How to Start a Granola Baking Business

by Nicole Manuel - Updated September 26, 2017
Muesli

Baked granola can appeal to multiple niche markets and be sold in a variety of ways. Knowing the challenges that are unique to the granola business can help you prepare for the unexpected while creating back-up plans for success.

Size of Market

When starting a granola business, it is important to understand your industry, your competition and your customers. According to Market Research Analysis, the food bar market in the U.S. alone is expected to approach $8.3 billion by 2016. CSP Magazine reported granola bar sales in convenience stores exceeding $99 million in 2013, with granola bars making up 16.6 percent of all bar sales by dollar at convenience stores. A more cost-effective and profitable way to sell granola is loose as a cereal or dessert topping. Cereal production in the U.S. has an average annual revenue of $11 billion, according to IBISWorld's 2014 industry report. IBISWorld predicts an increase in cereal production sales in 2014, with whole grain cereals, like granola, having higher marketability.

Granola Options

Granola provides many ways to diversify or specialize to better compete. It can be baked, dehydrated, pan-roasted or raw. Granola can be sold in bars, loose as a cereal alternative, or as a crumble for desserts or yogurts. It can be sold with gluten-free ingredients, raw vegan ingredients, high-protein ingredients, fruit and nuts, whole grains or sweet candies and other creative ingredients. To reduce initial costs, affordable ingredients such as rice crisps, oats and dried fruit can be incorporated into the mix to keep costs down. These savings can then be reinvested to use healthier or more gourmet ingredients or to buy more of the affordable ingredients to increase production. Your ingredients will determine your target market, packaging and advertising, and which government regulations you will need to follow.

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Government Regulations

To sell your granola, you will have to register with your local state officials for a food permit or food license. If you plan to sell your granola in stores, the FDA requires that you label your ingredients. If you are selling your granola at a farmers market, you must apply with the U.S. Department of Agriculture and undergo regular inspections. If you decide to seek certified labels for your granola, such as "organic" or "gluten-free," you will have additional applications and inspections of your ingredients, as well as your preparation and packaging processes. To obtain your "organic" label, you must apply with the USDA. For a "gluten-free" label, you must apply with the FDA.

Ways to Sell

Granola can be sold online or in a variety of locations including farmers markets, festivals, a flea market, or on consignment by selling to local groceries or health food stores. You can also set up your own website or sell through health food websites or craft sites. Your packaging and processing techniques might need to be upgraded to maintain freshness and shelf life if you expand your distribution beyond your local market. Otherwise, you can save money by minimizing the materials used in packaging and labeling, or by creating your own packages using cheap packaging material like cardboard and ribbons or recycled goods.

About the Author

Nicole Manuel is a finance and economics writer with a degree in economics and more than six years of professional writing experience. She is also a Certified Professional Coach (CPC) known as The Personal Eco-nomist, who specializes in helping people live healthy, abundant lives on a budget.

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