How to Start a Soft Drink Business

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Quick Reference

Soft drinks are popular around the world.  Major brands dominate the market, but small business owners have created new flavors that have been introduced to the market.  If you are looking for a business opportunity and think you have a creative flair when it comes to taste, a soft drink business could be an excellent opportunity for you.

Business Overview

A soft drink business creates new flavors of soft drinks, has them manufactured, and sells them to grocery stores and other retailers for resale.  Some sell their products online.

Industry Summary

According to Grandview Research, the soft drink market was $221.6 billion as of 2020 and is expected to grow at an average annual rate of 4.7% through 2028 to reach $320.1 billion.

Industry Trends

Soft drink trends are moving toward fewer preservatives and chemicals with eco-friendly packaging.  Flavors are more natural and low in calories and sugar.  The desire for convenience is prompting more sales of single-serve soft drinks that can be picked up and consumed on the go.

Target Market

Your target market will be those looking for alternative soft drink brands.

Skills, Experience, and Education Useful in Running a Soft Drink Business

There are several specific skills that you will need to open a soft drink business.

  • Knowledge.  You need to know how to make soft drinks and be able to come up with unique flavors.
  • Business knowledge and experience.  You will need to have at least some basic understanding of marketing, finance/accounting, and human resources.
  • People skills. You’ll need to be able to build rapport with your customers so that you retain them as customers and keep them coming back.

Steps to Starting a Soft Drink Business

Step 1: Write your Business Plan

After coming up with the idea, the next step in starting your soft drink business should be to write a business plan.  The business plan will make you focus on some important aspects of the overall business strategy, such as who is the primary demographic that is being targeted, how you plan to reach them, projecting sales and expenses, your value proposition to use for marketing and more. You’ll also need to do some research to calculate exactly what your start-up expenses will be and what your ongoing expenses will be.

Not only will a bank require you to have a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you to think through all the aspects of the business and then serves as a guide as you begin.

Related:
How to write a business plan
Free sample business plans

Step 2: Name the Business

Finding the perfect soft drink business name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, but it also has to be available to use. You can check your state’s website to see if the name is available and register your name.  Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do.

Step 3: Form a Business Entity

A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include a sole proprietorship, partnership, corporation, and Limited Liability Company (LLC).  Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.

RelatedComparison of Business Entities

Step 4: Select your Location

Many new soft drink companies start their business from their home and focus on their local market. Instead of investing the significant upfront costs of building out the facilities, equipment, bottling line, and health requirements, you can work with a contract beverage manufacturer or copacker create the beverage.

Related: Choosing a business location

Step 5: Apply for Business Licenses and Permits

Each state is different on the licensing required for consumable products. In most cases, employees will be required to have food sanitization permits, and the product will need to be created in a facility that is approved and inspected regularly by the local health department. Many states have lesser food safety requirements for businesses selling low volumes of products under the state’s cottage food law.

In addition, there also be general business license requirements such as a local business license, sales tax permit, and an Employer Identification Number.

Related: Common business licenses, permits, and registrations by state

Step 6: Source Suppliers

Suppliers will be needed for the raw materials such as sweeteners, fruit juices, etc. While purchasing from local markets may be sufficient to start, the costs and hassles of obtaining these ingredients often become unsustainable if the business grows.

Step 7: Find Financing

Coming up with a good business idea and having the skills to run it are one thing but getting the funding to start a soft drink business is another.  In order to get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs.

Related: Finding the money to start a business

Step 8: Open a Business Bank Account

Keeping your business and personal finances in separate business bank and credit card accounts makes it easier to track the income and expenses of the business.

Step 9: Get your Marketing Plan in Place

With the level of competition in the beverage industry, a solid marketing plan is a must to ensure your product can fly off of the shelves.

Common marketing techniques for a soft drink business include social media marketing and online advertising. However, most of your sales will come from developing relationships with distributors such as grocery and convenience stores. Many retailers are encouraged to sell locally made products in their stores, so don’t be afraid to ask.

Related: Low-cost ideas to market a new business

Step 10: Get Insurance

A soft drink business needs several types of insurance for full coverage:

General liability insurance can help protect you from third-party claims of bodily injury and property damage.

Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working.

Insurance policies will vary. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.

Related: Common types of insurance a business may need

Step 11: Hiring Employees

You may need employees to help you run your soft drink business.  Make sure that you select people with appropriate experience and training.

In addition to salary costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.

Related: Hiring your first employee

Step 12: Set up an Accounting System

Setting up an accounting system for your soft drink beverage company is critical to the long-term success of your business.

Staying on top of taxes not only keeps the business out of trouble with the government but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.

Related: Setting up accounting for your business

Things to Consider Before Starting a Soft Drink Business

Running a soft drink business, or any business will have its challenges.  You need to be prepared and make sure that you know what you’re getting into.

Marketing and acquiring customers will be your biggest challenge and an ongoing expense.  You will spend a lot of time working with distributors and getting them to buy your products.

You will face massive competition in the soft drink market, so your products have to be superior and appeal to a large number of people.  Be careful in only getting feedback from friends and family as they are appreciative of free product and often don’t want to hurt your feelings recipes.

There is a lot of advice regarding getting a patent from the United States Patent and Trademark Office for your recipe as it prevents anyone else from using it. Keep in mind that a patent is very expensive ($10,000 – $50,000), will probably take two years to get, and you have to write out your recipe. A better method is to keep the formula a trade secret, which is how Coca-Cola protected their recipe, which costs nothing; however, if someone else stumbles upon your intellectual property, they can’t be stopped from using it.

Talk to other entrepreneurs for tips on starting a business and do your homework to determine costs.  Research other soft drink businesses to see what they offer and what prices they charge.

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