If you want to learn how to start a potato chip company, ignore the “basics”.
By basics, I mean the “basics” that most “how to start a potato chip company” articles cover such as getting a bank loan and starting an LLC. You don’t want to do that. Instead, you want to focus on launching as soon as possible and make money before you do anything else.
Let’s talk about this…
Is Potato Chips Business Profitable?
If you’re new to the potato chips business, you’re probably worried if it’s even a profitable business to spend your time, energy, and resources on.
But unless you’ve been living under a rock, you’ve probably bought tons of potato chips from billion dollar brands before. For example, Lays and Pringles. When you see companies make obscene amounts of money by essentially selling 1 type of product to millions of people, you can safely assume that category is profitable.
The rest is going to come down to how you deal with your unit economics. If you don’t pay attention and react to your numbers, you will fail. However, if you’re smart when it comes to margins, pricing, shipping, cash flow, and acquisition costs… you can succeed.
Tons of new DTC brands are starting their potato chips brands… so why not you?
How Much Does It Cost To Start A Potato Chip Company?
There is no clear cut answer when it comes to the exact costs of starting a potato chip company.
That’s because the 2 factors you have to deal with can vary widely…
1/ Cost Per Unit
Cost per unit is the individual cost per bag of potato chips. If you want higher quality ingredients, it’s going to cost more per bag. If you want eco-friendly packaging, it’s going to cost more. If you want to start with less bags, each individual bag will cost more.
Minimums are the minimum amount of units you need to buy to get started with a manufacturer. Some manufacturers will let you start with 1,000 bags. Others won’t let you work with them unless you order 20,000 bags.
This all means your cost to start a potato chip company will come down to your preferences.
With that said, I suggest starting with a budget of $10,000-$25,000 to start.
Is it possible to start with less? With the right manufacturer, sure. It’s also possible that you may have to start with more, especially if you’re trying to build a premium priced potato chip product.
Potato Chips Business Plan: Build
The one problem potato chips brands have, especially at the beginning of their journeys, is that they’re not really that well optimized for advertising. It doesn’t mean they can’t or shouldn’t, but in a perfect world, you would start with organic traffic.
Which is why I suggest you take 6 months to build an initial “pre-launch” audience.
To do this, you would pick a channel and then publish content on the channel. For a potato chips business, this might be either a blog, Youtube, or TikTok. The type of content will consist of recipes, lifestyle, and a hint of branded content in the mix.
What this will do is help you start marketing your brand way before you ever launch.
So by the time you do launch, you have a group of people who will already know, like, and trust you. It also eliminates customer acquisition costs, which will be critical to your bottom line and will start the “profitability flywheel” much sooner and much more profitable.
Potato Chips Business Plan: Launch
One month before your official launch, you’ll want to transition from having just a social audience to having an email newsletter of people who are waiting to buy your chips.
You do this by setting up an opt-in page where people can give their email address in exchange to be notified when you launch your new brand.
This will be your most profitable customer segment, so don’t skimp on it.
Once you launch, you want to squeeze every ounce of juice from your audience while minimizing overall risk by launching in 3 different rounds rather than 1 huge launch. By this, I mean you want to sell your 1st batch of chips first, get customer feedback, improve your product (if needed), then order your 2nd batch. Then repeat the process with the 3rd batch.
After the 3rd batch, you would keep your store open permanently. If you’re wondering between Clickfunnels vs Shopify for this, choose Shopify.
The reason you want to do this is that it forces you to slow down and focus on product and profitability. It also reduces the huge amount of stress you’ll inevitably experience.
At this stage, you’re not looking to scale.
Instead, you’re looking to make sure that the business and your idea will work.
Potato Chips Business Plan: Scale
Once you’re ready to scale, there are a few options you can play with.
The most obvious thing you can do is start using paid ads to make more sales, faster. This is key to any potato chip business. Just don’t overdo it. Always focus on profitability. This means you’ll also need an ecommerce email marketing funnel so that your advertising is profitable.
The smartest thing you can do after that is to look at both online and offline retail.
Marketplaces would be the online version of retail.
The most popular example of an online marketplace is Amazon. Once you’re ready to scale, it’s going to be important to do well on Amazon because it’s the biggest ecommerce search engine in the world. You might not be able to keep customer data, but the revenue earned through Amazon can help improve your entire businesses’ unit economics and overall viability.
Offline retail is arguably even more important than online retail.
That’s because offline retail has a stable CAC. All you have to do is focus on getting in as many stores as possible. This is easier said than done, but it’s also the proven model for all new DTC food & beverage brands. Build a solid online business, but as soon as you can leverage it to go into physical retail, the better.