Cottage Food Business Ideas

by Temiloluwa Alagbe
179 views 8 minutes read
A cottage food business in the process of making cottage food products.

The cottage food business is relatively easy to start. It is also a great way to showcase your homemade products while earning some extra cash so we totally get why you are looking for some cottage food business ideas. Well, thankfully, your search is over because this article provides everything you need to know about the cottage food business. In this article, we detail of some cottage food business ideas and how to get started on them.

What We Covered In This Article

What is a Cottage Food Business?

A cottage food business is a home-based food production business involves selling food products directly to consumers. The term “cottage” is used to describe food products like these to highlight the fact that they are produced in a home. For a cottage food business, the distribution channel goes from the producer directly to the consumer with no involvement from middlemen. This makes the cottage food business cheaper to start than other businesses.

Why Start a Cottage Food Business?

There are many advantages to starting a cottage food business. Some of them include:

  • Low start-up costs
  • Work flexibility
  • Direct interaction with the consumers
  • Eco-friendly and sustainable business operations
  • Room for creative expressions

Best-Selling Cottage Food Products

As discussed earlier, cottage food products are homemade. Of course, the best products for your business to sell are heavily dependent on your area of operations. However, some cottage food products are generally popular and in high demand. Some of them include:

1. Baked products

From cakes to cookies to bread, baked goods are in high demand in many parts of the world. The global demand for baked products is projected to reach a total of $355 billion in 2032, proving the rapidly increasing demand for baked products. The high demand for baked goods makes it a great cottage food product to sell. Baked goods are also one of the cheapest and easiest cottage food products to sell. They are also known to sell out fast.

2. Jams and jellies

Jams and jellies are another high-demand cottage food product that is excellent for starting your cottage food business. With a Compound Annual Growth Rate (CAGR) of 1.5%, jams and jellies are high-demand products that are sure to bring you profit.

3. Candies and chocolates

Because of the affordability of candy, they are a globally popular product. The popularity of chocolates is due to their unique taste. Candies and chocolates also make for great gifts at events and special occasions, thus, increasing their global demand. Candies and chocolates are also great starter products for a cottage food business.

4. Honey

Because a lot of people have become conscious of the level of their sugar intake level, many people have diverted to a healthier option; honey. Honey is used for many purposes. From aiding digestive processes to clearing the human skin, honey is a multifaceted product that people love. Therefore, honey is an in-demand cottage food product that can boost your business’s sales.

5. Dips and spreads

Dips and spreads are one of the easiest cottage food products to make. They are also in demand as they have a CAGR of 5.43% from 2023 – 2029. One of the most profitable dips and spreads to make are gluten-free and vegan options.

Cottage Food Business Laws

Considering the delicacy of the food business, several laws have been put in place to ensure safe consumption for buyers. These laws vary in different countries and states but some of the common ones include:

  • You need a license to operate a cottage food business.
  • Products must be accurately labelled,
  • Prepare food products in a sanitary and hygienic environment.
  • Comply with all the cottage food laws in your place of operation.

Best Countries to Start a Cottage Food Business

1. The United States

The United States is a great country to start an excellent business in because of the growing demand for cottage food products. According to a survey conducted by the Specialty Food Association, over 70% of consumers in the United States purchased cottage food products. Some states even offer incentives like tax breaks, reduced fees, and even loans to create a conducive environment for cottage food business owners. Cottage food businesses like Baked by Melissa, Trader Joe’s, and Whole Foods Market were able to make the most of the business-friendly environment in the United States.

2. Australia

The cottage food industry in Australia is worth over $1 billion. In addition to offering tax deductions, accelerated depreciation on kitchen equipment, and capital gains tax concessions, there are also grants and funding programmes for cottage food businesses in Australia.

i) Small Business Innovation and Research

This funding programme aims to help small businesses grow by providing small business owners with up to $250,000 to improve their services and production processes. Cottage food business owners can apply to this funding programme by submitting an online application. The qualification requirements include your business being Australian-owned, registered in Australia, and with an Australian Business Number (ABN). Your business also needs to be identified as a small business by the Australian Small Business and Enterprise Ombudsman.

ii) Rural and Regional Small Business Innovation Grants

This is another funding programme aimed at small business owners. However, its main focus is on small business owners in rural and regional areas in Australia. Cottage food businesses that are innovative, technically feasible, and with a clear path to commercialization are eligible to apply for this funding programme and the application process is completed online.

3. New Zealand

New Zealand is known for cottage food production indicating a high demand for cottage food products in the country. There are also grant programmes put in place to aid the growth of the cottage food industry in New Zealand.

i) Regional Economic Development (RED) Funding

This funding programme aims to boost economic growth in regional New Zealand. Cottage food businesses can be eligible for this funding as long as they create job opportunities, are located in regional New Zealand, and demonstrate financial viability. You can determine the application process by contacting your local RED office.

ii) New Zealand Trade and Enterprise (NZTE) Growth Grant

This is another grant programme aimed at helping New Zealand businesses grow. This funding programme provides up to $150,000 to New Zealand-based businesses to help them grow and succeed on an international scale. Cottage food businesses need to have an exportation plan to qualify for this grant programme and the application process is completed online.

4. Canada

Canada has a high demand for locally produced food, thus, it is one of the best countries to start a cottage food business. In addition to having a high demand for homemade products, Canada is also known for its business-friendly laws. There are also grants and funding programmes that are effective in the country to aid the growth of businesses in the country:

i) The Agri-Innovation Programme

This funding targets Small and Medium-sized Enterprises (SMEs) to help them improve their business operations by funding the purchase of advanced equipment. The grant programme provides up to $100,000 and cottage food businesses can send in online applications as the sole focus of the funding programme is businesses in the agricultural and agri-food sectors.

ii) The Canadian Youth Business Grants

The Canadian Youth Business Grant programme, as the name implies, provides funding to young entrepreneurs who are beginning their adventure into the business world. Cottage food business owners who are between the age of 18 – 29 and are Canadian citizens with Canadian-based businesses are qualified for this funding. You can send out an application by filling out an online form. The funding programme provides up to $15,000 to businesses that are deemed worthy of the funding.

iii) The Canadian Agricultural and Agri-Food Innovation Programme

This grant programme aims to improve the sustainability of the Canadian agricultural and agri-food sector. As cottage food businesses qualify as a part of the agricultural and agri-food sector, cottage food business owners are eligible for the funding. The programme provides up to $250,000 to businesses in the agricultural sector in Canada and the application process is completed online.

5. The United Kingdom

The United Kingdom is a country filled with resources for cottage food business owners and high demand for homemade products. The country also provides funding to growing businesses to aid their growth, thereby, boosting the nation’s economy.

i) The Start-up Loan Scheme

The start-up loan scheme was put in place by the UK government to aid start-ups. This programme provides up to £25,000 to new businesses in the United Kingdom at a reduced interest rate of 6% per annum. In order to qualify for this loan your business needs to have a viable business plan that demonstrates that you are skilled enough to run a successful business.

ii) The Prince’s Trust Enterprise Programme

This programme provides training and funding to young entrepreneurs in the United Kingdom. The training and funding programme runs for three years and is open for business owners between the ages of 18 – 30. To qualify for this programme, you need a feasible business plan with the potential to create job opportunities and you must also live in the UK.

Cost Estimate for Starting a Cottage Food Business

1. Legal costs

Because you are handling food, there are some licenses and permits that you will need to get before you can legally start a cottage food business. Some of them include:

i) Business license

Every business owner needs to have a business license to legally operate their business. The cost and process of getting a business license depends on the country your business is based. However, we can tell you that the process typically involves filling out an application form at your business’s county clerk’s office and paying a fee of about $100. You can find out the application process for a business license in your country by contacting the country’s agency representative or speaking with a business advisor.

ii) Sales tax permit

Because the cottage food business involves selling food directly to the consumers, you need a sales tax permit. The application process typically involves filling out an application at the state tax department and is usually free. However, as we have stated earlier, there may be registration fees applicable in your business’s country.

iii) Food handler’s permit

Because you will be handling food for the general public, you will need a food handler’s permit. Getting one involves taking some food safety courses and passing a test. The cost of getting a food handler’s permit is typically within the range of $100.

iv) Home kitchen inspection

Your workspace needs to be inspected by your local health department. This usually involves scheduling an appointment with your local health department and having a local health inspector review your checking, ensuring that it meets up with the food safety regulations of the locality. This process also costs about $100.

Please note that this is simply an overview of the legal costs of starting a cottage food business. You may need more licenses and permits, depending on your locality. The cost of getting the above-listed licenses also varies according to your locality.

2. Equipment and ingredient costs

No food business can exist without ingredients, and cooking equipment makes your cooking process faster and easier, For this reason, equipment and ingredient costs are inevitable for a cottage food business. Depending on the size, capacity, and features of the equipment you choose to buy, equipment costs vary from $500 – $3,000. As ingredients are a recurring expense, the cost of getting ingredients for your cottage food business ranges from $150 – $500 monthly.

3. Branding and packaging costs

The amount of money spent on branding and packaging depends on your tastes. However, the average cost of branding and packaging your cottage food products is within the range of $500.

4. Insurance costs

Regardless of the type of business you run, you need to protect your business from risks and this can be achieved by getting insurance. Insurance costs usually range from $300 – $1,000 annually, depending on your average income.

5. Promotion and marketing costs

Promotion and marketing costs depend heavily on your budget. You may start a small-scale cottage food business without spending any money on promoting the business (as long as you promote it yourself, of course). You can also spend a great deal of money on promotional and marketing strategies. One thing we can tell you for sure is that money spent on advertisement and marketing is always worth it. Hence, we recommend that you separate a part of your business capital for promotion and marketing strategies.

Cottage Food Business Ideas

1. Cookie Business

You can start a successful cottage food business by selling cookies in different flavours, shapes, and sizes. The affordability and convenience of cookies make them a go-to snack for most people. In addition to being in demand, cookies are easy to make and are a low-risk investment with a high profit margin.

2. Cupcake Business

Selling homemade cupcakes is a sound investment because cupcakes are a staple in most parts of the world. Cupcakes allow you to showcase your creative side by putting different drawings and designs on the snacks. They are also relatively easy to make and are also a low-risk investment.

3. Candy Business

Candy is popular with children and children constitute a good part of the population, hence, starting a candy business can be very profitable. Although candy can be difficult to make, the candy business is a low-risk one with a relatively high profit margin.

4. Gluten-free Products Business

Gluten-free products have seen an increase in global demand. Because a lot of people have become conscious of what’s in their diets, gluten-free options have become very popular. Although making gluten-free products is a bit more complex than making regular ones, the profit margin of the gluten-free business makes it worth the trouble.

5. Flavoured Bread Business

Flavoured bread has a growing demand because of the uniqueness and variety it provides. Bread is a staple in nearly every home, thus, offering a variety of flavoured bread will be welcomed by the public. The flavoured bread business is also a low-risk investment with a high profit margin.

6. Herbal Tea Blends Business

By selling a variety of homegrown herbal tea blends, you can make a lot of profit. Besides its numerous health benefits, tea is used to entertain guests which makes tea blends an in-demand product. The tea business is a low-risk, high-profit investment as the start-up costs are relatively and the product is in high demand.

7. Chocolate Business

A chocolate business is a profitable cottage food business idea because chocolates are also in demand. The rich and flavourful taste of chocolates makes them a desired snack and they are also great gift items. Starting a chocolate business is a financially sound decision because along with being a high-profit investment, chocolates are also relatively easy to make.

8. Cake Pops Business

Cake pops are an interesting dessert option that is in demand around the world. They are basically lollipops made with cake. What’s not to love, right? This is exactly what makes the cake pops business a lucrative business venture. Cake pops are also easy to make and selling them will earn you substantial profit.

9. Honey and Honey Products Business

Because of the numerous health benefits of honey, honey has become an increasingly popular product around the globe. Selling honey and/or products made with honey is a profitable cottage food business idea as honey is a natural sweeter which makes it preferred over artificial sweeteners.

10. Dried Pasta Business

The dried pasta business is a low start-up business with a high profit margin. Because cooking pasta is a fast and easy process, pasta has become a staple food in many homes, thus, making dried pasta is a high-profit business idea. The dried pasta business is also filled with many niches that make it possible for you to express your creativity in different ways.

Small Cottage Food Business Ideas

This is a list of cottage food products that are easy to make and also in high demand. You can easily start these businesses at home and not a lot of complex machinery is needed.

1. Doughnut Business

Doughnuts are easy-to-make snacks that are in high demand on a global scale. They are staple desserts in many parts of the world and this contributes to the increasing demand the cottage food product experiences. In essence, the doughnut business is a highly profitable cottage food business idea because it is easy to make and in demand. The snack also gives room for the expression of your creative spirit.

2. Homemade Beverages Business

You can make a substantial profit by selling beverages made from natural ingredients. Some of these relaxing beverages include lemonade and refreshing smoothies. A relaxing cup of lemonade or a smoothie goes a long way in easing the stress that comes with daily life activities. Not to mention, they are affordable too. This is why a homemade beverage business is a highly lucrative cottage food business idea.

3. Seed-Based Snacks Business

Mixing dried seeds with natural sweeteners makes for a delicious, healthy, and convenient snack. For this reason, making a business out of this is a business-savvy decision. As mentioned earlier, a lot of people are conscious of what is in their diets and consequently, they will prefer a nice and healthy snack over a sugar-filled one.

4. Flavoured Popcorn Business

You can also earn a worthy income from selling flavoured popcorn in catchy packs. Popcorn is a globally popular snack and therefore, mixing things up a bit by producing it in different flavours will certainly appeal to the public. The popcorn business is also a relatively low-risk, high-profit business investment.

5. Pastry Business

Freshly baked products like croissants and scones, accompanied with a cup of tea or coffee, are a nice breakfast option. Making fresh and delicious pastries for commuters is an excellent business idea because of its profitability. Pastries are also easy to make and require no complex machinery in their production process. Therefore, the pastry business is a low-cost business with a high-profit margin.

6. Granola Bars Business

The profitability of the granola bar business leads back to the growing demand for healthy snacks. In addition to being energy boosts, granola bars are also delicious and easy to move around, making them the perfect mid-day snack. Because the process of making granola bars is relatively simple, the granola bar business is a low-cost one with the potential to make you a large profit.

7. Homemade Sauces and Dips Business

Making delicious homemade sauces like marinara, salsa, barbecue sauce, and unique dips like guacamole and hummus, is a creative way to earn money. The best way to make a profit from a homemade sauces and dips business is to ensure all your recipes are unique. Give your products a special flavour and watch your sales soar through the roof.

8. Ice Cream Business

Ice cream is a desert staple in many parts of the world, thus, creating a high demand for the product. Selling ice cream in exciting and unique flavours can be a very profitable low-cost business idea as the process of making ice cream is a simple one.

9. Fruit snacks Business

Due to the increasing demand for healthy snack options, fruit snacks are also a profitable cottage food business idea. By mixing cutting up fruits into bite-sized pieces and mixing them with natural sweeteners, you can produce delicious fruit snacks for sale. Because the process of making fruit snacks is not complex, the fruit snacks business is a low-cost, high-profit one.

10. Preserved Pickles Business

Pickles are found in nearly every home’s refrigerator and as such, it is safe to say that they are a staple cooking ingredient. The versatility of pickles is what makes the product in demand. Pickles can be used as a snack, in sandwiches, and to add flavour to many dishes. It’s no surprise they are found in many homes. Along with being in demand, preserved pickles are also easy to make and hence, the preserved pickles business is a profitable low-cost cottage food business idea.

How To Start a Cottage Food Business

Starting a cottage food business is a relatively simple process because the business does not require many skilled personnel and is easy to get licensed.

1. Conduct market research

Because there are a variety of in-demand cottage food products, choosing the best one for your business can be a tricky task. The demand for a specific cottage food product may be high on a global scale but it may be low in your locality. For this reason, it is important to conduct thorough market research before selecting a product for your cottage food business. Understanding the market trends and general preferences of your target market is essential for starting a successful cottage food business.

2. Decide on a product

After thorough market research, you will have a list of some of the most popular cottage food products in the locality. Select the product that works best for you and work on modifying the usual recipe to give it your own taste. Once you have made the cottage food product your own, you can now work towards starting a business with it.

3. Draft a business plan

The business plan for a cottage food business may not be as complex as the ones for other businesses but it is important all the same. Without a plan, your business is just an idea floating in your head and that is a terrible way to run a business. You need to plan every detail of your business by creating a foolproof business plan with solutions to every problem your business could possibly encounter.

4. Research local cottage food laws

There are various laws in place to ensure consumer safety. The food laws guiding the operation of cottage food businesses differ in every city. Therefore, before starting a cottage food business, you ought to ensure that your kitchen meets all the food safety standards of your locality.

5. Obtain required licensing

Once you are sure that your kitchen is on par with your locality’s safety standard, you should make the necessary moves to ensure your business gets the licensing it needs. Because licensing is proof that your workspace and practices are up to standard, it is not enough to simply research your locality’s safety rules and follow them. You need to get government approval that the cottage food products produced in your kitchen are safe for human consumption.

6. Develop a pricing strategy

As soon as your business receives government approval, you are ready to begin operations and the first step is to figure out your prices. After purchasing equipment and ingredients, you need to develop a pricing strategy that will earn you some profit while being perfectly reasonable for consumers. To accomplish this, you need to research the prices of your competitors and figure out price options that will best them while making a profit for your business.

7. Implement promotional strategies

After creating a reasonable price list, your business is ready to launch. In other words, you are ready to begin implementing promotional and marketing strategies. You can run online ads or talk to your family, friends, and neighbours. Whatever marketing and promotional strategies you choose to implement, ensure they resonate well with your target market and remember, there is no such thing as too much publicity.

Tips For Starting a Successful Cottage Food Business

1. Be Unique

An important part of the success of a cottage food business is uniqueness. Create recipes that cannot be found anywhere else and yet are exciting and addictive, This is why flavoured cottage food products are in higher demand than regular ones. Whatever cottage food product you have chosen to sell, give it a distinct taste that can only be found in your product. Of course, to accomplish this you will need to research ingredients and ingredient compatibility and even make a few test dishes.

2. Give your business time to grow

Like every other business, your cottage food business needs time to grow. Don’t be disappointed if your customer base is not as full as you expected it to be. Keep creating unique recipes and specialties and the popularity of your cottage food business will increase gradually.

3. Don’t compromise on quality

Maintaining high-quality standards is important for the growth of your business. Even after you have created a successful cottage food business for yourself, you must not let your quality standards drop because that is the quickest way to ruin all your hard work. Use only fresh ingredients and ensure that your food products are kept fresh and ready for immediate consumption.

4. Provide excellent customer service

The disposition of your sales representative is a key determinant of whether a customer returns or not. Serve customers with a pleasant attitude and pay attention to whatever complaints they may have about your business. Excellent customer service because you can sell the best products and still have a low sales output due to poor customer service. As it is important to keep product standards high, it is equally important to keep customer service standards high too.

5. Build relationships with stores within your locality

Networking with convenience and grocery store owners expands your product distribution channel. Getting your products sold in different stores within the locality increases their popularity, and soon enough, more people will begin to come to the source which is your cottage food business. This is a marketing strategy that can significantly increase your customer base and as a result, will increase your sales output.

Conclusion

Cottage food products are in high demand globally and as such, starting a cottage food business can be very profitable. The popularity of various cottage food products varies from place to place and some continents like Africa and Asia have very different in-demand cottage food products. Finding out what cottage food products sell the most in your preferred locality and creating your own uniqueness to these products will make your products the cottage food products that are in high demand. The cottage business can be tricky to figure out but thankfully, because you have diligently completed this article, it’ll be a cinch for you.

Image Credits: All images on this website are sources from Getty Images, Pexels and Unsplash.

You may also like

@2021-2023 Biztraction Consulting | Fixing business friction.