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How The Coronavirus Impacted The Cottage Food Industry In 2020

How The Coronavirus Pandemic Impacted The Cottage Food Industry in 2020

Recently I was asked to briefly describe how COVID-19 has impacted the cottage food industry this year. Here’s what I wrote for that blog post:

“The pandemic has impacted everyone differently, but it has impacted everyone. Some cottage food businesses have shut down temporarily or permanently, while just as many others have seen their sales skyrocket. More cottage food businesses started this year than any other by far, and overall, the pandemic has caused a huge surge of interest in this industry.”

That’s a very simplified view of what has been a crazy and complex year.

In this post, I’ll dig into some of the major trends and story lines that impacted the cottage food industry in 2020.

Another Recession

A decade ago, the Great Recession renewed interest in small local food businesses and spawned the advent of modern cottage food laws, so it comes as no surprise that this year’s recession caused the cottage food industry to grow substantially.

But despite this growth, it hasn’t been distributed evenly. As I noted in the quote above, the pandemic hit entrepreneurs hard in both directions.

And unlike the Great Recession, the factors that affected cottage food businesses this time around were quite different.

Negative Factors

Here are some of the reasons why cottage food businesses struggled and/or closed:

  • Farmers markets and local events closed indefinitely
  • Some state and county governments deemed cottage food businesses “non-essential”
  • Home life (including home schooling) took priority over the business
  • Lack of gatherings and events, like weddings, birthday parties, and corporate events
  • Difficulty sourcing ingredients due to shortages in stores
  • Concern for personal safety and wanting to shelter-in-place

Positive Factors

Here are some of the reasons why cottage food businesses started and/or thrived:

  • Loss of job — needing to replace income
  • Extra time at home — starting a fun side project
  • Consumers’ increased interest in local baked goods and comfort foods
  • Consumers’ decreased interest in going to grocery & brick-and-mortar stores
  • Discovering/buying food online became the norm

Overall, I would say that the positive factors outweighed the negative ones. That might surprise you, but it also surprised many entrepreneurs who tried selling their homemade food this year.

For every person that I heard from that was struggling, I heard from someone else who couldn’t keep up with demand. Despite the challenges, entrepreneurs found a way to overcome them to meet the needs of their neighbors.

Super Moms Face A Tough Choice

It’s hard enough to be a mom without a pandemic or business to worry about. Remarkably, many stay-at-home moms run cottage food businesses in addition to taking care of their kids. (At least three-quarters of cottage food business owners are women.)

Before the pandemic, many stay-at-home moms baked when their kids were at school. So when school moved into the home, many decided to put their business on hold.

But many also found a way to make it work, even if that meant baking at night after putting the kids to bed. And that’s due, in large part, to the massive increase in demand for baked goods this year. It’s a lot harder to shut down a business when items are selling like hotcakes!

Boon for Baked Goods

Businesses selling baked goods (particularly sourdough bread) did especially well this year. While I have personally heard hundreds of stories of bakers being overwhelmed by orders, you can find one example in Episode 8 of my podcast, where David Kaminer shared that his sourdough bread sales doubled after the pandemic hit.

Although people sought comfort food to make lockdown life a bit more bearable, some of the increase for home businesses is likely correlated to the decrease in sales for commercial businesses. In Episode 22 of my podcast, Nicole Pomije shared some of the struggles she’s faced as a brick-and-mortar business this year.

In addition, despite a huge decrease of in-person events and parties, people found reasons to celebrate at home anyway. Many home bakers have told me that they received many more orders this year, but that the orders were smaller in size. However, despite the decrease in order size, the end result was still a significant net growth in their business.

The Lockdown Boom

As the owner of Forrager, I’m in a unique position for being able to see cottage food trends. Most people who visit my website come from Google, usually after searching for something like “how to start a food business from home”.

Therefore, as more people become interested in starting a cottage food business, I see that interest reflected in my website stats in near real-time.

When states got hit hard with lockdown measures, the interest in cottage food spiked. Consequently, the most interest came from the state that was hit the hardest — New York.

Comparing 2019 to 2020

Top 5 states visiting Forrager from mid-March 2019 thru December 2019:

  1. Illinois (8.83%)
  2. Florida (7.08%)
  3. California (6.55%)
  4. New York (4.86%)
  5. Texas (4.45%)

Top 5 states visiting Forrager from mid-March 2020 thru December 2020:

  1. New York (7.18%)
  2. Illinois (7.16%)
  3. California (6.63%)
  4. Florida (5.37%)
  5. Virginia (5.12%)

As you can see, New York jumped way up into the #1 spot this year! It really wasn’t even close to California in 2019, but New Yorkers showed a huge interest in starting a food business this year.

And in case you’re curious, I looked at my stats from prior years, and found that New York has always hovered in the #4, #5, or #6 spot since 2014. So this year’s major deviation is clearly related to the impact of the pandemic.

Time To Get Online

One of the biggest challenges for small food businesses is that most consumers are too busy to notice them. That busyness leads most people to do the fastest and easiest thing — buy all of their food from a grocery store, often from name brands that they already know and recognize.

But the pandemic gave people a lot more time to explore new food options. Especially when grocery stores were out-of-stock on many staples, people looked for alternatives, and oftentimes, an alternative was just down the street!

One benefit of small cottage food businesses is that they can be very flexible and adaptable, which was particularly helpful this year, since things changed quickly and changed often.

With people spending more time on their phones and devices while stuck at home, the business owners who quickly embraced social media and other online platforms usually fared the best.

Instagram-Only Businesses

As you might expect, online sales for food items rose exponentially this year. Buying food online and getting it delivered is now part of many people’s normal routine.

As a result, cottage food businesses have been getting way more orders through their websites, Facebook pages, food delivery services (like Postmates), etc.

But one interested trend that I’ve seen is the proliferation of Instagram-only businesses.

People are literally starting food businesses simply by creating an Instagram account. They post delectable photos of what they are making and get orders through direct messages or texts.

These businesses have no other way to find them: no website, no Facebook page, no online listing, etc. Growth happens hyper-organically through Instagram-sharing and word-of-mouth alone.

This business model has been extremely successful this year for many new entrepreneurs!

Illegal Businesses

So far, I have only been talking about legal food businesses that are following their state’s cottage food law.

However, there has been a massive growth in illegal home food businesses this year. And let’s be clear: it’s always been very common for food entrepreneurs to disregard the laws when they are starting out.

But this year was exceptional, and it’s almost entirely due to the fact that so many food service workers were laid off indefinitely or permanently. For the first time in modern history, we had thousands upon thousands of well-qualified cooks that were stuck at home without jobs.

Naturally, they kept on cooking anyway, much to the delight of their neighbors, dishing out dozens of tasty meals each week. Most of them turned a blind eye to the food laws, and considering the extreme circumstances, fortunately most health departments turned a blind eye to them as well.

In a year of social distancing and isolation, the pandemic ironically enabled many people to once again connect with those who produce their food.

As restaurants eventually go back to operating semi-normally, we can expect to see health departments start cracking down on these street popups more and more, but it will be interesting to see if some of these shifts in the food space become permanent.

Removing Limitations

Although a few government officials in some states/counties decided that cottage food businesses were “non-essential”, I actually think the pandemic proved just how much our communities need these small businesses.

In fact, this crisis raised an important question: are cottage food laws too limited? As the food system struggled to adapt to rapid changes, our food laws were only dissuading would-be producers, rather than enabling them.

Microenterprise Kitchens in California

Along those lines, we are already seeing significant shifts in California to legalize micro restaurants. California is the currently only state with a law specifically designed for home restaurants.

A couple years ago, I wrote about why that law was fundamentally flawed and unlikely to get adopted by many counties. Here we are two years later, and there’s still only one county (Riverside) that permits these micro restaurants.

HOWEVER, this year was the shot in the arm that this law needed. Due to popular demand, county officials are taking action, sometimes without their health department’s blessing. There are now 6 counties and 1 city that expect to be issuing permits in 2021!

Moving Forward

As we look ahead to 2021, I wonder what will last, and what will fade. Are some of these changes permanent?

  • Will consumers maintain their demand for comfort foods?
  • Will people continue to buy their food online?
  • With the taste of entrepreneurship in their mouths, will food service workers go back to their former jobs?
  • Will governments start to loosen restrictions for home food businesses?

Only time will tell.

But here’s one thing that I can say with absolute certainty: this year’s pandemic led to a much greater awareness of (and interest in) the cottage food industry.

Ultimately, that will only benefit the cottage food industry for years to come.

Conclusion

It’s been an unforgettable year — yet one that many would like to forget.

For cottage food businesses specifically, this year brought plenty of challenges, but also bountiful opportunities as well, especially for bakers. Many new entrepreneurs saw their sales take off in a big way this year.

Lockdown measures caused a huge surge in interest in home food businesses. While most restaurants and brick-and-mortar stores were stuck in lockdown, their displaced employees embraced opportunities to keep cooking for their local communities.

In a year that may have felt especially long, one of the biggest factors that affected this industry was time. With extra time at home, producers further explored their culinary side, while consumers had more opportunities to discover new food items nearby.

Some might want to forget about 2020, but they will remember the local food items that they discovered, and the amazing people who provided them!

Comments

This is all very fascinating. I’m ready to do SOMETHING! The wind kind of left my sails when I came to realize online sales are illegal in Missouri 😔. But. There are other avenues. This post is encouraging!

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