169. Building a Profitable Single Origin Spice Company

Building a Profitable Single Origin Spice Company

Jordan Buckner: [00:00:00] Building a CPG brand comes with a ton of challenges, but there's also paths to building a successful company, whether that's through the right financing operations or by building a profitable business and having that as a goal from the get go. early stages. So I want to kind of dive into what that looks like and one path of getting there.

And so I invited on Ori Zohar, who is the co founder of Burlap & Barrel, a line of single origin spices. Ori, welcome. 

Ori Zohar: Thanks for having me. I'm excited to chat with you about this. 

Jordan Buckner: One thing that I've loved about following your journey, and we did a webinar a couple of years ago on this, was the way that you are really focused on the value that you provide to customers, but then also building a community around customers in a space that is really like one of the core commodities of Spices, but you've been able to find a way to differentiate yourself and kind of build loyalty with your customers.

Amongst , your customer base. And I love in this episode to kind of get into some of the insights that you learned [00:01:00] from that process, but maybe to start for our listeners who haven't heard of you give us just like the 30 second overview of what burlap and barrel is and how you got started. 

Ori Zohar: Yeah, great.

Thanks. Burlap and Barrel is a social enterprise. We're a single origin spice company that works directly with small holder farmers. We set them up to be their own direct exporters. So we get really exceptional spices that comes through a really clean and simple supply chain. So really fresher, better, higher quality spices.

And we've been kind of living on the, like people know about single origin for coffee, tea, chocolate, people go to their butcher, to the farmer's market. So kind of, it's all single origin. And so we're just extending that kind of value into spices that instead of being coffee, tea, chocolate, we're working with saffron farmers, you know, in Afghanistan, and we're working with paprika, you know, pepper farmers and smokers in Spain.

And so we're doing that all across the world. The company is seven and a half years old now. Me and my co founder, Ethan, are running it. Ethan's kind of the culinary side. He worked [00:02:00] as a chef and an aid worker and kind of brought those two parts of his life together. And my background is in more business and marketing and operations.

And so I've been a long time entrepreneur. And so we kind of are two sides of the same coin. We're kind of bringing in culinary and business together to try to build a one competent social enterprise. So that's a little bit about us. 

Jordan Buckner: I love that. So when you say social enterprise what does that mean for you and burlap and barrel?

And how are you like finding these suppliers and helping them build their own businesses? 

Ori Zohar: So social enterprise, technically, we are a public benefit corporation. And so to get into a little bit of the nitty gritty. All all for profit businesses have a fiduciary responsibility to maximize shareholder value.

So all these companies are built on maximizing profit and company value. Public benefit corporations are a relatively new structure, but where the company is allowed to equally and legally has the fiduciary responsibility. to also promote a public benefit and equal weight with their kind [00:03:00] of shareholder value.

So our public benefit is connecting smallholder farmers to high value markets. We have to publish an annual report on that. We love that transparency. We want to bring people in along the journey. And the whole idea is that most of the time spices come through this really long and kind of confusing process from the farm to your kitchen.

If you go to some large retailers and check the country of origin on your peppercorns, there might be five countries listed on there. So what we instead do is we set up farmers to be their own direct exporters. We pay them a lot more, but instead of the farmer selling fresh spices into like somebody who's going to clean it, but it's buying from hundreds of farmers and somebody who's going to dry it and somebody who's going to grind it, and then someone's going to export it.

We work with the farmers to do all that. So they're able to make a lot more money. We then get spices, don't get mixed and mixed and mixed with good quality, bad quality, new, old, lots, all that stuff. And we then have a really clean and direct. So the farmers make a lot more money. They're able to kind of support their communities [00:04:00] in a better way.

We it's literally five X. Plus than what they'd make on the commodity market. But so instead of being a company that then donates money later for social, which we also do, but it really, the point is that our spices are a lot better because we pay the farmers more and that allows us to have a really clean supply chain.

So it all kind of works together and kind of just pointing capitalism in a direction that actually pays all the people along the supply chain. And so we love that. 

Jordan Buckner: I am very inspired by that because I think a couple of things that. You can do and have done really well as 1 finding a category that has, you know, 99.

8 percent awareness, which are spices, right? Not everyone knows every single spice, but you have a range of collections where something on your site. Somebody, you know, everyone uses and everyone can go there and find it. But then you have a very clear kind of reason to believe, and not only how it helps the farmers and suppliers that you work with, but also the customer [00:05:00] benefits from having a higher quality spice that they can use.

But then they also can feel good about it by knowing where it comes from and that it's being able to support others as well. And I think that's just a really great and clear Product and story and reason to believe that people like, ah, I get it. Right? Like, it's so simple to have someone to understand that.

Now, I know there's also things of like, why does quality matter and how they are different because there's a lack of education about spices and the sourcing where they come from. I'm kind of curious. How much education are you having to do around, like, the premium nature of your spices or have you found that like people get it or you're just tracking to the people who care.

Ori Zohar: We kind of have two types of spices, but one of our rules always is that like you should be able to open our cinnamon and smell it and taste it and just buy it based on those merits. You don't have to care that we're a social enterprise. The social enterprise is the reason why the cinnamon is so good, but you don't need to like buy it because you think it comes from a [00:06:00] good supply chain.

You should buy it for that purpose. But hopefully all of our spices have to pass this test that they need to be memorable and intense and wonderful and special based on their own merits. But we kind of find that we have two categories of spices. One is kind of better versions of spices that maybe you already have in your pantry.

So those are some of our best sellers. We have this incredible wild human that, that grows in Northern Afghanistan. We have this really incredible cinnamon, Royal cinnamon from central Vietnam. That is really not a type that gets exported out of Vietnam. It's mostly Cassia cinnamon, but we found true Vietnamese cinnamon.

So that's the thing that people are like, that feels like going to the farmer's market and having an apple that was picked that morning off the tree. versus something that is in your grocery store has been in cold storage for six months. Like people don't believe that their grocery store produce often.

Why is it available year round? Because it's made to be available year round. And so then we have this other category of spices, of really cool spices that we think you should know. And so like, this is our like ground black limes that if you're somebody that, that cooks Persian food, You'll be familiar [00:07:00] with whole black limes.

We ground them into a powder and you get this like citrusy tart, but also savory elements, all the cooking. And so what we do is people come to us because of something that they found. Maybe it's an earth for chili from Turkey or a silk chili, which is the Aleppo style chili from also from Turkey. And then you'll come in and you'll give it a try.

And then you'll want to explore the rest of our lineup. We have great newsletters that we send out twice a week that are meant to be educational and informative and fun and new products. We have an incredible spice forum on Facebook that has 12, 000 members strong, where people are just kind of sharing recipes and asking questions and teaching each other.

But like, we don't have a ton of capacity to like put a ton of educational stuff out for you. We'd love to do that. But but we also work with some chefs and influencers and all that stuff. So we're really trying to do this full court press of you find out you come to us for one spice and then you slowly explore the rest of the lineup.

But we also try to have good places where a lot of really, really wonderful home cooks are there. And so like just Ask him any question about any spice and you'll get 50 [00:08:00] responses on how you should cook with it and what you should do and get that help. So we tried to make a community that kind of is like a self serving community that's a really happy and wonderful place on the internet, unlike most social media.

Jordan Buckner: Yeah, I think that's really, that's really key. Right? And like, you're finding something, like, if you just had a page that was like, only about your spices, you're like, hey, we're just going to let you know when the new spice comes out, like, blah, you know, maybe a couple dozen people would join, but because you tapped into this recipe sharing community and people who will like, really share the things that they make and help others.

I think that kind of pulls it all together. I'm curious to kind of take me back to the beginning. You've been around for over seven years. Now about when in that journey did the company become profitable? 

Ori Zohar: We were profitable from day one, but it was a little bit of a cheating profitability because we weren't taking salaries.

And so, I mean, my background, the previous company that I did was a venture backed mortgage company. I mean, I bounced around from different businesses. I've always had a soft spot for food in my heart. And then when Ethan, it was [00:09:00] our second business together, we had an ice cream company in 2010 that I got a lot of cavities from.

But but when we kind of jumped into this, you know, I'd come from this heavy duty venture backed mortgage company that we had started and we're trying to build as a friendlier way to get a mortgage. We raised 32 million. We're trying to sign a C receipt term sheet, which we signed for 40 million, but the investors were just waiting for us to go bankrupt.

So that was really tough and heartbreaking. And we ended up selling that company, , but selling it at less than we had raised. So it was just a really. Tough journey. We were able to salvage it still. So with burlap and barrel, we're like, we were willing to tolerate a lot of pain in order to kind of.

Stay bootstrapped. But we also did it a little like we had, you know, about 10 years into our careers. So Ethan and I had both been able to save a little bit. We did some consulting, we stayed a little bit on unemployment, like we just tried to like scrounge and scrape by. The first year, Ethan's apartment turned into our packing facility and fulfillment center.

So like, We didn't get to do things all kind of by the [00:10:00] book the way that we really wanted to build them up, , but we were able to kind of skate by and just kind of keep building this business slowly. So we were always profitable , and in the early days where like, we could either pay ourselves some salary , for this, or we could use that money to buy more spices and kind of keep feeding this engine.

And so by the time we were on our third year, we were able to pay ourselves minimum wage. And that felt amazing. But I talked to a lot of early stage entrepreneurs and it's a really hard thing of like, Let's say there were two of us, let's say we each wanted to pull a 50, 000 a year salary, which, you know, is, is not enough to live off in New York city.

But, but a start, I mean, your business that needs to pay 50, 000 plus employer taxes, social security, all that stuff means that it's going to cost you 60, 000. So how much revenue does your business need to make? I have 120, 000 left over, you know, to be able to pay salaries and it's a, it's a really tall order.

So. We were just doing all kinds of other things. Like I was doing some consulting, you know, there's all this other stuff that we were doing just to get the business to the point where it could afford to pay salaries or that [00:11:00] wouldn't put the business in like existential threat. So, so that's how we stayed profitable.

It was by not paying salaries. And then eventually we kind of started building ourselves up to being able to pay ourselves somewhere near what a market rate would be. My friends that work in finance or in law are doing way better, but we get to build this company and it's really fun and it's, and it's really great.

So we've really, it's been a really tough balance. And because we source spices directly from the farmers, we buy our spices at harvest and many of our spices up to once a year, so we literally now have millions of dollars in inventory. We've, you can't use that to pay salaries, you can't use that to pay staff, so it's been such a kind of careful balance, but I will tell you that it feels a little bit arbitrary, but when we passed a million dollars in revenue, Everything became easier.

And that was for two reasons. One is we were hitting some kind of scale with our packaging, with our label printing, with our co packer feeds, our fulfillment center, with our shipping, like we were able to all of a sudden buy stuff at some [00:12:00] scale that that was able to reduce our costs. And then number two at a million dollars a year, because we were a profitable business that whole time we were able to then qualify for some lines of credit, like banks, all of a sudden we're like, you're no longer this crazy, risky thing that we would in no way want to finance.

But then we were able to get lines of credit and stuff like that. So things became a little bit easier when we crossed a million in revenue, but that's a bit of an arbitrary like thing, but banks seem to care about that. 

Jordan Buckner: Yeah. I've seen the same thing as well, because people talk about Economies of scale in the food industry, and I simultaneously, like, at a certain point is just around the 1, 000, 000 dollars in sales.

Like, you start to be able to order, like, truckloads of things and or half truckloads. And that's usually where, like, the savings start to max out until you're like, a 10, 000, 000 dollar business or than 100, 000, 000 dollar business. Right? There's like, it almost 10 X is when you start getting those higher efficiencies.

Totally. That's awesome that you've been able to get to that point. You primarily, or almost exclusively, were selling on direct to consumer, right? 

Ori Zohar: [00:13:00] We started, yeah Ethan was doing a lot of door to door sales to restaurants and that really helped us get started, and also helped us legitimize ourselves, because then we could go to HomeCooks and be like, check it out, all these chefs that you admire.

Use our spices. And so that really helped us. We did a lot of that on the menu of 

Jordan Buckner: the restaurant or just like the show we tried, 

Ori Zohar: but it wasn't always there. But like, we knew that as soon as we got 11 Madison park to buy some coriander from us, we then turned around and said, as seen at 11 Madison park.

So we knew that if we could land some of these key accounts, then that would help turbocharge our like legitimacy to journalists. The customers and also we really opened a lot of doors so they didn't need to put us on the menu, but we knew and it was a real claim. So we were able to start kind of singing that from the rooftops because I think early days, you need to build legitimacy, because a lot of people go on your side like why should I believe you.

And we're like, well, look at all these chefs. Look at all these journalists. Look at all these reviews. So we just tried to do whatever we [00:14:00] could to kind of build some legitimacy in the eyes of home cooks that were coming onto our site for the first time. And so restaurants and chefs really helped. In the early days, we realized that it was cheaper for Ethan and sometimes me to fly to the farms, meet the farmers, spend good times doing relationship building, and then check spices in our luggage on the way back.

But eventually, we started working with fulfillment centers. But in the early days, I mean, It was really tough. Like it's hard to make money when you're shipping spices by air, but we couldn't ship spices by ocean because our orders were too small. So like, there were all of these points of scale that really helped us build margin and that's how we really started pushing on e commerce because in e commerce we were able to have direct relationships with customers.

We were able to sell short lots. Like if we only had like. a hundred jars, we could sell it on our site and be like, Hey, we have this really special lot of spices. We don't have a lot of it. And that's that you can't do that with grocery when you're doing distribution and all that stuff. It took us. really like six plus years to start really pushing into [00:15:00] grocery aside from independent and specialty.

And then the other thing is that we launched in late 2016, but that means that we were kind of, we hit the pandemic at a time where half of our revenue came from restaurants. That went to exactly 0 percent as of March of 2020. And it's grown back, but, but not in the same way as our e commerce has grown because we saw people who are stuck at home, they grocery stores weren't carrying spices, or really they were starting to fight toilet paper and like ground beef and beans, you know?

And so people started going online. There was a meaningful behavior change. People started going online for spices and we were like ready for it. So 2020, 2021 and even 2022 we're all this like just feed this like new group of folks that were really interested in getting spices. We're looking for better sources.

And then if they gave us a chance, how do we make it that they never go back to grocery store spices because they've tried our spices and we provide them with great customer support, cool varietals, really good flavors, and really fun ways to kind of, learn about how good single [00:16:00] origin spices can be in ways that that they weren't available in the grocery store.

So that was the kind of theme of the last few years since the pandemic is holding on to this newfound e commerce customer. 

Jordan Buckner: Yeah, one thing I want to really highlight that I've seen a lot of successful companies do is find a Early source of customers that both can support the business financially, but then also add some of that legitimacy, like, for you was the restaurants, right?

And being able to go and sell door to door and your business model. Wasn't like, we're going to be in every single restaurant, but like, let's find some key ones. Let's find chefs that care influential chefs that want to talk about this. And then you can use that to highlight, but it's also a really great stable revenue source.

As long as the restaurant is like open, then they're gonna keep buying from you don't have to like sell to them every single, single time. And we 

Ori Zohar: supply some other spice companies with bulk sacks, like that's not the core of our business. But if it lets us buy more stuff from farmers, it's less it lets us have full containers of spices, rather than like smaller shipments.

So Our [00:17:00] philosophy, and this ties back to our public benefit, is we always just wanted to buy more spices from the farmers. The farmers don't care if we sell it to restaurants or home cooks or like cosmetics companies. And so we just tried to say yes anytime anybody wanted to buy our spices if we could reasonably fulfill that order.

And so that's how we built our business. And it means that Ethan and I were two people for the first few years of the business. We had four lines of business. We had e commerce, we had food service, we had grocery slash retail, and then we had bulk. And it felt a little silly, but we're like, hey, if, if Lush wanted to buy our turmeric in 25 kilograms, 55 pound sacks It felt silly to be like, no, we don't do that.

We were like, absolutely. Thank you so much. We hope it doesn't turn your customers orange. 

Jordan Buckner: Well, I remember too, I had a conversation with Margarita Womack, who's the CEO of Mas Panadas, the Frozen and Panada brand. And she said like the majority of their business early on was selling private label to retailers.

And it allowed them to, like, build their own [00:18:00] branded product up, which is at, like, at a loss until it could reach profitability after a couple of years because the private label was able to support and provide enough revenue coming in for the company to still be profitable. And they, like, tripled their, their manufacturing facility is running, like, 3 shifts a day, right?

Like, it built that really strong foundation, which I think a lot of. Founders kind of overlook those opportunities, but they're really totally, 

Ori Zohar: I was talking to a tinned fish founder yesterday and, and she's having a lot of success in hotels. And it's like, I don't know why, but like that she found the niche and like that, like it just kind of go where the demand is, you know, like if you're a stream, you just kind of like follow, follow down the path.

And I think that like, it may not be who you think it is, but Hey, if that's the way that you build your company and get to exist and get to grow that's a real gift. 

Jordan Buckner: So now I know you are beginning to expand into retail and grocery. Why now? And what's your strategy behind that? 

Ori Zohar: Yeah, a big piece of why now is that we know that to work in [00:19:00] grocery you're not usually selling to the grocery store.

You're selling to distributor. You, the grocery store often isn't like setting up the shelves. You need to pay for a merchandiser. If you can't even sell to the buyer, you have to hire a broker. And so we didn't have the margin to support any of that stuff early in the business, but we could do e commerce selling straight to people's homes and building really good customer relationships.

As we grew, we moved our jars from buying jars from like local packaging resellers domestically to now we get the manufactured in Taiwan that gave us. Margin, we were working with our co packers and we were moving more volume through them. So we were getting better pricing. We were working with our fulfillment centers.

So all of a sudden we were building more and more margin into our product. And then we were like, okay, now we're ready for grocery. And I think a lot of companies start from like the top down, like when it'd be amazing to do national distribution. But I've heard a lot of advice from other founders that are doing that it is really expensive to be doing low volumes at national distribution, because you're paying all the money for that [00:20:00] infrastructure, but you're not pushing enough stuff through the pipe, you know.

to really justify it. So we kind of flipped it on its head. We actually don't want to be a national distribution right now. It's too expensive and spices are too slow of a category, at least so we think to get started. So we're doing it bottoms up instead of top down. So we started with small specialty independent places that don't have an eight foot wall of spices, but that curate some brands and that we're kind of their staff knows every product in the store and loves it and sells it.

And where customers come to find cool new things and gifts and all that. So that's worked really well for us. Now we're slowly kind of expanding into like regional specialty and we're slowly dipping our toe in the water of kind of local distribution and learning how to do that. They care about turns.

They care about taste size. They care about promos. And like, it's really easy to kind of lose sight of that. We went into a store that was carrying our spices. One of my friends was in Plano, Texas for a great store that was carrying our spices. She sent me a photo of it. And I was like, [00:21:00] wait, where are two thirds of the spices?

And like, we don't have a merchandiser there. So just sold out. We emailed the buyer and they ordered 1, 400 worth of spices. So like, it's like the level of attention of detail that you need for this to work. It's so high. And that's where I think a lot of people lose their shirt and national grocery stores are low margin businesses by default.

So they're letting more and more of the, of the companies in there do it. And if you're Unilever and Procter and Gamble, you, you own the truck, you own the distribution, you own it. So you can do it profitably in ways that we could never. So we'd be a competitive disadvantage national. So we started small independent and specialty and are kind of, again, just following the wind in there to like.

Following the path of this stream, you know, it's a slowly growing into more and more regional specialty, but not trying to jump into big national where we're going to be at a competitive disadvantage and believe me, the bigger companies are going to eat our lunch all day long. They're better at it. 

Jordan Buckner: Yeah. I think that's a really smart strategy because I think also I find a lot of people will find these big opportunities, right? And it's like, Oh, it's going to create this really great revenue [00:22:00] and take off, but then you have issues of these large distributors charging fees. I know. Kelly Perkins, who's the CEO of Spinster Sisters, just created a post on LinkedIn that between the taking a unified their national distributors, the fees and chargebacks from working with them is accounting for 30 percent of their revenue.

Of their entire company's revenue, not just the revenue through those distributors, but across all their channels because of how egregious they are. And like, it's something that can put companies and has put companies out of business. And so I really think you're taking a smart approach of, like, building the retail business from the ground up.

Ori Zohar: I appreciate that. And we've just heard so many horror stories. It seems like if you have deep VC pockets, you can really quickly scale up to being 100 million a year business, but you're going to do it at a meaningful loss. And if those VCs disappear, you might be out of business pretty quickly. Since we're bootstrapped social enterprise, we've kind of had to live by the rule of profitability.

[00:23:00] And, and that's kind of forced us to be more creative in our solutions. The other cool thing that we've seen is there's a lot of companies that sell e commerce like online, , but we can get in there as a complimentary product. So for example, Rancho Gordo, which is one of my favorite companies of all time.

And I talk about them all the time. They sell a lot of beans online and if you don't buy from them, you should, but they also sell some of our spices online. So it's been a really nice way to get introduced. So it's not retail, but it kind of is because we're selling them our wholesale cases. They're selling it through there.

So it's been a really good relationship with Rancho Gordo. We do the same thing with King Arthur Baking. And so like those relationships that have taken a long time to build up, but it's really nice because these are, these are companies that sell really great things. And we can kind of, sell complimentary products where they get to make a little more money because they're having higher orders because they not only sold the beans but the spices to cook the beans or King Arthur flour sells the flour place plus some spices that you'd want to bake with.

And we get to be introduced to a bunch of people who are buying beans online and flour [00:24:00] online. And what a great group of people that is to know. 

Jordan Buckner: Ori, I love all of those partnerships that you have, because I think it speaks to like building that really strong community within CPG. One thing that I am hearing from a lot of brands is that, or that they launched in retail in the last like year or so.

And then they're starting to see all these fees and the long length that it takes to be profitable with natural distributors. And some of them are coming back to e commerce. I'm curious. How has your e commerce playbook changed in the new consumer behavior now in terms of acquiring customers and then other things that you do to keep those customers returning back and maybe some lessons that other founders can use as they're beginning to expand their own D2C right now?

Ori Zohar: Yeah, that's a really good question. I think we have e commerce and so we really try to keep prices similar and we get a ton of pressure from grocery to drop prices. And so that just kind of changes our whole business. We don't want to be for 9. 99 somewhere and 7. 99 somewhere [00:25:00] else. Like it just doesn't make sense.

And it confuses customers. The other thing that we've learned. Is that finding a customer who doesn't know us and convincing them to buy us either through paid ads or inside the grocery store is quite an expensive proposition. We can't do it on e commerce. We haven't been able to do it on Amazon. We haven't been able to do it in grocery.

So what we're doing instead is we're trying to build a halo around our brand of awareness. And that's through PR, and that's through affiliate, and that's through our e commerce customers telling their friends and all that. But hopefully by the time somebody sees us online, or sees us in Epicurious, or Savor, or sees us in a grocery store, they're already like, oh, I know that brand.

And so, so that way they meet us in the grocery store. They already know something about us. Maybe they want it to try us. Now they're going to grab a jar off the shelf. And so we've constantly been trying to find a way. How do we do partnerships? How do we work with influencers? How do we do custom collaborations with you?

We'll have big audiences amongst the people we want to get in front of. [00:26:00] We're just trying to make it so that by the time you're trying to make you encounter us and retailer on our site, you already know something about us. And you like us because a lot of other companies are like, we'll give you a 30 percent off and we'll give you this.

And I give you all these crazy concessions and they're like, do you want to come back at full price? A lot of customers are like, absolutely not. So we're trying to maintain the right price and the right value so that we can kind of make money, be a healthy company, pay our farmers on time, do all the really important things that we value as a company, but we're but still let people try our spices and get to know us so that when they're ready to buy they've already had some good experiences, heard good things, try to set a friend's house, read about us or influencer talk about us.

So that's the kind of halo that we're trying to build around our brands. And that way we don't have money for sampling and huge couponing and all this and that. I think that that often is where companies lose their shirt. It's, they really try to do the full court press kind of in the grocery aisle, and it's just really expensive.

And Unilever doesn't have to do that because you've already had Utz pretzels and you've already had this or they own the [00:27:00] whole aisle. So we're trying to not, we can't outspend them. So all we can do is be a little more clever and how we get, how people get to know us so that they have a really, they know us and like us even before they see us on the shelf.

Jordan Buckner: I love that approach. Cause I see a lot of brands try to go to like spending on pay ads first and then wondering why they're losing so much money is because no one's heard of you. They don't know what the product is and you don't have relationship with them. And by building that in all these other ways, then.

Like you mentioned, it makes that sale much easier. I think the other thing that it does is it builds that effect. So when people see you in retail, they know about you and your community. So that's amazing. I'm excited to follow you from here on out as I've continued to do. Thanks so much for being on the podcast today and sharing your story.

Ori Zohar: Thank you for having me.