Sunset for Saucedrop, and some things we learned along the way

In 2015, my wife and I launched Saucedrop as an experiment. We wanted to explore what kind of business we could launch and run as a side hustle with a modest amount of upfront investment, while also maintaining our day jobs. Saucedrop was born, and here we are 2 years later with an answer to our original question.

As it turns out, for us having a side hustle and day jobs became increasingly incompatible over the long term. Trying to focus equally on both became difficult, and in the end we realized that one or the other suffers. This was a disheartening realization. To further compound this, we also realized that we were not in a position to quit our day jobs to focus on Saucedrop full time.

To that end, we have made the decision that Saucedrop has run it’s course. This decision is not one that comes lightly, as we have enjoyed working on it immensely, and have learned an incredible amount in that period of time. We also have enjoyed the support of many friends, family, coworkers and of course our loyal customers during the past few years for which we are very grateful.

Given that we viewed Saucedrop as an experiment, we wanted to provide a conclusion of the things we learned during the past two years. We have grouped these findings into discrete topics which we have listed out below.

Observations on subscription ecommerce

• Branding is important. It greatly affects your customer’s perceived value. Perceived value is the sense the customer gets that they have received something that meets their needs and warrants the price that was paid for the service. Within a crowded market like subscription boxes, branding is an important differentiator.
• Knowing your audience is pretty key. We spent some time doing research on who our audience might be before we launched. That gave us a good grounding. Over the years we learned that the hot sauce market has a few distinct factions:

The Diehards: mainly male, love the super hot sauces, seemingly high correlation with other relatively macho-oriented pursuits (rock shows, beer, motorbikes). Not price sensitive for high quality.

The Foodies: General love of food, curious but not super committed to hot sauce, value the new & novel. Mainly in urban/metropolitan areas. Price Sensitive.

The Casual Consumer: Likes hot sauce, but has only ever known the big brands. Developing an interest and willing to learn. Very price sensitive.

The Gifters: People who will buy hot sauce for people they know who fit into either category above. Less price sensitive.

• Packaging is an important experiential component of subscription ecommerce. Well designed packaging protects box contents and helps convey a sense of surprise and delight to customers when it comes to unboxing. Careful control and optimization of packaging dimensions also helps contain costs, and helps deliver efficiencies with postage rates. Companies like Lumi, Packlane and Stickermule are lowering the barrier to entry for companies wanting to deliver a premium packaging experience.
• There is still plenty of room for companies to innovate with packaging. Particularly experimenting with reusability. Currently a lot of subscription ecommerce results in a huge amount of waste, which for us was always a sore point.
• Overall, subscription ecommerce is great for niche audiences and gifting, but if your service doesn’t deliver better price, speed, convenience or curation, you’re likely to experience high churn rates. Ultimately many players in this arena will be competing with Amazon, unless they can retain an edge by integrating vertically by making and distributing their own products or being able to provide excellent curation.
• In order to supplement and protect subscription businesses in the long term, many are complementing their offering with physical retail locations to allows product sampling before committing to a purchase.

Marketing

• Launching on Product Hunt was an unbelievable stroke of good luck. It helped us gain initial traction and secured us high quality customers which have stayed with us for the duration.
• Marketing was the biggest challenge we faced post-launch and an area in which we struggled during the entire duration. Without any previous Marketing experience, we had not really put any sort of plan in place, and this cost us in the long term.
• The ‘Traction’ book helped us understand that marketing was essentially a trial and error process where you have to try out many different experiments across different channels and double down where you see progress. Having a good understanding of who your customers are is a big advantage.
• In retrospect we wish we had pursued avenues that were free/low cost rather than wading into testing ads with Google AdWords and Facebook. We foolishly spent a chunk of our very modest budget pursuing this, which in hindsight should have been approached more methodically or outsourced entirely. Google/FB both offer incredibly advanced advertising tools, however these are incredibly opaque and difficult to navigate and comprehend as a novice.
• The biggest lesson we will take away from our experiences with marketing is that it is an integral part of building products and services. Marketing helps establish essential feedback loops with customers, which inform future product decisions. Without marketing, it is practically impossible to achieve product/market fit, and any efforts will languish until you run out of motivation/runway.

Side Hustles

We wrote some of our thoughts about this a year ago. There are some things which we have now come to appreciate now which we feel are important to add.

• Doing things part time and in isolation makes things ten times as hard and take much longer than they ideally should. This is not good for a business. Chances are if you are trying to add your own spin to something, by the time you ship you will already be behind your competition.
• Warren Buffett’s concept of knowing your circle of competence provided us with an extremely helpful framework for making decisions to best allocate time and effort (vs investment capital but the lesson still applies) or indeed seek external help to help us move forward.

Hot Sauce/Food Industry

• We experimented briefly with integrating further down the value chain by trying to make our own hot sauce. This could have been an interesting avenue to pursue, but the unit economics of it didn’t work with our size. We did not have a large enough subscriber base to justify making a large batch of our own recipe sauce, and the prospect of holding onto inventory and trying to sell it piecemeal was not an option we wished to pursue.
• The hot sauce market is crowded, and while barriers to entry are relatively low, it is hard to achieve high quality as well as scale. Working with contract packaging companies to help speed along product development is an option, as many co-packers offer a variety of different hot sauces in private label format. This was a viable option, but we felt this would not offer us long-term differentiation.
• Hot sauce displays many of the same dynamics as the wine industry. Wine and hot sauce both rely on seasonal base ingredients. Hot peppers and grapes are both affected by amount of sun they receive and the nature of the land they are grown on.
• High quality peppers are seasonal, at least in the North Eastern US. This adds a timing constraint of when you can source high quality, local ingredients and a time window of when you can make a sauce product. Some varieties of hot pepper — as with grapes — are not suited for large scale cultivation, thus affecting the supply for making single-varietal hot sauce. Sauce makers who can commit to purchasing less common pepper varieties can differentiate their products — we see this happening already with super-hot varieties. We think single-varietal pepper sauces will become more common as people’s tastes expand and harder to cultivate peppers become more financially feasible to grow.
• Hot sauce and wine also appear to have the same dynamics in how branding and packaging affects the perceived quality and value of the end product. During our time running Saucedrop, we spoke to many costumers and hot sauce enthusiasts, and there was a consistent preference for premium-feel branding which mirrors behaviours seen in the wine industry.

Queen Majesty was by far one of our customer’s favorite brands- which we attribute to high quality ingredients and beautiful branding/packaging.

Acknowledgements

We wanted to give a few shout outs to the countless number of people who have supported us along the way.

Jana Swierczynski — for being the inspiration, sounding board and chief taste tester for Saucedrop. ustwo — for giving us the time, space and creative freedom to pursue this & being our first and most loyal customer ❤. Leah Shea for helping us learn about print design, Eduardo Oliveira for your help with our branding. Lee Simpson and Bram Kanstein for helping us launch on Product Hunt. All our customers, particularly all of those who have been with us for the duration — thank you very much for supporting us. All of our hot sauce suppliers over the years; Tango, Queen Majesty, Chicho, Outer Limits, The Bronx Hot Sauce Co, Taco Jesus, No 7 Sub, Bravado Spice, 1807 Hot Sauce, The Brinery, Char Man, Old St. Augustine, Apinya Thai, Formosa, Born to Hula, Hank’s Sauce, Mustard and Co, Huckle’s Sauce, Bushwick Kitchen, Ying Yang Sauce.