How to Start a Spice Business
Do you enjoy making enticing dishes using a blend of spices and herbs? Do you enjoy finding the perfect blend of spices to create memorable, tasty dishes? If this resonates with you, then starting a spice business is an ideal opportunity for you.
Spice adds flavor or depth to otherwise bland food—and what better word to describe your business than spice, a word meaning flavor and depth?
A spice business creates single spices, herbs, or spice blends for sale. The business sells the products online, in retail locations, or at markets. In addition, spice businesses create blends and seasonings for specific brands—such as for a restaurant to craft a signature flavor.
A small, home-run spice business needs equipment, spices, and ingredients to formulate and package its products. A home-operated spice business is also responsible for product labeling and shipping.
As the spice business grows, the spice business may delegate some operations elsewhere. For instance, larger spice businesses may order pre-blended spices in bulk from a manufacturer—the manufacturer grinds, blends, bottles, labels, and ships the spices.
Spices, herbs, and seasonings are made from all kinds of ingredients, capturing flavors from all over the world. As such, spices vary in value, and manufacturing and reselling prices fluctuate. For example, saffron is one of the most expensive spices, costing approximately $20 for 0.06 oz.
Spice businesses follow along similarly to the seasoning, sauce, and condiment production industry—an industry that has seen consistent growth from 2015 – 2022. The seasoning, sauce, and condiment production industry earned seasoning, such and condiment production industry earned $29.2 billion in 2022. In fact, from 2017 – 2022, this sector grew by an average of 3.4% each year.
Additionally, the number of seasoning, sauce, and condiment production businesses increased between 2017 – 2022 by an average of 3.7% each year. As of 2022, there were 4,148 businesses in this industry.
Although the industry has seen consistent growth year-to-year, here are some trends to be aware of:
Low barrier to entry. Spice businesses have a low barrier to entry, meaning there are few obstacles to getting the business started. For instance, when you create a spice business, you don’t need a degree or a significant investment of cash, and stringent regulations do not limit you. Although these facts make it easier to get started, it also is easy for others and increases industry competition.
Competition. Competition is high in the spice-making industry. The low barrier to entry plus the growing market (both in revenue and number of businesses) makes the perfect environment for businesses to thrive. However, competition can make it harder for small or new spice businesses to expand and beat out existing brands.
Economic influence. Although some spices will always sit in home cooks’ cupboards, some spices and herbs are considered specialty items and extras. As a result, spice businesses do well during a strong economy, low unemployment, and high consumer spending because consumers are more willing to spend money on extra items.
The target market for spice businesses includes individual consumers and other businesses.
Individuals. Individual consumers may be home cooks or those looking to buy gifts for cooks in their lives. Spices are also occasionally used for crafting, so the crafting market may also be interested in your products.
Businesses. Other businesses that your spice business appeals to include restaurants and retailers. For example, restaurants may need a spice business to supply them with seasoning products. Similarly, retailers selling cookware or food products may be interested in a spice inventory and also need a supplier.
Checklist for Starting a Spice Business
While the prospect of owning and operating a small business is exciting, starting any kind of new venture involves a lot of steps and planning. After all, success doesn’t happen overnight – it takes time, effort, and drive.
To help get you started on the path to becoming a successful business owner, look at this checklist that outlines the most common steps to start a spice business.
Step 1: Write a Business Plan
Writing a business plan for a spice business is one of the most important steps to getting your business off the ground. A well-written business plan can help you determine whether or not your idea is feasible, research the industry, analyze the strengths and weaknesses of the competition, and to obtain financing.
A business plan also serves as roadmap that can be revisited over time as needed, allowing you to measure short-term and long-term goals against key milestones.
Related: How to write a business plan
Step 2: Name the Business
Choosing a name for a spice business can be challenging and a bit overwhelming for a lot of people.
It’s not only important to pick something that will help make your business memorable and appealing to potential customers, but it has to be available to legally use.
Related: Tips on naming a business
Step 3: Form a Business Entity
A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the 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.
When deciding on which business entity is best for a spice business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 4: Select Your Location
The key to success for a spice business is finding a suitable location to make your spices.
Some spice businesses operate out of a spare room and bottle themselves or outsource production to a commercial facility, while others have a dedicated manufacturing facility and storefront. Some spice businesses will need to register with the Food and Drug Administration (FDA). In addition, each state has different requirements, so you will want to first check with your local health department to comply with any food production requirements and recurring health inspections.
If starting out selling in small quantities and mostly selling locally, most spice businesses fall under state cottage food laws, which have far fewer requirements than larger businesses.
Step 5: Apply for Business Licenses and Permits
In addition to local food production facility requirements, a spice business may also be under regulations from the Food and Drug Administration (FDA), depending on the ingredients. In general, there aren’t labeling requirements as long as there isn’t an allergen or any health claims.
In addition to spice-related requirements, there may be general business registrations required. Every state is different, however a local business license, sales tax permit, and Employer Identification Number are commonly required.
Step 6: Finalize Production and Packaging
After getting licensing in order, it’s time to finalize the production of spices and order equipment, and open accounts with suppliers. Most suppliers will want to see proof that the business exists before giving out pricing, so they may ask for a business license or sales tax number.
Eye catching packaging is critical to encouraging customers to grab your product off the shelf, so make sure your spices are in a professional-looking package.
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 spice business is another. Fortunately, the cost to start a new spice business can be relatively low; however, funding to start a business can be difficult. Banks are typically going to want the borrower to have good credit and be able to invest 15-25% of their money towards the total start-up costs.
Step 8: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 9: Get your Marketing Plan in Place
Running a successful business starts with getting the word out to potential customers. Developing an overall marketing strategy that is current and appropriate for your target audience is essential, and there are several options to get the message across.
If you plan to market locally, setting up at a farmer’s market can be an very effective and low-cost way to get in front of a lot of people. Don’t forget to have lots of business cards and brochures to hand out! Additionally, contacting local retail stores to carry your product is another effective way to generate sales. To pull in more customers, offering sampling on-site will encourage customers to try your spices.
Setting up an online store or selling on marketplaces like Amazon is a path for many spice business owners, but it’s important to get people to notice. Online marketing is a great way to generate brand awareness and sales, but with an almost never-ending array of options, it can be overwhelming to decide where to start.
Social media is one option to reach targeted audiences on platforms such as Instagram or Twitter will introduce potential customers to your products, as is budgeting to place ads on search engines.
Other options include attending trade shows and local events related to cooking will provide an excellent opportunity to educate potential buyers about your products. You could also consider working with local restaurants to feature your spices in new dishes.
Whatever method you choose to advertise your new spice business, it’s important to make sure that the message is clear and concise so as to attract customers!
Step 10: Get Business Insurance
If you’re running a spice business, or any business for that matter, it’s essential to protect yourself and your livelihood by getting the right insurance coverage.
General liability insurance can be used to protect yourself from bodily injury due to your business operations, while product liability insurance protects a business from claims that arise out of products that harm its customers.
Property and inventory insurance provides protection for buildings, equipment, and inventory due to damages from theft or natural disasters.
If you are running a business out of your home, be sure to check your policy as most won’t cover damages resulting from any business activity.
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Common Questions When Starting a Spice Business
How much does it cost to start a spice business?
Part of starting a spice business includes setting an initial budget. Starting a spice making business is relatively inexpensive but has several expenses to budget for.
Business formation costs. Business formation costs include items such as a business license, permits, and insurance coverage. Each state regulates the sale of business licenses and permits, so check your state’s website for small businesses to determine the price in your state. In most states, it costs less than $1,000.
Insurance coverage protects your business from losses and liabilities that cause financial hardships. Insurance rates vary based on coverage limits and risk, so contact an insurance agent or company for a quote.
Ingredients. Arguably, one of your largest ongoing expenses will be your ingredients. Initially, you may need to purchase a variety of spices to make your spice blends. Spices can be bought from wholesale vendors or bulk manufacturers. But, these vendors typically require a minimum order. Therefore, you may need to budget several thousand dollars initially to get a base amount of ingredients.
The higher the quantity, usually the better the price per pound. For instance, a pound of cinnamon can range from $11 to over $30 per pound, depending on how much you order. Similarly, garlic powder ranges from $5 – $16 per pound.
Equipment. Some equipment you will need include items such as:
– Packaging machine: $50 – $10,000+
– Spice grinder: $15 – $40
– Food scale: $10 – $75
– Jars: $0.80 each when ordered in bulk
Location costs. When operating out of your home, you may not have location costs. But with commercial space (such as a commercial kitchen), you will need to account for rent and utilities.
You can lease commercial kitchens for monthly or yearly use, or you can lease commercial space hourly. The rental expense for commercial kitchen space ranges from $500 – $2,000 for a monthly lease or around $15 for an hourly rental basis.
Employee wages. Employee wages can become another sizable business expense but can certainly be worthwhile since employees add significantly to your business’s growth. For example, an office assistant, a packer, and a customer service representative add to your team and earn an average of $16 per hour.
How profitable is a spice business?
Profit margins vary from product to product, but generally, a 10% profit margin is average. In most cases, food products have an even higher profit margin, sometimes up to 40% – 50%. So, for example, if a jar of spice costs $10 to make, you would need to sell the jar for at least $11 to earn a 10% profit or $15 for a 50% profit margin.
So, let’s say you settle in the middle and operate with a 30% profit margin. If you sell 1,000 jars with a 30% markup, your spice company stands to earn a profit of $3,000.
Are there grants to start a spice business?
It’s extremely rare to find a grant to start a spice business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.
What skills are needed to run a spice business?
Each business requires a different skill set to run smoothly and efficiently. Here are some of the essential skills needed to run a spice business:
An understanding of spice and flavor. First and foremost, an understanding of flavors and spices helps you create unforgettable spice blends that have your customers returning time and again for another jar. Being an expert in flavors and spices will also help you choose quality ingredients.
Sales and marketing. Sales and marketing are skills that help you sell your product effectively. Being versed in sales tactics and marketing plans can get your business to where you want it to be regarding revenue and sales.
Product management. Product management involves everything from initial product planning to final production and sales performance. Project management skills help you plan your project so that you have an established budget, an idea of the needed ingredients, and an ability to assess sales to inform your next round of production.
Health and safety. If you operate out of commercial space to make your spices and spice blends, you may need a permit from the FDA. Knowing about health regulations and safe labeling practices is also important to avoid causing unintentional harm to your customers.
Employee management. As your business expands, it may be helpful to hire employees. Therefore, having team management skills ensures that your business grows in the direction you envision and keeps your team operating efficiently.
The low barrier to entry makes starting a spice business an accessible business to start—but one with high ongoing costs and heavy competition. Regardless, a spice business can be rewarding, especially when you have a taste and passion for spices, herbs, and seasonings.