July 10, 2017

The Cottage Food Industry – Today & Tomorrow (PODCAST)

David Crabill of Forrager.com, an expert on home-based food businesses, and I talk about where the cottage food industry in the US stands today and where he thinks it’ll go in the future.

David Crabill is the co-founder of Forrager.com, a website solely focused on the cottage food industry, which is a term used to describe home food businesses. Since the cottage food industry was created via a collection of state laws, there is no official government organization to help organize or improve it. Forrager seeks to organize and improve the resources available for this growing group of small, independent cooks.

On the culinary front, David has been making chocolate chip cookies since he was eight years old. While trying to start his cookie business in 2011, he learned about the cottage food industry and created Forrager to help others get their home food businesses off the ground. When he’s not developing websites, perfecting recipes, or answering cottage food questions, you can find him solving puzzles, traveling, and speaking at a Toastmasters meeting.

TRANSCRIPT:
Jennifer: So, welcome, David. Thank you for being on today.

David: Oh, thank you so much for having me.

Jennifer: So, we’re talking about cottage food and the cottage food industry today, but just to, again, lay the foundation, let’s start with basic terminology and basically, what does this phrase, cottage food, actually mean?

David: Cottage food is an interesting term because there’s no technical definition for it. It’s just the term that people have started using over time. But generally, when I use the term cottage food, I’m referring to somebody’s homemade food that they’re selling. So, that’s pretty much.

Jennifer: Okay. So, the home-based food producers, basically.

David: Yeah. I mean, there’s a commercial food space where people are selling food that’s made out of a commercial kitchen and then the cottage food is basically for people who are selling out of a home kitchen.

Jennifer: Okay. Now, within the cottage food industry, can you talk a little bit about how there is not federal oversight of this law? We’re talking here in the U.S., I just want to make that clear, for folks who are talking in the U.S. today. Other countries might have very different rules and regulations when it comes to home-based food production for sale. So, there’s no federal oversight in terms of cottage food, correct David?

David: Right. Many people don’t know, but the Food and Drug Association, the FDA, produces a food code, but states adopt whatever laws they want when it comes to food loss.

Jennifer: So, for this cottage food industry, it’s a state by state basis, right?

David: Right. So, in the food code that the FDA publishes, there actually is no allowance for selling homemade food. It’s illegal in that document. So, states have to override the food code that they adopt and specifically allow these homemade food sales on a state by state basis.

Jennifer: Can you share with us at a high level like what you’ve seen changed in the cottage food landscape in the last couple of years? Because as you and I have talked prior to today’s interview, you know, you’ve mentioned that there’s been a lot of changes in cottage food over the last probably five or seven years.

David: Right, and it keeps evolving. I’d say that the cottage food industry started to develop about a decade ago when the economy went downhill. A lot of states started to enact these cottage food laws to enable homemade food sales to actually allow people in their community to use something that they had, their own kitchen, and make some money by selling food. So, that’s what got the ball rolling, I’d say, probably the recession in the United States and since that time, most states have enacted a cottage food law to allow some form of homemade food sales, although those laws run a gamut. There’s all different types of ways that states allow the law.

Jennifer: So, within that, what have some of the most liberal things that you’ve seen states allow and then the counterpoint, what are some more would be considered conservative or restrictions that are placed on cottage food entrepreneurs?

David: Right. So, in terms of liberal things, that reflects back to the last question in terms of how cottage food laws have been changing, so even though a lot of states have enacted a cottage food law, in the past few years, we’ve seen yet another transition into what’s been termed food freedom and that is basically people openly questioning the government’s right to have any say over whether people can sell homemade food. So, to give a little bit of background, the cottage food laws typically come with restrictions. You can only make certain types of foods, you can only sell in certain types of places, but the Food Freedom Movement is really trying to take all the red tape away and prevent the government from being able to stop someone from selling their homemade lasagna to a neighbor.

Wyoming is the first state that implemented a state-wide food freedom law. So, in Wyoming, you can sell almost anything with the exception of red meat. You could even sell chicken pot pie or something that would be banned in almost every other state and that’s got to be one of the most liberal things that has come out over the past 10 years. But at the same time, a lot of the liberal things that I’ve seen, such as Alaska, allows a lot of different kinds of food and they don’t have very much government oversight. But those laws, Wyoming and Alaska also have very few people who are using the laws. So, it’s possible that the most liberal things that have actually happened come from states like California and Colorado that have added a lot of allowances still with government oversight, but they also affect thousands of people.

Jennifer: Mm-hmm (affirmative). Yeah, you know I was thinking as you were talking twofold. One is that I’m originally from Wyoming and so as you were talking, you know, I’m like, “Wow,” when I go home to Wyoming I want to talk to some more folks back there and see what they’re thinking and how that impacts them, but you’re right. I mean, the joke in Wyoming is that four-legged animals outnumber humans in four to one ratio. But as you’re talking about California and Colorado and allowing allowances, like here in Washington State where I’m currently based, when our cottage food law was first enacted it was really restrictive and over the last couple of years, they keep evolving it and keep opening up what types of products you’re allowed to sell, how much revenue you’re allowed to make. So it’s been interesting to watch that rule evolve over time, which is another thing, you know, for folks to just be aware of that hat you see written down today might not necessarily be the same thing next year.

David: Right. It’s great when food laws keep getting amended. That’s been most clear in Colorado. They’ve amended their cottage food law I think each year for the past three years and they’re really one of the standards now for cottage food very recently because they’ve removed a lot of the restrictions that were initially in their law whereas Washington, while their law has evolved, I’d say it’s still very restricted. Washington is one of those places that could make huge strides in the cottage food space because it would impact so many people, but the reality is that very few people are actually using Washington’s cottage food law because it just doesn’t make that much sense for people to do it because of how restricted, and expensive, and complicated it is.

Jennifer: Oh, absolutely, especially again speaking personally when compared to our neighboring state Oregon, which at least looking at it from the perspective of a Washington resident, Oregon is pretty liberal in comparison in terms of how much they allow their residents to make as cottage food entrepreneurs where they can sell their products and how they can sell their products.

David: Right.

Jennifer:So, for some folks, the idea of starting a food business out of your home versus finding and renting kitchen space really sounds ideal. Based on your experiences and your conversations with home-based food business owners, what are some of the benefits of using a home kitchen for your food business?

David: I think that people can pretty readily see some of the benefits. For instance, if you’re a stay-at-home mom or dad, just being able to stay at home with your kids is a massive benefit. Just being able to work at home and also be able to be with your family is a huge, huge advantage of the cottage food laws. Also, most people have a home kitchen that they can work from, they already paid for it. So, the fact that it’s free is a massive advantage because a commercial kitchen can sometimes run $20 to $30 per hour to rent it out.

Jennifer:So while that all sounds great, are there challenges in working out of a home kitchen?

David: There are definitely challenges. I mean, for one, the home kitchen is built for residential use. It’s not built for … it’s built to make food for a family, it’s not built to make food for 100 people at a farmer’s market. So, just the fact that it’s a very small kitchen severely limits people into how much they can make and also the laws themselves had a lot of restrictions on the home kitchen simply because the cottage laws typically come with restrictions about what you can make. So, a lot of times people will choose to forego the cottage food laws and use a commercial kitchen if they want to make a certain item or if they want to sell in a certain way.

Jennifer:So, speaking of challenges, I’m also wondering about … so those products that are allowed to be produced in a home kitchen are produced in a home kitchen. How does the average consumer respond to this? Do you find either historically or has this changed over time, has there been challenges in home-based food entrepreneurs gaining the trust of consumers if the consumers know that the product is produced in a home kitchen?

David: It’s so funny because that’s what I would have initially expected and I’ve noticed a lot of people who are diving into the space and starting up their own cottage food operations. They also are concerned that people will not trust their products because they’re using their own home kitchen. In reality though, I’ve noticed that it’s typically an advantage for people to advertise that they’re using their home kitchen because most of us do eat homemade food. We make it ourselves at home or someone else makes it for us and we don’t get sick. You know, it’s perfectly safe. So, I think that most people want to help small business, small producers, people in their own community and the actual consumer perception, there’s not a level of distress that people often think is going to be associated with producing from someone’s home.

Jennifer:Well, that’s great news.

David:I would also add that it actually is pretty safe. I mean, there are horror stories about commercial kitchen sometimes and I don’t know if you’ve seen commercial spaces, but I’ve certainly heard from a number of people who have worked in commercial kitchens that were rented and it’s not necessarily safer or cleaner or any of that than a home kitchen space would be.

Jennifer:Yeah. I’m sitting here nodding my head because I’ve worked both in restaurant and bakery settings and then I’ve also worked in shared kitchen spaces or kitchen incubators and of course, everyone is different, but there you definitely see things that raise eyebrows and make you a little bit concerned from time to time. So, absolutely.

David:Right. It’s interesting because people like to hide the fact that they’re using their own home kitchen, but I think that’s generally just advantageous for a cottage food operation.

Jennifer:Again, that’s great to hear because that’s the one question that I get asked a lot about is, should this be something I advertise or not? Again, here in Washington State, we actually have restrictions that you have to advertise it on your packaging and not every state has that, but folks are concerned when they have to disclose that. So, it’s good to hear when you don’t see that as being a disadvantage.

David:Yeah, and it’s funny how, I think, people’s perceptions of what they need to do are oftentimes to what is actually important. I’d see a lot of cottage food operations who think they need to be really thorough about what they put their labels and I need to think about every single ingredient that’s listed out and in reality, when most people come to the market, maybe unless you’re living in a certain area like the bay area or Los Angeles or something, but for the most part, people are pretty trusting. They come to the market, they try something, try a sample. They don’t look at the label. I think that people can get really anal about what they are doing when they’re trying to start a food business, but a lot of those things just don’t matter in the big picture.

Jennifer:So, you just mentioned, for example, farmer’s markets being one sales channel that you see cottage food entrepreneurs use and again, the caveat here being that every state has different regulations around where cottage food entrepreneurs are allowed to sell their products. But do you see certain sales channels used with success amongst cottage food operators at a high level across the U.S.?

David: Yeah. Certainly, the cottage food laws have been successful for some people, so we know that there are sales channels that work. I’d say that it’s not a blanket answer of one sales channel is better than the other. It completely depends on what someone is selling. So, for instance, if someone is producing custom cakes, the best sales channel for that is typically doing direct sales out your home and using Facebook to promote your business and getting referrals from friends and that has been probably the most successful type of cottage food operation in terms of how much they’re selling, but if you’re doing something like selling peanut butter or nuts, then a farmer’s market might be a better place for you to be selling those things because you’re in front of a known audience or a known market and you have people coming by and buying those things.

So, I’ve seen a variety of different sales channel work well. I would say, I’d actually add to this, that a lot of times, people want to sell online and they think that that’s going to be the secret key to their success in business and I think people overestimate the capabilities of their online presence. I think that people think that they’re going to sell a whole bunch of stuff if they can put their product online, but I actually see that as being one of the least successful sales channels for people who are just starting out.

Jennifer:Yeah. I’ll concur with you there, not just from a cottage food standpoint, but I see this a lot with, you know, those products that are made in commercial kitchens and they’ll say, “Oh, my sales strategy is that I’m going to be selling online.” It’s like, then do you have a really strong online marketing strategy to support that? At least at farmer’s market, as you mentioned, folks are going to walk by your both and see you, but how are you going to get people to find you on the internet and in amongst millions of websites that are out there? It can just be really hard if not impossible.

David: Wait, and it’s not just a matter of getting eyes because I’m a website developer, I know that there are people who will just somehow find a website. I don’t know how, but you put a website up and you’ll get traffic to it. So, you can generally get traffic in many ways through advertising or what have you, but it’s a matter of developing trust with people. Typically, people have to have a strong sense of trust towards a person or a brand before they’re willing to pay for something and this concept is someone’s just going to run across your product and buy it is hard to do if you don’t have some level of trust established either through your own presence in your community or through maybe online reviews on Etsy or something like that.

Jennifer: So, with you then say, my next question was going to be for you, what do you think the key thing is for home-based food entrepreneurs to build successful business? You just mentioned trust. Do you think that that trust component is … is that key to success or are there other things that you see as being really critical?

David: Yeah, my answer to this question has changed quite a bit over the last few years. I think initially, I thought the key to success of business would be what product do you have? How good is it? How good is your recipe or what’s your marketing like? How’s your product packaged? That’s going to be the key to success, but I’d realized that the key to success, I mean, it ties in with the trust concept, but it’s really the entrepreneur themselves that are the key to the success of the business. I say this because I see a lot of people make the same mistake over and over again.

I think, generally, people who try to enter this space and become a cottage food entrepreneur, they like doing their own thing and they also don’t [technically 00:18:59] want to be the face of their business. They want to hide behind the scenes, they just want to make their food and however it gets sold is great, but they don’t really want to be on the center stage. I think that’s actually the exact opposite approach that someone needs to take when they’re starting a home food business. People will hide behind a curtain and say, “Oh, I’m working on this secret thing and I’m not going to tell you what it is until it’s ready,” and then even when it is ready, they won’t actually take ownership of their business. They’ll put on their website the ubiquitous we-word like we believe in blah, blah, blah. When you’re starting a business, it’s all about you. It’s all about that entrepreneur and when people are buying a product, they’re not buying a product, they’re buying part of your experience.

So, that’s the biggest key I’ve seen in terms of people who are successful is that they take ownership of their business and they develop relationships with people and those relationships are what boosts their business. In terms of their product, but product doesn’t matter as much. You need to find what they call product market fits. You need to make sure there is demand for what you’re selling, but if you have the right entrepreneur who’s willing to take ownership of their business, they’ll eventually find the right product for their market.

Jennifer: Yeah. Thank you for sharing that because so often people see it as being that the product has to take center stage and again, it ties back to that piece that you’re talking about with trust that people need to trust the person and the story behind it, behind that product before they want to spend money on that product.

David: Yeah, and it’s really hard too because typically, a product is the impetus. It’s like your grandmother had this really great apple pie that everyone loves and it’s the talk of every Thanksgiving, you know. So, it’s like, “Oh, I want to start this business to sell my grandma’s apple pie,” and I think that’s generally where I see people get caught into a trap because their business is revolving around the product instead of revolving around their desire to start a business.

So, a lot of times, when that product doesn’t catch on or maybe the market isn’t willing to pay a fair price for it, that’s when people’s business will close. But if someone is starting from the standpoint of wanting to start a food business and they’re really passionate about making and selling food and sharing it with their community no matter what form that takes, then they’ll be able to make adjustments over time to ensure the success of their business and they won’t get caught up on, “Well, if I can’t sell these cookies, then why bother?”

Jennifer: Yup. That’s one of those statement words like it’s so obvious and yet it’s something we so often overlook because you’re right, we go into it and myself included because I’ve toyed with the idea of starting up a cottage food business in addition to a small food biz and it’s always been around the product, not necessarily around the business.

David: Right. Yeah, it’s very hard. I mean, it took me years to learn this because I initially got into the space because I want to sell chocolate chip cookies that everybody raved about or sell my grandfather’s fudge that is always a staple around the holidays. So that’s what got me into this space. So I think it’s important to recognize that products can get people into the space but ultimately, the people who I see thriving are the people who are willing to adapt their business to whatever the market is asking for. For instance, I tried selling my fudge but it just so happens that selling really unhealthy things these days is not a huge hit at farmer’s markets. Most people are interested in more healthy choices for their families. So, it’s not really a viable business for me unless I was trying to sell in an area to market. It’s like a farmer’s market would not be the right choice for selling a product like that because it’s just not what people are looking for at a farmer’s market.

Jennifer: Yeah, especially not on a week in, week out basis. One thing for a one-time purchase because it’s for a special event, but you’re right, it’s not something that … and I say this being a professional pastry chef, I hate to say it, but it’s true. Desserts and the like are not necessarily something that most consumers, especially like you said, at farmer’s markets are looking to purchase every single week.

David: Right.

Jennifer: As we talked about there’s being a lot of changes in the cottage food industry over the last few years and given your insight, take a look into the crystal ball and where do you think that the cottage food industry in the United States will go in let’s say five years from now?

David: Well, of course, I can’t know exactly where it’s going to go. I mean, if you’d asked me that five years ago, I probably wouldn’t have been able to tell you where it is today, but I know where I’d like it to go and that’s …

Jennifer:I’d love to hear that.

David: There are a couple different things I’d like to see. One is in expense of the Food of Freedom Movement and it just makes sense to me that selling homemade food is something that people have done for pretty much all of human history. It’s a fundamental part of our lives that we make food and we share it with other people. We don’t usually get compensated for it, but I think that we should be able to if people want to make that their livelihood and most food is perfectly safe, but the reason why homemade food is disallowed is because there’s a lot of concern about if you don’t have a sanitary work environment and everything, then you might get someone sick and certainly, that does happen on a rare basis.

So, in order help prevent a few problems, we disallowed an entire ecosystem of homemade food entrepreneurs so I’d like to see the Food Freedom Movement bring a little bit more awareness to how much government oversight there is in the food space and allow people to question whether that should be the case. The other thing that I’d like to see in the future is perhaps a nationally recognized cottage food law because right now, the cottage food laws, they’re on a state by state basis and some of them are actually quite good. They allow people to run lucrative businesses out of their homes. But the problem is that because they’re on a state by state basis, those people cannot sell to other states, so they wouldn’t be able to list their product on a website like Etsy, and sell online, and then ship it to somebody in another state because there isn’t recognition between states of the other state’s food laws.

So, if there were some sort of national recognition on cottage food, for instance, in the food code that would allow cottage food to act a lot more like commercially produced food, I think that would be highly beneficial to people because it’s one of the biggest limitations that I see currently in the cottage food industry.

Jennifer: Yeah. Again, speaking from a state that is still decently restrictive, I know in talking to cottage entrepreneurs here locally that they just say, “Why can’t we do what Oregon is doing?” Even if you might live just across the bridge from Oregon, it’s like I’m sorry, you can’t. You know, talking about your concern over sanitary conditions and food borne illnesses, the reality is even in highly regulated environments like commercial kitchens that are regularly overseen by either USDA and/or county health officials, you still run into issues of food borne health issues.

David: Yeah, I know and it’s interesting because there’s always a concern about the health and safety of a home kitchen. It’s always brought up when a cottage food law is being discussed or enacted and yet, I still have not heard to this day and I’ve been in the industry for quite a few years and I talked with thousands of people about how cottage food, I still have not heard to this day one instance where a cottage food operation was the cause of a health concern. Usually, the health department gets called about illnesses, food borne illnesses all the time, but they’re usually out of these commercial, inspected, approved kitchens and to be fair, that’s also part of just the fact that cottage food is restricted to usually very safe foods that don’t need to be refrigerated, but it’s just like even the commercial kitchens are always producing things that are totally safe. So, it’s just interesting to me that there’s so much skepticism that comes through when you’re talking about a home kitchen.

Jennifer: Absolutely.

David: I wanted to go back to the last point where you’re talking about people who … like if I am in Washington right over the bridge, why can’t I sell in Oregon? I’ve heard that a lot too and I think we did have to question that because the state laws are so across the map literally and figuratively, yet people’s actual … I don’t know how to put it, but you know people are living the same lives in each state. People are subject to the same health laws in each state in terms of what’s going to make them ill and so it’s funny how some states allow certain things and other states don’t. We have to wonder, is there a really good reason why that should be the case?

Jennifer: No, I agree with you. Like you, I would love to see a national ruling on this if for no other reason also just for clarity because I think it oftentimes makes it harder for home-based food entrepreneurs to start up because they have to figure out exactly what is allowed in their state and potentially, also their county and what business licenses they need and they don’t need, and it can throw a lot of people off of the course because it can be so frustrating.

David: Yeah. It’s really confusing. It’s extremely confusing, hence the reason why people have to spend so much time just figuring out how to do. That’s something that I think should be very simple, you know. You want to go down the street and sell something at the farmer’s market and yet that can sometimes take months to get approved in certain areas. But it is important to recognize that it’s improved a lot. Back 10 years ago, 15 years ago, homemade food sales were almost universally banned in the United States and I think you’d see it across all thousands of life where there is kind of a waiver, a spectrum and you got from one side to another and we were in a state of being just totally disallowing and distressing of homemade food and that was totally on one end of the spectrum.

The cottage food laws had brought that way back and pulled back a lot of the control that the government imposed on food sales and it seems like it’s continuing to be pulled back. So, it’s definitely been a huge improvement and we continue to see states improve their laws and today, there are hardly any state that don’t allow any kind of homemade food.

Jennifer: That’s a great note to end on. We might not be at the cottage food utopia yet, but the industry has come a long way. I want to just quickly mention that a lot of this has also been driven by average civilians. There’s an article on my site from a couple of years ago about the woman who really pushed through the cottage food law in Louisiana and it’s a grandmother who was frustrated by this law. So, a lot of times it is just an average civilian who’s frustrated by it who decides to take it to their lawmakers, get a bill passed and does all the work to do that and to gain momentum behind it. So it’s really exciting to also see, again, the average civilian just saying, “This is really important to us,” and building the from the ground up.

David: Right, and that’s an important thing to note because a lot of people ask me, “I can’t do X, Y, Z. When is my state going to change this law?” Just given that we do live in a democracy, it’s like well, you might have to be the person who changes the law, you know. That’s how these bills and laws get started. Quite frankly, before I got into this space, I had no idea how a bill or a low got passed, so it does take a lot of learning and diligence. But I’ve seen time and time again where a regular citizen will say, “Hey, I’d like to sell my homemade food or I’d like to sell this item and it’s not allowed in my cottage food law,” and they’ll take the initiative to contact the congressman and make it happen and that’s the way that our political system runs.

Jennifer: Well, you know, it’ll be exciting as you mentioned nobody can sit here and 100% accurately forecast where the industry will go, but it will be really interesting to see what happens in the next 5, 10, 15 years and where we are then compared to where we are now.

David: Yeah. I believe that just having seen the past few years that it will be an improvement over what it is today because certainly, these cottage food laws have been very popular and I don’t think it’s happened to-date where a cottage food law has been redacted or made worse through an amendment. So, there’s certainly a lot of desire among people to do this, to sell their homemade food without having to go through a bunch of loopholes and I would expect that that inherit desire amongst the people of our country will continue to provide the path forward to make the laws better.

Jennifer: Great. Well, I’m excited to see what happens in the coming years and David, I want to thank you for coming on today and sharing your thoughts and your experience having been in the … you’re really looking at the cottage food industry like no other has for the last 10 plus years, so thank you.

David: Thank you so much for having me.

Jennifer: Absolutely. Thanks.

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