By Harald Zoschke
If your last name isn’t McIlhenny, chances are that you were not born as a fiery foods business entrepreneur. At least I wasn’t.
Running a software company for more than fifteen years in Europe and closely watching the signs of the time, I figured out a few years ago that it would not be advantageous to have all my eggs in one basket. At the same time, a friend of mine in Florida was having a hard time keeping up with his growing hot sauce business–besides running a hot shop with his wife, he had created two award-winning sauces that were taking off in terms of sales. Amidst the boom, however, the couple split up. Since the wife was the administrative part of the couple, and he couldn’t afford employees, he was lost in a flurry of making sauces, ordering ingredients, taking orders, and packing and shipping product.
Lesson learned: Before Mom and Pop decide to run a fiery-foods (or any other) type of business together, they should perform a serious self-check. Is the marriage stable enough to take the added stress of an operation that might turn into sixteen hour days? Are they able and willing to spend almost twenty-four hours a day together? Will they be able to manage a business in addition to their family?
In this particular case, my wife Renate and I were able to help, to everyone’s benefit. We acquired our friend’s hot sauce shop and worked it into our newly-founded fiery foods company, which got a nice head start due to the two sauces that were already well established. Also because of this purchase, our friend had some money on his hands to pay overdue bills, and he was then able to concentrate on his old job again, which he never gave up completely.
Lesson learned: Never fully give up your existing job or business until you feel confident that your “hot & spicy” operation will pay for all your needs, plus bring you some extra money. If you are a newcomer, try to build on existing experience and reputation.
While our friend had cooked and bottled his sauce in small batches, we figured that we needed to manufacture on a larger scale in order to keep up with the demand, as well as our plans for growth. Since we did not want to invest in a manufacturing facility of our own, we decided to use a local contract packer (“copacker”). After he signed a nondisclosure agreement, the copacker started to look at our formulas. While our products called for plenty of fresh peppers, this manufacturer was better prepared to work with mash (peppers chopped and brined at the grower’s location), so he advised us to use his mash, too. We were in for a big disappointment. Our sauces looked terrible, tasted different, separated like hell, and were only acceptable for a trip to the dumpster. Time to switch copackers.
Being higher up learning curve by now, we made a better choice the second time. Not only is our current copacker able to work with fresh peppers (he uses fresh ones for his own products, too), he shops for all ingredients without markup, and charges less manufacturing cost per case than his predecessor.
Lesson learned: Be especially careful when choosing your copacker, as he determines the quality of your product. If you need fresh ingredients, find out what the copacker normally uses. Find out what he is charging for key ingredients, then compare prices to some wholesale suppliers that you call up. Check hygiene, too; it’s helpful to visit the operation in question unannounced. You might be surprised.
As your business picks up, you’ll probably be in for yet another lesson. It seems to be notorious in the fiery foods industry that nobody pays you on time. Don’t run your business on the last dime; always have a financial buffer.
While companies like McIlhenny and Pace account for the lion’s share of this industry, strolling through the aisles of the National Fiery Foods Show® quickly shows you that many of the companies are very small–Mom & Pop, Father & Son, Buddy & Buddy. And guess what: When the show is over, every single mini company will write up almost identical “Thanks for stopping by our booth … we give you flavor and heat …” letters to their potential new customers. All other day to day tasks are handled in a similar fashion–every company an island in the sea of an industry that’s rapidly getting more competitive. One-thousand-fold duplicated efforts in small companies make sure that none of them will ever become a threat to the established fiery foods big wigs. In order to survive, you must work smarter and distinguish yourself from the rest of the crowd.
Lesson learned: If you are able to find trusty competitors, it might be worthwhile to join forces and split tasks among partners; each company still can (and should) keep its corporate identity. This means one person ordering supplies for two or more companies; another person taking care of administrative work and maybe answering the phone. Yet another one taking care of sales calls for all partners’ products. Sharing resources like phone systems, computers and staff skills can save big bucks and help you to make more money more quickly–law firms are the best proof. And last but not least, your customers are benefiting–they need only call one supplier for many products, and consolidated warehousing and shipping on your side saves them money. My company is undertaking such a co-operation with another local hot sauce company, and as far as any of us can tell, it is working quite well.
This story wouldn’t be complete without talking about Web sites. Even the smallest fiery foods company can no longer afford to be without an Internet presence. And of course there are “Web Designers” out there who know this very well and are just waiting for you. While I am fortunate enough that my software company in Europe is selling Internet technology, which enables me to build our fiery foods Web presence without external help, I saw quite a few fellow entrepreneurs talked into dubious site designs, banner ad purchases and online mall rentals. The most frequent sales argument you’ll hear is the number of “hits” (the total number of times all pages on a Web site are viewed), which is often mistaken for the number of potential buyers.
Lesson learned: Before signing up with a Web site designer, banner salesperson etc., ask for references. Don’t base your decision on hard to prove and often meaningless hit rates; find out what the referred clients actually got out of their investment. If you do develop a Web site, keep in mind that a successful site is never static. If you don’t provide interesting and varying content (including recipes, some humorous stuff, places to purchase your products etc.), people will visit your site only once. Decide who will provide this information, and who will be in charge of updating the site. And remember: people won’t visit your site even once if you don’t tell them where you are, so don’t forget to include your Web address (“URL”) on your business cards, stationary, show banners, as well as in your press releases and ads. Also, be sure you or your “Webmaster” registers your site with major search engines, the Internet’s powerful counterpart to the Yellow Pages. I decided to take care of our site myself, and I can tell you it takes a lot of time (say goodbye to late night TV shows).
Well, I’d like to tell you more about lessons I’ve learned so far, but I gotta go maintain our Web site….
Harald Zoschke is president of Suncoast Peppers, Inc. in Kressbronn, Germany and runs www.pepperworld.com
Update, September 2000: The above Hot Seat article originally appeared in Fiery Foods Magazine in November 1998. A lot has happened since then, as readers can tell by visiting our Web site. Although our first attempt of co-marketing with a “competitor” didn’t last too long, we learned how increasingly important strategic alliances have become. Latest development: Teaming up with CaJohns Fiery Foods Company of Columbus, Ohio. They acquired our award-winning line of hot sauces, which includes Vicious Viper, Belligerent Blaze, Butt Twister, Liquid Ax, El’s Red Eye, Sir Fartalot’s, Peppa Colada, Florida Heat, and Currybbean Fiesta. In turn, both companies’ products will soon be introduced in Europe. This way, our sauce line benefits from CaJohns’ strong distribution infrastructure. In turn, CaJohns does not have to worry about marketing their products abroad.