business How to Co-op a sauce business

The Hot Pepper

The Hot Pepper

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I was sitting here thinking about all of the smaller sauce companies that bit the dust. Ones that I miss. Great f****** sauces that just didn't make it. The passion sauces. The companies that started up because friends told them "this shit is gold!" So they started small with little knowledge and sold a few hundred bottles and eventually disappeared. I was thinking of how to co-op a brand. So basically there is ONE brand that serves as an umbrella. It has a name. The sauce company that closed up, this would be the brand under the brand and there would be many. One sauce I remember was Feisty Parrot. Great sauces! They were active here and used the forum for a lot of suggestions. We watched them rise and fall. But let's get back to the co-oping.
 
Okay so McCormick own Frank's Hot Sauce. Frank's Hot Sauce has multiple flavors. In this scenario, Feisty Parrot would have been Frank's, not McCormick. McCormick is the co-op. But they do not own the companies under them they serve as a co-op only.
 
So let's give it a name. Fire Frenzy.
 
So Fire Frenzy would be funded by a pool. A pool of saucemakers that own brands. FF handles marketing, etc. Feisty Parrot would be of the many brands. Independently owned but part of a co-op model business under Fire Frenzy.
 
Would this "all-in" model with pooled resources help the small survive? Would they be able to hit hard as a unified effort acting as a parent brand (Fire Frenzy)? Should there be a max of allowed brands to avoid diminished returns? 
 
I have more to say but I am going to hit Post now and continue later. And maybe salsalady can chime in on her thoughts on this model.
 
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Loosely based on:
 
1. I live in a co-op. It's an alternative to a condominium and really only popular in NY. But you basically "own" your own portion of the building but really what you own is a percentage of the whole building (based on your unit size) with the co-op being the parent which you have stake in. And you pay monthly "fees" for management of the building based on your unit's size (this would be the pool for marketing, etc.), and there is a board that is elected to make decisions from the owners. It's a self-governing communal business model. You care about the whole building not just your unit. So in the end you own a small portion of something larger, so you care about the larger entity's success. But I live in/own/manage my own unit (this is like owning your own sauce co. within the co-op).
 
But also:
 
2. The co-op business model is very popular in the UK. Pubs, soccer, food... watch this video.
 
 
https://www.youtube.com/watch?v=90FL_bBE4mw&feature=emb_title
 
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You run your business as usual and this has nothing to do with manufacturing costs. The co-op is a joint-effort marketing and distribution parent with limited seats available. It has a name that becomes the parent brand for marketing purposes and brand recognition. Like Kraft etc. But it's a self-governing co-op of small saucemakers not a parent corporation.

Okay more later. ;)
 
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I'm interested.

There's some co-op apartment buildings down here. It's super hard to get into them. It's the type of thing people write in their will leaving the apartment to their loved one because "rent" is only like 350 dollars.
 
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Right, so you kind of understand the model. If I want to paint or renovate, I can. Buy furniture, yes. So in the sauce biz that is your own expenses like trade show booths, merch, manufacturing, etc. The monthly fee would be for things like marketing and distro, etc. In my building it's for keeping up the building, repairs, renovations, shared utilities, etc. They also set rules. So there's some things the saucemaker could not do that would violate the co-op rules. I guess in this case it would be more of a code of ethics, but also rules for their Fire Frenzy products.
 
But the board also votes on covering certain things you benefit benefit from overall. 
 
So in essence, it could pay for some manufacturing. And the the labels of the parent co-op on the sauce. So with that basic understanding, let's move away form the building analogy and talk about the sauce only.
 
I will keep calling it Fire Frenzy for continuity.
 
Hypothetical:
Okay so! Fire Frenzy. We are looking for 10 companies to form a co-op. I am one of them (because it needs to be self-governed, this is NOT an outside company looking to manage sauce companies. (Again this is hypothetical I am not looking.) So looking for 9. I want to meet up with at least 2 to brainstorm and go over the initial plan. These two members will likely become board members until year two when there is a vote. We discuss things like how much money we need from each saucemaker. Let's say 20K. That's $200,000 overall. Now we decide what the money goes toward. Things like, a manufacturing run for 1-2 flavors for each maker. Maybe just start with 1. You may have a sauce company already or may be starting one. Doesn't matter. So let's say Texas Creek is interested. We can do a run of that sauce with the new label and we decide how to present it. So we have a Fire Frenzy logo and maybe in script letters, tilted, it says Fire Frenzy Presents and under it Texas Creek Spicy Steak Sauce. Others that are startups, same. FFP logo above theirs. There is a FF website that sells all the sauces branded with FF but also you run your own sites independently and carry the FF version plus all your others. When we do trade show we do one big FF booth. We share all marketing. We pummel the market. We try to get into retail with the FF brand. Definitely need a good accountant lol. Anywho, yeah. Still brainstorming here. ;)
 
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Also our board does interviews and you must be approved if you want to buy a unit if someone is selling. This would also apply here. I guess, in the food world, we could use a fancier word, like curated selection. ;)
 
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The co-op here is incorporated. The business model is co-op. Now you get the idea. Okay carry on.
 
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You only pay that large chunk once. The rest is monthly. You figure out a number that works to market, run sauce again in x days, have a reserve, etc. And the profits are split from the FF sauce so some goes back into the co-op (small or none, can be figured out). The co-op profits and that's a good thing. That's the money for more sauce, marketing, etc. Everyone keeps making money and sauce.
 
Ok done for now
 
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Basically higher monthly fees would be no profit sharing you keep all.
Smaller monthly fees would entail profit sharing.
The board decides.
 
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well, I have to say, if Texas Creek Spicy Steak Sauce is to ever be seen outside of Hank's Market, this is probably the only way.  :lol:
 
 
Some things that come to mind-
Why did these other companies fold?  No time to properly work it if it's their weekend project?  No place to make sauce regularly? burnout? Couldn't get the profit margins right?
 
Going off the original numbers, if some of these small companies had $20,000 to buy into a co-op, they are are probably established enough, would they benefit from the co-op?  Would they maybe use that $20k to build a kitchen? 
 
If the co-op sponsors production, we'd have to work with a co-packer.  Lots of those to look at.
 
If there is a FF website with the 10 business's sauces, where would it be physically located, who would do the actual packaging and shipping?  Everyone would have to ship their sauces to that location....which is $$$ on top of more shipping $$ to the customer.  When I had the sauces online, I really didn't sell that much via online sales. Maybe others do better than I did with online sales.  Part of it was because it cost $9 to ship one 12 oz bottle of $6.99 BBQ sauce.
 
If I lived over in western Washington, in a place way more populated than the Methow valley, I would say with a pretty good certainty, that I could grow the salsa business with local sales in a couple counties and add in the hot sauce sales to local stores, I could live off the food products income.  So I wonder why some of these other companies didn't make it?  Scott Zalkind has been full time in the greater San Francisco area for (7? 8?) years.  Lots of other companies also.
 
I understand the building co-op situation.  Farmer's co-ops join to get better prices for their product.  Not sure how brewery/distillery co-ops work.  Definitely need to JayT this for more information.
 
I'm interested to learn more.
 
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In essence the key is brand power and resources. 10 strong as one brand and pooled resources to be able to do bigger things as that brand. You can always leave the co-op if you think you are successful on your own at some point.
 
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salsalady, it's just an idea but the model is interesting. There's many possibilities actually. You could simply not include manufacturing costs and have them do as they do but the co-op could pay only for the label for the new bottles with the new branding on it. Or that is the initial cost to join, plus the maintenance (membership?) fees. It can be simple or more complex. But the idea of a gang of companies acting as one with a curated product branded as a new brand, with the power of the co-op's resources behind them all, is interesting. 
 
Yes we also have food co-ops here. The model is huge is the UK. Here it's just more of a shared thing for groceries, over there it's full-scale biz.
 
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So you create a diverse product line (5 hot sauce, 2 salsa, 1 BBQ, etc.) but that line is curated to form one powerful brand. So similar to what one maker might have already, but this is one product from each maker to form the diverse line. When it grows you can either do 2 products from each, or look for new members. But you keep it small to avoid saturation. 
 
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SL would definitely be on the board with her crazy knowledge! I have sauces and a name but still have no idea where to start believe it or not lol. So that collective would be awesome. :)
 
salsalady - CEO
thp - intern
 
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Okay this just evolved into a new but same idea. A THP brand that is curated and sold on this site and the THP brand is also sold on their websites. Things that make you go hmmmm.

Just part of the brainstorm keep the other conversation going
 
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Distribution- might make sense to utilize an established online store like HEAT. They could set up a separate page featuring FF products. Everyone would still have to ship to them, but they have shipping established and other products to entice customers.
 
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Yes they are very open to working with us, I talked to him once about a page for THPA winners and he was down wit that.
 
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The Hot Pepper said:
 
salsalady - CEO
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Oh, hael no! I cant even keep up with making my own sauces let alone anything with a smidge of responsibility.

:lol:
 
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