Launching an Edible Insect Business, Part IV: Go-to-Market
We’ve assessed the potential market size and we’ve seen who’s currently in the market, along with their product lines. Next: based on everything we’ve found so far from our research, what’s our go-to-market strategy?
Product-market fit
In my previous article, I hypothesised that larger insects (likely crickets and/or locusts) would be a good product to sell, for three reasons:
- It is an unfulfilled niche - most insects sold in the UK are small.
- It could increase our price:weight ratio, making them more comparable with substitute products.
- Customers may prefer the more satisfying experience of eating a larger insect.
Of course, when you have a hypothesis, what do you do? Systematically test to prove its validity!
The first reason has already been sufficiently proven from competitor/product research. Before looking into operations (the second reason), we should determine if there would be customer demand for larger insects (the third reason) - that is, if there product-market fit.
There are two approaches I would take:
- Launch a website “selling” them and see how much interest is generated (e.g. through sign-ups or pre-sales). It would be a good idea to have an advertising budget to direct traffic to the website.
- Acquire product (either from an existing farm or raising a few of my own) and attend farmers markets (or similar in-person events) and give out free samples, and ask for feedback.
Assuming there is a positive response to this, I’d move to the next stage.
How do we get the product?
Now we need the supply to fulfil the demand - the operations part of the business. There are two possible approaches:
Buying them from a farm
The simpler option is to buy them. There exist companies who farm insects for non-human consumption purposes already, such as animal feed, and some of these are already raising them to hygience standards suitable for human consumption, as demonstrated by the fact some companies assessed in part 2 utilise this method.
I foresee two potential obstacles to this approach.
The first might be the size. The farms that serve existing market players produce small insects, for reasons mentioned in a previous post, and they might not be willing to change their operations for a start-up without guarantees of large orders (which, for us, come with associated costs and risks). Insects raised for animal feed can be larger though, including crickets up to ~30mm, and locusts up to ~60mm, so they might be a better option.
The second might be food and hygiene standards. Products sold for human consumption do need to be safe, which is of course good, but that does make it more difficult for us, especially given insects are classified as a novel food. As mentioned above, some farms do meet these requirements, so it is possible, but those that produce larger insects for animal feed may not, as it would be an additional cost for no benefit, and therefore we’d have to provide a benefit to them that would outweigh this cost.
To get a more solid understanding of what is possible, I would, after getting up-to-speed with food hygiene standards and other requirements, make contact with companies that raise insects (for any purpose) and see if and how they could provide me with large insects suitable for human consumption.
Raising them ourselves
The alternative is to do it ourselves. I also foresee two potential obstacles to this approach - knowledge and costs.
Compared to traditional farmyard animals (e.g. cows, chickens, pigs), initial research suggests insects are easier to raise. Their diet can consist of lower-quality food scraps, and a cricket is much smaller than a cow, with fewer ethical considerations, so they need less space. Owners of pet lizards sometimes raise their own at home; there are videos available on YouTube describing the process, proving you don’t need a PhD to be successful.
However, there are undoubtably issues that a cursory look would not uncover, especially when trying to produce at scale. An error killing an entire generation is a risk that could have severe consequences to a young business. As such, it would be a great idea to have entomologist with expertise in insect-rearing to join the team.
Next, costs. CAPEX would primarily be the farm, and given current land/property prices, this could be significant - although we could (and would) start small, such as at home in a garden shed. Next there is the equipment - this can be as simply as some plastic boxes and egg cartons, plus some environmental regulation equipment (e.g. heaters), so initial costs could be relatively low, although they would need replacing and upgrading as we scale. Finally, getting some starter insects, but this should not be expensive either.
OPEX. A feed source would have to be established, but potentially this could be sourced from councils as part of their existing food waste programmes. Energy costs could be significant, however; many crickets like to stay at ~30°C, and English weather typically isn’t that hot (although recently it has been!) Fortunately, renewable energy technologies are bringing energy generation behind the meter, and reducing wholesale prices, so this would hopefully reduce (on a per-volume basis) over time.
Which is best?
One of the benefits of raising them ourself would be having complete operational control to test methods to drive down costs. The biggest obstacle to large-scale uptake of entomophagy is the cost associated to the end consumer (see part 3), and vertical integration is one of the best ways to reduce production costs. Developing a system that could automate the process, or utilising AI to provide optimum conditions (feed, temperate, moisture, etc), could be the key to making this economically viable.
Of course, initial costs would be significantly higher, especially to produce at scale - the aquisition of land, equipment, and the ongoing costs of heat and feed. This might require a large loan or an outside investor.
However, this decision is actually a bit of a false dichotomy. Starting a small-scale breeding operation at home is low-cost and low-risk, as is contacting a number of existing companies and asking about what they offer. In reality, I’d do both simultaneously and, considering demand levels and supply capacities, decide which path to pursue.
Other costs
Getting the insects themselves is only one of the costs. Whether we get them from a farm or raise them ourselves, the end product is, well, a bunch of dead insects. These will need to be packaged and shipped, which, at least to start with, would likely be done internally. Inventory storage would need to be considered, as would customer service.
There are regulatory costs too, as mentioned earlier, such as those relating to food hygiene and being a registered food-selling business. These would include both initial application costs plus ongoing compliance costs. And, of course, there are the “typical” business costs, such as incorporation fees and any legal/professional expenditures.
Sales and marketing strategy
We have some initial interest, and we have some product ready to ship - now what? Time to sell!
Given it’s a new, small, niche market, the biggest factor would be raising awareness and piquing curiosity. Any publicity, from traditional media (e.g. a BBC article about entomophagy) to social media (e.g. the TikTok locust challenge), would be good publicity. Also, the more places people could try them in person, the better. Perhaps we could borrow Red Bull’s MINI Cooper idea, but instead of a can of sugar on top, have a giant insect!
As for the actual selling, we’d utilise the same methods we used to measure market interest - online (utilising ads), and in-person events. Longer term, once we had some track record, we’d look at partnerships with other companies, such as bars, restaurants, marts/supermarkets. These can be very competitive, especially for national brands with low margins (e.g. supermarkets), so it might be best to start with local players - one of my local bars in London is Mexican-themed and does serve a cocktail with an insect as part of it, so that could be a good option.
To be continued?
That’s it for now. Maybe I’ll do some of this for real. Let’s see what happens eh?