High cost of shelf space sinks award-winning startup

CHARLOTTE, N.C. – The rapid demise of their business is a sore subject for sisters-in-law Holly Paeper and Monique Prato.

In two years, their Charlotte-based gluten-free foods company, Bumbalooza, rose to prominence in the specialty foods community – winning awards, shelf space at 400 stores, the owners say, and – as a Charlotte Chamber Power Up Challenge winner – a $25,000 check.

But less than three months after Bumbalooza won the Power Up prize, Prato, 37, and Paeper, 41, moved out of their distribution warehouse, cleaned out their offices and stopped selling baking mixes.

The reason, they said: They spent thousands trying to get their products in the aisles of large grocery chains only to feel the sting of delayed and partial payments from the food giants they would not name. Unable to replace the money they lost, Prato and Paeper decided that closing the business was their best option.

“We were bleeding cash,” Paeper said. “We didn’t realize the true costs of getting the shelf space … would sink a small business.”

The push behind Bumbalooza came from a common thread in Paeper’s and Prato’s lives: Many of their family members, children included, are gluten-intolerant.

“We just saw a need to try and have cleaner food, and there’s just not a lot of products on the marketplace,” Paeper said.

The moms sought to make a change. Together, they created baking mixes that came in a variety of flavors, including cookies n’ cream cake, an oatmeal bar with caramel and a “pink lemonade donut.”

“We stuck with mixes that were a little different,” Prato said.

Prato and Paeper didn’t want to compete with Betty Crocker or Duncan Hines. Instead, they tried carving their own niche in the $109 billion specialty foods industry. For a time, it worked. “We made a really good run of it,” Paeper said. “We were so convinced that this was it, that this was the path.”

In order to get on big shelves, food makers typically must pay larger retailers “slotting fees” for shelf space. In Bumbalooza’s case, the owners said they paid grocery chains more than $20,000 each.

They assumed payments for their products would follow. It rarely happened.

Some larger retailers wait 90 days to pay smaller suppliers, said Chris Reedy, of Blue Ridge Food Ventures.

By January, Bumbalooza’s seams came undone.

“Closing the business was one of the most difficult decisions we’ve ever had to make,” Prato said.

Bumbalooza is the first business to close so soon after winning the 3-year-old Power Up Challenge, chamber spokeswoman Natalie Dick said.