, I still prefer fresh foods.

Although frozen foods are basic needs, any drop in disposable income can affect individual’s budget on what to spend. The higher the disposable income, the more money that individuals and families will have to spend. During recession, people tend to cut down their budgets.

If we should borrow a leaf from Porter’s Five Forces Model, you will agree that new entrants can pose a threat to business. New entrants can dilute your market share. If the market you serve is not large enough, you may experience a drop in your revenue by the reason of some of your customers buying from your competitors.

 

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