Gourmet gamble: Could you make it as a food entrepreneur?

It was 2007; not the greatest year to be working in financial-services recruitment, and so Ian Hart – whose main client was Lehman Brothers – decided it was the right moment to look for a new career. After completing an electronics and engineering course, he started miniaturising Tesla coils and went on to create a programmable jammer to cut mobile-phone signals dead at the touch of a button: "Useful on a bus crammed with teenagers," he notes, "but also illegal".

He then tried making a handheld weapon detector that could be used by the police, "but the electricity wouldn't behave properly." Undeterred, he thought, "I have a pretty good wine collection, I wonder if I can change the character of Bordeaux wine by extracting the water once it has been bottled?" He found he could, but unfortunately there wasn't much of a market for re-engineered wine.

Finally – after successive failures – Hart had a moment of inspiration: "Since I had the vacuum distillation already in place, I thought, why not try gin? London used to be full of people making and selling gin from their homes, now it's pretty much only big companies who are doing it... People love gin." He was right, and by using strictly organic, Soil Association-certified ingredients stored in hand-sealed bottles, all made at home, Hart tapped right into the zeitgeist.

In the past 10 years, the British food and drink industry has grown at an astounding rate. No longer synonymous with Spam and corned-beef sandwiches, our grocery market is now the eighth largest in the world and predicted to be worth £162bn by 2015. And the Food and Drink Federation, the trade association representing food manufacturers in the UK, expects an industry growth of 20 per cent by 2020. And small, independent companies – feeding off a wider fashion for consumable products that look and feel handmade – represent potentially big business.

Despite the economic gloom, luxury edibles (think Paul A Young handmade chocolate and Kitty Travers' hand-churned ice cream) continue to fly off the shelves at the farmers' markets, delis and specialist food counters which have sprung up on street corners and in playgrounds across the country.

But how realistic is the 'good life' dream? Can the seemingly insatiable public appetite for fancy foodstuffs offer hope to a legion of disillusioned city slickers seeking a way out of the rat race? And how many trendy niche food-stuffs can one economy sustain? Given global financial pressures and the sheer number of artisan products already on market, the luxury-food industry could be in real danger of eating itself.

On a spring morning in a red-brick semi in north London, Ian Hart's kitchen is obscured by a complicated assembly of glass pipes, dials, pressure-taps, and a rotovap – "the type favoured by Heston [Blumenthal] and Ferran [Adria]"; a canister of liquid nitrogen and stacks of glass bottles of every shape and size. Above the sofa, cables run through the window and into a wooden shed storing an auxiliary freezer and vacuum pump; beyond that is a large shed stacked floor-to-ceiling with distillates: juniper, cardamom, oak bark, angelica.

As I arrive, a delivery man unloads a 5kg sack of cardamom – batch 6585, from India – which is added to a great pile of boxes in the hallway ("the doorbell doesn't stop all day"). The batch number is carefully logged; traceability of ingredients is all-important for a small producer like Hart, in case of an inspection.

Hart has been up since 4.30am, talking to buyers in other time-zones; after an afternoon of paperwork and dealing with overheads, he and his partner, Hilary Whitney, will make the rounds of London's bars and restaurants, giving out samples, checking out the competition, drumming up new trade. And then he'll do it all again tomorrow, before spending the weekend actually crafting the stuff.

As we taste various distillates – grapefruit, fennel, juniper, angelica – Hart explains that his first customer was the landlord of his local pub who, after tasting the gin, agreed to sell it behind the bar, "though the label was the wrong way up for the optics; we were very naive".

Business has expanded exponentially. Today they produce 1,500 bottles of Sacred Gin a month, which are sold for £30 each at Fortnum & Masons, Selfridges, and Gerry's of Old Compton Street, and served to discerning drinkers at a number of the capital's smarter bars and restaurants. This week Hart confirmed shipments to China and Australia, making it 10 countries to which he exports his wares.

A success story, by all accounts. So, how much is it making? Here is the rub. Several years in, Sacred Gin is yet to make a penny.

The public appetite for good, honest fare in this country, says the Guild of Fine Foods' Bob Farrand, has been a long time coming. "After the war, Europe was starving. While governments in France, Italy and Germany promoted sustenance farming, feeding the local community with local food, Britain went in the other direction: our farmers were told to grub up their hedges, expand their field sizes, creating big prairie fields like those in America," he explains. From then on, the food industry became about mass-production: "People wanted their oranges to taste the same, their cheese to taste the same. Seasonal variation all but vanished."

Then, with the BSE outbreak of the 1990s and then foot-and-mouth disease, things changed again. Dairy farmers who could no longer make money from milk were forced to diversify, adding value with speciality cheese and setting up farm shops. People were forced to think about where their food was coming from, to ask why as much as 80 per cent of what we put in our mouths was being imported. All these factors, helped along by the rise of the celebrity chef, combined to create a public craving for artisan produce.

In the past 10 years, the number of artisan makers have multiplied. Farrand launched the Great Taste Awards in 1994; since then, its silver and gold stickers have become the ultimate stamp of approval for independent producers. Last month, 8,000 of them turned out to have their products entered at the event; that's a rise from 300 in the awards' second year. Although, scrolling through the list of products submitted at this year's Great Taste Awards – from Masala Chai Caramel chocolate to vegetarian haggis – it's hard to imagine what new ideas any future entrepreneurs could possibly have.

Such is the influx of new companies applying for foodie pitches at Borough Market that the market has temporarily closed its waiting list. "At the moment we're getting between 30 and 100 applications a month," says Borough's development manager, David Matchett.

Though that will not deter those queuing up to enrol at Nottinghamshire's School of Artisan Food, which opened its doors in 2009, in an old stable on Sherwood Forest's Welbeck Estate, offering 10-month courses in bread-making, cheese-making and butchery/charcuterie, for £18,500, plus the cost of accommodation.

Sheila Russell, the director of studies, says a number of applicants are so-called 'life-changers': "Most come from creative industries like graphic design and advertising, but also IT and the City. For a lot of them, they want to find another way." Often for city-dwellers coming from high-pressure jobs, "another way" means being your own boss, not having to commute, making time for the family. The reality, says Farrand, is quite different. "A dream's a dream, but the 'good life' plan doesn't work. You've got to evaluate and have a business plan that will stack up."

The odds for those starting up a small business are not favourable. The Federation of Small Businesses says more than half of new businesses will fail in their first two years. Hart, who had several false starts before Sacred Gin, is candid on this point: "Look at my history: failure after failure. You have to be able to fund failure if you want to succeed." Even when you do succeed, it is often a long while before the cash starts rolling in.

What is more, starting your own company is hard, hard work. As former Lloyds clerk Susan McCann discovered when she launched her Simply Add Chilli range, described as "a delicious chilli-based dip-come-cooking condiment made with local strawberries". McCann had been made redundant after spending 23 years in the same job. "I thought: what on earth am I going to do now? I'd been making the paste for years, some of the girls at the office said, 'why don't you try selling that?' "

In November 2010, after signing up to several waiting lists, McCann got a pitch at a local farmer's market: "I made 200 jars, and sold the lot for £3.99 a jar. It was a bit of an 'Oh My God' moment. It had cost me £2.30 a jar plus £60 for the stall, but I still made a profit. I realised I could really do this." Today, Simply Add Chilli is sold in four Waitrose stores; when it launched at her local Newton Mearns store, 550 jars went in three weeks, outselling Heinz ketchup. As a get-rich-quick scheme, however, it's been anything but.

Initially, not knowing anything about the food and drink industry, McCann got in touch with her local trade association, Scotland Food and Drink, which puts new businesses in touch with buyers and experts in marketing and social media, and the food industry; she joined Business Gateway, which gave her a mentor and information on pricing, and secured backing from a number of business loans designed to support start-ups – which are available from the likes of the Business Funding Centre, Business Link, and Chambers of Commerce.

"There was so much involved, it's frightening," McCann says. And it is an ongoing process. In order to build brand awareness, when she is not cooking or jarring or labelling or doing the accounts, she spends her days at tastings, tradeshows and markets. As well as being a seven-day-a-week job, it is expensive. "Entering the shows is terribly dear, the price of jars has gone up, diesel has gone up, but I can't put my prices up because people see my product as a luxury item. I keep telling myself if I can get through this year and break even, then I can carry on."

Despite the problems, McCann wants to pursue her dream. "You're doing something for you, something you really enjoy. I'm sure I can make it work; if it did fold, it wouldn't be for lack of trying."

The Innocent story: three Cambridge graduates who started out in 1998 spent £500 on fruit to make smoothies, which they sold at a festival. Their success was such that last year they sold a 58 per cent stake to Coca-Cola for between £60m and £70m, after seeing Innocent take 75 per cent of the UK's £169m smoothie market. That much is well known. What is often forgotten is the £250,000 initial investment and aggressive marketing campaign that was needed to see their ambitions realised.

The rewards can be a long time coming, too. After paying VAT and other government duty, and dividing the remainder between themselves, the manufacturers, the distributors and the retailers, Hart makes £4 on every £30 bottle of Sacred Gin sold. "That £4 then goes straight back towards overheads, cost of food materials, bottles, labels, graphic designers, samples... Making it is one thing, selling it is quite another," he explains. Standing out against the competition, and sending out the right impression, is all-important.

At a time when consumers are cutting back on big purchases such as holidays and cars, some are "trading up" in other ways, specifically turning to smaller luxuries like artisan condiments and cordials. The focus is not just ethics – attracting those who are willing to pay more for something independent and locally produced – but also about aspiration, selling a lifestyle. When it comes to packaging, there is a difference between something that looks handmade, and something that actually is.

Duncan Sambrook knows all about image. His eponymous brewery is one of the independent drinks industry's greatest success stories; after six years in business, Sambrook's company now turns over £1.2m a year. Along with two silent partners and a number of private investors, the former Deloitte employee stumped up £350,000 for the start-up – and of that, a staggering £30,000 went on marketing and design alone.

In order to compete in an increasingly overloaded market, you need to get your product seen in the right places, says Tracey Marshall, local and regional buyer for Waitrose. The store clearly understands the value of the trend for artisan produce, having launched its WI range earlier this year with the tagline "The closest thing to homemade".

"Once you've done your research and know that it will sell, which means putting your product in front of people who aren't family or friends," says Marshall, "you need to think about how it sits with what else is available." Selling in-store is very different to a stall. "You might sell your jam for £3 at a farmers' market, but if every other on our shelf is £2, you need to rethink. You have to think about optimising your allotted shelf-space, so packaging needs to be longer than wide, with portrait not landscape labels."

The market for handmade British products offers a promising profit abroad, too. Exports in food and drink from the UK grew by 11.4 per cent in 2011, to the tune of £12.15bn; traditional British fare is a marketable commodity abroad, and smaller artisan companies can tap into that. The luxury chocolate brand Chokolit for example, makes 25 per cent of its sales from foreign markets including Hungary, Mexico and 12 states in the US.

Back in London, Hart is adamant that he and Hilary will soon be in the money. "We've already built an international export business; in theory we're able to make 10,000 bottles a month." With enough financial reserves to weather a storm and a good space in the market secured, Hart has reason to be optimistic.

After all, as the food and drink industry continues to swell, the potential for small business is still great. But the million-dollar question remains: what will catch the public imagination? Above all else, as with any business model, it is about creating a hunger for your wares. As Farrand says: "the last thing this country really needs is another chutney or ice cream."

Artisan foodies: the success stories

Tyrrells Crisps

Farmer William Chase was forced to diversify after failing to make enough money from potatoes. He launched Tyrrells Crisps in 2002 and sold the company eight years later for £30m

Sipsmith gin and vodka

Fairfax Hall and Sam Galsworthy worked for Diageo and Fullers, before opening the first recorded spirit micro-distillery in London in 200 years. They now make 400 bottles of spirits per day

Beckleberrys

Father/son team Ian and Peter Craig first entered their ice cream for the Great Taste Awards in 2002. Their products have since won 40 awards, and are stocked by Selfridges and Wholefoods

Tracklements

Launched in the 1970s, William Tullberg's condiment company is now world-renowned. All products are still made in small batches, and are stocked at food-counters from Hungary to Japan

Innocent

In 1999, three friends bought £500-worth of fruit and created a smoothie empire. Last year they sold a majority share to Coca-Cola for £60-70m

The five golden rules

Do your research: is there a market for your product?

Put it in front of strangers: would they pay for it?

Find the right outlet: does it stand out on the shelf?

Secure your investment: it costs more than you think

Be prepared to fail: half of new start-ups go bust within two years