How to Start a Food Packaging Business

In an age where convenience is king, people buy all sorts of packaged foods. In fact, the demand for packaged foods is growing by leaps and bounds, with the food packaging industry set to expand more than 40% by 2028. Food packaging businesses make containers mainly for pre-prepared foods, like grocery store deli items, restaurant takeout, baked goods, frozen foods, and more. Starting a food packaging business takes quite an investment, but it’s a great opportunity to get in on a growing market and make good money. 

But you should know that starting a business is a serious endeavor that requires a great deal of entrepreneurial knowledge. Luckily, this step-by-step guide has all the business insight and information you need to successfully launch your food packaging company. 

Step 1: Decide if the Business Is Right for You

Pros and cons

Starting a food packaging business has pros and cons to consider before deciding if it’s right for you. 

Food packaging industry trends

Industry size and growth

• Industry size and past growth – The global food packaging market was worth $338.34 billion in 2021 after growing more than 6% in 2020.((https://www.fortunebusinessinsights.com/industry-reports/food-packaging-market-101941))
• Growth forecast – The global food packaging industry is projected to grow more than 40% by 2028 to reach $478 billion. 

Trends and challenges

Trends in the food packaging industry include:

• Technology trends in food packaging enable food packagers to put QR codes on containers that allow consumers to access more information about the products.
• Eco-friendly food packaging, including compostable packaging, bioplastics, and recyclable packing, is exploding, with the market set to grow nearly 8% from 2021 to 2022 to reach over $211 billion. 

Challenges in the food packaging industry include:

• Rising prices of raw materials are presenting a major challenge for food packaging businesses and cutting into profit margins.
• Regulations regarding materials that come into contact with food are enforced by the FDA and must be thoroughly adhered to by food packaging companies. 

How much does it cost to start a food packaging business?

Startup costs for a food packaging business range from $100,000 to $250,000 or more. Costs include manufacturing machines, employee wages and operating costs since those will need to be in place and functioning before you can start bringing in revenue. 

You’ll need a handful of items to successfully launch your food packaging business, including: 

• Manufacturing machines
• Raw materials such as paper and plastic
• Safety equipment

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$150 - $200	$175
Business licenses and permits	$100 - $300	$200
Insurance	$100-$300	$200
Business cards and brochures	$200 - $300	$250
Website setup	$1,000 - $3,000	$2,000
Manufacturing Facility Rental Deposit	$10,000 - $25,000	$17,500
Manufacturing Machines	$50,000 - $150,000	$100,000
Raw Materials	$5,000 - $10,000	$7,500
Initial budget for employee wages	$15,000 - $25,000	$20,000
Initial budget for operating costs	$25,000 - $50,000	$37,500
Total	$106,550 - $264,100	$185,325

How much can you earn from a food packaging business?

Prices for food packaging vary based on the type of product. For example, you can sell a pack of 100 styrofoam containers for about $25. Customers such as grocery stores and restaurants will tend to buy in large quantities, so these numbers will assume an average order of $500 when you’re first starting out. Your profit margin after manufacturing costs, overhead, and labor should be about 20%. 

In your first year or two, you might have 50 customers who purchase once a month, bringing in $300,000 in annual revenue. This would mean $60,000 in profit, assuming that 20% margin. As you acquire more regular customers, your average order could increase to $1,000 and you might have 200 customers who purchase once a month. Labor costs will go up, reducing your profit margin to about 10%. With annual revenue of $2.4 million, you’d make nearly a cool quarter-million in profit.

What barriers to entry are there?

There are a few barriers to entry for a food packaging business. Your biggest challenges will be:

• The high start-up costs of machinery and other expenses
• Complying with stringent federal regulations

Step 2: Hone Your Idea

Now that you know what’s involved in starting a food packaging business, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.

Why? Identify an opportunity

Research food packaging businesses in your area to examine their products, price points, and what sells best. You’re looking for a market gap to fill. For instance, maybe the local market is missing an eco-friendly food packaging manufacturer, or a flexible food packaging business. 

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your products or services

There is any number of food packaging products you could choose to manufacture by getting the right machinery including:

• Frozen food containers
• Microwave safe containers
• Hinged lid containers
• Styrofoam containers
• Clear packaging containers
• Bakery item cardboard containers

You could also offer labelling or food packaging design that includes company logos. 

How much should you charge for food packaging?

Prices will vary based on the type of containers you manufacture. You’ll need to check average market prices for various types of packaging to make sure you’re competitive. After all costs, you should aim for a profit margin of 20%.

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will depend on the types of containers you manufacture. You could focus on restaurants, grocery stores, food processing companies, frozen food manufacturers, food trucks, or commercial kitchen operators. You can find relevant businesses on LinkedIn, but your best bet will be to find local businesses on Google or Yelp and give them a call. 

Where? Choose your business premises

You’ll need to rent a space for your manufacturing facility. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm a Business Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “food packaging” or “food containers”, boosts SEO
• Name should allow for expansion, for ex: “FreshPack Solutions” over “MealPrep Solutions”
• Avoid location-based names that might hinder future expansion
• Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

• Executive Summary: A brief overview of the food packaging business plan, highlighting key points and objectives.
• Business Overview: Detailed information about the food packaging business, including its mission, vision, and the problem it aims to solve in the market.
• Product and Services: Description of the specific food packaging products and services offered, emphasizing unique features and benefits.
• Market Analysis: In-depth examination of the target market, identifying trends, customer needs, and potential opportunities for the food packaging business.
• Competitive Analysis: Evaluation of competitors in the food packaging industry, highlighting strengths, weaknesses, and strategies to gain a competitive edge.
• Sales and Marketing: Outline of the sales and marketing strategies, including distribution channels, pricing, and promotional activities for the food packaging products.
• Management Team: Introduction of key individuals in the management team, emphasizing their skills and expertise relevant to the food packaging industry.
• Operations Plan: Detailed plan outlining how the food packaging business will operate, covering production processes, supply chain management, and quality control.
• Financial Plan: Financial projections, including income statements, balance sheets, and cash flow forecasts, providing a comprehensive view of the food packaging business’s financial health.
• Appendix: Supplementary information such as resumes of key team members, additional market research data, or any supporting documents relevant to the food packaging business plan.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to food packaging businesses. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your food packaging business will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Venture capital: Venture capital investors take an ownership stake in exchange for funds, so keep in mind that you’d be sacrificing some control over your business. This is generally only available for businesses with high growth potential.
• Angel investors: Reach out to your entire network in search of people interested in investing in early-stage startups in exchange for a stake. Established angel investors are always looking for good opportunities. 
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a food packaging business. You might also try crowdfunding if you have an innovative concept. When your business gets to a certain level of revenue and you’re poised for growth, you might be able to attract angel investors or venture capital. 

Step 8: Apply for Licenses/Permits

Starting a food packaging business requires obtaining a number of licenses and permits from local, state, and federal governments.

Food packaging companies can get a Safe Quality Food (SQF) certification by taking courses through the SQF Institute. It’s not required and it’s a bit pricey, with each course costing close to $1,000, but it can give your company credibility. 

You also need to make sure that you follow FDA regulations regarding food packaging manufacturing. 

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your food packaging business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks. 

You may want to use industry-specific software, such as Fishbowl, Acumatica, or MRPeasy, to manage your processes, inventory, invoicing, and payments. 

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.

You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

Marketing

For your food packaging business, the marketing strategy should focus on highlighting the quality, safety, and innovation of your packaging solutions. Emphasize your commitment to sustainability, the versatility of your products for different food types, and any unique features like reusability, biodegradability, or custom branding options.

The goal is to establish your business as a provider of efficient, environmentally responsible, and customer-focused packaging solutions. Here are some powerful marketing strategies for your future business:

Kickstart Marketing

• Professional Branding: Your branding should communicate reliability, quality, and eco-friendliness. This includes everything from your logo and website to your product design and trade show booths.
• Direct Outreach: Network with food producers, manufacturers, restaurants, and retailers to introduce your packaging solutions. Attend industry expos, trade shows, and networking events to build relationships and showcase your products.

Digital Presence and Online Marketing

• Professional Website and SEO: Develop a comprehensive website showcasing your range of packaging products, their features, and benefits. Use SEO best practices to optimize your site for search terms related to food packaging, sustainable packaging, and custom packaging solutions.
• Social Media Engagement: Use platforms like LinkedIn for B2B networking and Instagram for showcasing your packaging products. Share content that highlights the features and benefits of your products, as well as customer testimonials.

Content Marketing and Engagement

• Packaging Innovation Blog: Share informative articles about packaging trends, sustainability in packaging, and tips for food manufacturers and retailers on choosing the right packaging.
• Email Newsletters: Keep your clients informed about new product developments, company news, and industry insights through regular newsletters.
• Webinars and Online Demos: Host webinars or video demos to educate potential customers about your packaging solutions and their applications.

Experiential and In-Person Engagements

• Trade Show Participation: Exhibit at industry trade shows to showcase your products, network with potential clients, and stay abreast of industry trends.
• Product Samples: Offer sample packs to potential customers so they can experience the quality and functionality of your packaging first-hand.

Collaborations and Community

• Partnerships with Industry Leaders: Forge partnerships with food manufacturers and distributors to expand your market reach.
• Sustainability Initiatives: Collaborate with environmental organizations or initiatives to enhance your brand’s commitment to sustainability.

Customer Relationship and Loyalty Programs

• Customization Services: Offer bespoke packaging solutions to meet specific client needs, enhancing customer satisfaction and loyalty.
• Referral Programs: Implement a referral program that rewards existing customers for bringing new clients to your business.

Promotions and Advertising

• Targeted B2B Advertising: Use digital advertising platforms to target businesses in the food industry, emphasizing the unique selling points of your packaging solutions.
• Industry Publications and Events: Advertise in trade magazines and participate in industry panel discussions to position your brand as a thought leader in the packaging industry.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your food packaging business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your food packaging business could be:

• Eco-friendly food containers for your takeout and delivery 
• Top-quality food packaging for your culinary creations
• Custom-made food packaging for your deli goods 

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a food packaging business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in food packaging for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in food packaging. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a food packaging business include:

• Manufacturers – produce food packaging products
• General Manager – scheduling, staff management, ordering, accounting
• Marketing Lead – SEO strategies, social media

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Food Packaging Business – Start Making Money!

With the rising popularity of prepared foods, delivery and takeout, food packaging is booming. Breaking into the industry takes a major investment and hard work, but it can pay off in a big way. You just need to pick the niche that works for you, and you can build a food packaging empire. You’ve got the business knowledge now, it’s time to start making your food packaging dream a reality!