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Published September 30, 2013, 10:45 AM

In the food business

Carmella Alvaro watched as a metal machine rolled two sheets of raw pasta, tapped out a dozen square raviolis and inserted a three-cheese and roasted-garlic filling.

By: Virginia Bridges , The News & Observer (Raleigh, N.C.)

DURHAM, N.C. — Carmella Alvaro watched as a metal machine rolled two sheets of raw pasta, tapped out a dozen square raviolis and inserted a three-cheese and roasted-garlic filling.

“I can decide how fat or thin the ravioli are,” says Alvaro, 37, who runs Melina’s Fresh Pasta in her garage-turned-commercial kitchen that hums with 11 freezers in a neighborhood in northern Durham. “We want them to be full. It is really about the filling.”

Since 2010, Alvaro has been building her natural pasta company, which sells its goods with simple ingredients at farmers markets in three counties, through community-supported agriculture programs, in smaller specialty shops and three restaurants.

Now, Alvaro is working to get into Whole Foods Market and more restaurants.

If Alvaro and others want to make it in the competitive food industry, they have do a lot more than meet the required due diligence, which includes following handling regulations, finding packaging and preparation space, incorporating a recall system, identifying proper bar codes and obtaining product insurance, people in the industry said.

Calling the food industry extremely competitive “would be an understatement,” says Annette Dunlap, an agribusiness developer with the North Carolina Department of Agriculture and Consumer Services, which has programs to help food growers and producers move their businesses forward.

Dunlap estimated that less than 10 percent, and possibly as little as 1 to 2 percent, of food businesses make it past the five-year point.

“And it’s not unusual for a food business to take eight to nine years before you are actually profitable,” she says. “It’s a very intensive investment with a lot of upfront commitment.”

The ones who succeed master basic business principles and understand how to control costs, produce consistently and execute a quality marketing plan, Dunlap says.

“And then there is always a certain amount of right time, right place and luck,” she says.

Entrepreneurs need to understand the food retail landscape, Dunlap says. About 60 percent of the country buys its groceries at Wal-Mart, she says, leaving everyone else fighting for the other 40 percent.

“That means you have to think of the supermarket shelf as real estate, and that piece of real estate has got to make the store money,” she says.

The good news is that the specialty food industry, which centers on small-batch and artisanal products, has hit record sales highs for three straight years.

U.S. sales of specialty foods and beverages rose 14.3 percent to $86 billion in 2012, which is more than double the 6.8 percent increase recorded in 2011, according to the State of the Specialty Food Industry 2013, an annual report from the Specialty Food Association.

The report tracks sales of specialty foods through supermarkets, natural food stores and specialty food retailers, but doesn’t include Wal-Mart’s sales.

Each path to sustainability is unique depending on the product and the company, says Jeff Thomas, manager of Goodness Grows in North Carolina, a state marketing program.

Businesses can work with wholesale distributors, sell directly to specialty and other stores, or sell roadside, at farmers markets or to restaurants and other food service companies.

“We work with over 3,000 different companies, and each one them has a slightly different model than the one before,” Thomas says.

Dunlap recommends introducing products at farmers markets and community-supported agriculture programs to build volume before approaching larger stores such as Whole Foods.

When a product is close to shelf-ready, entrepreneurs should approach a local Whole Foods, which has a liaison who works with local producers and growers, says Stephen Corradini, vice president of purchasing, merchandising and distribution for the grocer’s South region.

Goods that end up on shelves at Whole Foods have to meet minimum requirements, such as no artificial flavors, colors or preservatives, but owners also need to have a mix of a great product, an intense passion and an understanding of where they fit in their market’s spectrum.

Owners should also pay attention to customers’ wants such as price, flavor and product texture, Corradini says.

Entrepreneurs need to demonstrate their product in stores once it’s on shelves and understand its retail performance.

“The process of getting new items added and being a successful product is pretty Darwinian at times, particularly in the grocery categories,” he says.