How to beef up your business

Note: Transcripts are automatically generated from episode audio, and are not fully corrected for spelling, grammar, and formatting.

MIKE SALGUERO: Start-ups are like hacking through a jungle with a machete. At the very beginning, what you need are people who are willing to hack aimlessly because you don’t know where you’re going, but who work night and day and just keep hacking until they find a path. Then you’re like, “Ooh, OK, here’s a path. Let’s take the path.”

Then you start needing some people with a little more experience. Maybe they know how to use a compass, and eventually you get to a road. When you get on a road, you kind of need people who know how to drive cars. If you just go for the car drivers, then you lose the hacking culture, where you’re willing to do whatever it takes to get this thing off the ground.

JEFF BERMAN: This is Masters of Scale.

[THEME MUSIC]

I’m Jeff Berman, your host. This week on the show: Mike Salguero. Mike Salguero is the founder and CEO of ButcherBox, which he has bootstrapped into a $600 million revenue business. Do I have that right?

SALGUERO: Yeah, we’re hoping to do $650 million this year.

BERMAN: OK, $650 million. It has been D2C and is now in Target stores nationwide. Mike, welcome to Masters of Scale.

SALGUERO: Thank you. Longtime listener. Thrilled to be here.

Copy LinkHow early hustles shaped Mike Salguero as an entrepreneur

BERMAN: We’re thrilled to have you. Let’s start at the beginning. Where did your entrepreneurial journey begin, Mike?

SALGUERO: I had a paper route when I was 10 years old, which wasn’t quite entrepreneurial, but it was a start.

BERMAN: Should we explain what paper routes are to the younger people?

SALGUERO: A paper route is where you pick up a stack of newspapers, 35 of them, and deliver them every day, six days a week, rain or shine.

BERMAN: So you had the bug early. You were out hustling.

SALGUERO: I was out hustling early. I went to school in Boston, and I did a bunch of sales jobs. I got out of school and started doing real estate rentals, which was a very entrepreneurial, sales-focused thing. On the side, I started a little T-shirt company. My first T-shirt had a shamrock and said Boston on it, and I sold it during St. Patrick’s Day. I had 100 shirts that I paid $5 a shirt for, and I sold them for $10 and made $500, the fastest I’d ever made money.

BERMAN: You knew your market pretty well.

SALGUERO: Yeah. Us Bostonians love St. Patrick’s Day. Then I did another T-shirt. This was in 2004 during the George Bush, John Kerry election. The T-shirt said Buck Fush on it, and we sold 17,000 T-shirts over the course of a two-month period.

BERMAN: Wow. This is still pretty early days of e-commerce.

SALGUERO: Yes.

BERMAN: Were you selling this through Amazon or through your own website?

SALGUERO: Mostly at festivals, door to door, and from a booth. I had salespeople. I was in a few stores and had sold all these T-shirts, but I didn’t have any money. I was like, “Where did all the money go? What happened here?”

BERMAN: Where did all the money go?

SALGUERO: I think it went to us going out at night with backpacks full of T-shirts, going to the bar and selling them, and then using that money to buy drinks. That’s where the money went. So I ended up having this realization that I didn’t know what I was doing, and I wanted to go get a real job. I worked as a real estate developer for three years, got my MBA at night at Babson, which is known for entrepreneurship, and then left that and started my first company. I ran that for eight years.

Copy LinkWhat Mike Salguero learned from his first start-up

BERMAN: What was the first business?

SALGUERO: The first business was called custommade.com. We bought this listing service from a woodworker who had built it in 1996. We bought it in 2008. He had 350 of the best woodworkers in the country on this website. When you talked to them, they were like, “I get all my business from that website, and I pay $35 a year for a subscription.”

So my co-founder and I decided that we were going to try to buy the website and make it better because this was 2008, and you couldn’t log in and manage your own profile. Easy things like that made us think, “Oh, we’ll just make this. It’ll be super easy.”

Then we’d expand it out of woodworking into other custom categories. We raised venture capital, and we moved from focusing on a listing service to focusing on a marketplace where we took a marketplace fee for everything that went through, which wasn’t really a good idea.

BERMAN: Why not? I mean, that’s the eBay or Etsy model, right?

SALGUERO: The challenge with the idea was that a custom transaction involves a tremendous amount of back and forth with the maker. If you’re going to get a custom dining room table, you want a lot of communication. And when you think about these makers, they’re not necessarily tech-savvy. This was 2011. They might not even have had a cell phone yet. We were asking them to interface with a consumer on our platform so we could keep the platform fee. It didn’t work.

BERMAN: They were just going around the platform at that point.

SALGUERO: They were going around the platform. They were complaining that they had to be on the platform. They didn’t want to pay the platform fee once the transaction had happened. They thought it was unfair since they had to do so much work. But we had raised money on that idea. So in 2011, we went out and raised money from Google, First Round Capital, and a few other top-shelf VCs. They bought into the marketplace concept. It became pretty clear that the marketplace wasn’t going to work, but we couldn’t go back because we had already chosen that track: marketplace, VC capital.

BERMAN: And it wasn’t going to work because, on Etsy, for example, the product choices are limited. There’s only so much customization. Or even on Airbnb, you may need to communicate with the host about whether you can get an early check-in or whatever it might be. But here, it was the level of customization that made it hard?

SALGUERO: Yeah. When most people think about custom, it’s like you can monogram the thing. That’s it. My co-founder actually still runs CustomMade. It’s now a jewelry website, and you can fully customize things, but just in jewelry. They now do all of it themselves. That’s a much easier, better way to do it.

BERMAN: Sure.

SALGUERO: We had 60 people at our height. We were burning half a million dollars a month and just flooring it toward a wall that we all kind of saw.

Copy LinkHow investor pressure can trap founders

BERMAN: Why was there not a pivot available? If they pivoted the business or evolved the business since, what was happening when you were accelerating toward that wall and could see you were going to slam into it, where you couldn’t hit the brakes or jam the steering wheel to the left?

SALGUERO: This idea that you could be a marketplace for custom stuff was so attractive. And that’s what we sold our venture capitalists on, and we raised about $30 million. At the time, Airbnb, Uber, and all these third-party marketplaces had sprung up, and they were doing really well. So when we wanted to go back to a listing service or some sort of other model, we got a lot of pushback. A lot of, “That’s not what I invested in. I didn’t invest in a listing service. I invested in a marketplace.” If I had been older, wiser, and better, I probably would’ve said, “I don’t care. I’m doing what’s best for the business.” But that’s not how it happens.

BERMAN: If an entrepreneur were coming to you today under these circumstances, it sounds like your advice would be to slam the brakes or grab that steering wheel and twist it if you know it’s going to fail.

SALGUERO: Yes, but it’s very hard. What they don’t talk about is the phone calls where, if you guys don’t do what we say, you’re probably going to be blackballed. You probably won’t be able to raise money again. You’re dealing with these powerful venture capitalists, and they can get in your head.

BERMAN: I just want to spend one more minute on this because I think this is an under-discussed challenge for founders. They sell investors on a vision and a dream. That’s what the investors buy into. Then, as they’re operating, whether it’s a design problem or a product problem or a business-model problem, they realize that something material to what the investors bought into actually isn’t going to work. So how does a founder stay in integrity with themselves? How do they fulfill their responsibilities to their stakeholders, team members, customers, and partners while also dealing with potentially some of the most powerful VCs in the world saying, “You do it our way, or basically you’ll never work in this town again”?

SALGUERO: I think that’s really hard. I would say that I lost my integrity. I thought I knew what was better for the business, but when you have top VCs telling you what to do, it carries weight. It wasn’t always a threat, but it was like, “No, this is the way you should do it.”

As somebody who was young, and it was my first company, I was like, “Okay, they must know better than me.” I talk to lots of people who are trying to raise money these days, and I try to tell them that there is a path of bootstrapping, which I’m happy to talk about. But you go out and try to raise money. We went on about 75 different pitches, and then we got a check. And when there’s that dynamic, you don’t really think about the person you’re going to be locked to for 10 years. You don’t really go through the dating process. It’s like, “Oh, they’ll give me a check. Okay, great. I’m tired. I should take that check. I need the money.”

BERMAN: Put a ring on it.

SALGUERO: Yeah.

BERMAN: Let’s go.

SALGUERO: And so you don’t necessarily think about what happens if this goes sideways. We had negotiated really well. We had a lot of rights. They couldn’t overthrow us. They couldn’t outvote us. But even still, there was a lot of pressure for us to do what the original plan was, even if it didn’t seem like that was going to work out.

Copy LinkThe origins of ButcherBox

BERMAN: What happened to end your time at CustomMade?

SALGUERO: We ended up doing a transaction with Wayfair, which was another business in Boston. All of our employees were able to get jobs at Wayfair, which was nice, except for me. We had a party, closed the gate, and put the lock on it. It was this big iron gate, and that was it. That was the end of it. That was right before Memorial Day weekend of 2015. I had been buying a lot of grass-fed beef because my wife and I were trying to clean up our diets. So I started asking the question: How would you deliver meat to someone’s house? Omaha Steaks had been doing it for a long time, so I knew there was a way to do it. I just couldn’t figure it out. When CustomMade closed, I took the weekend off and then decided I was going to spend the summer trying to spin up this concept of delivering meat to your door.

BERMAN: So you gave yourself a whole weekend break.

SALGUERO: It was a long weekend.

BERMAN: Okay, fair. All right, a three-day weekend. Right, Memorial Day. Here we go.

SALGUERO: It just felt like I needed to move on immediately.

BERMAN: What was telling you? Was this head, heart, or gut? What was animating you to say, “F it, I’m going to get going”?

SALGUERO: I think it was heart and gut because, rationally, I was burned out, and that was probably a bad idea. I really wanted to keep doing business, but I wanted to do it differently. I wanted to do it my way. So even when I started ButcherBox, and to this day, I stayed at home on Fridays. I was like, “I’m not working on Fridays. I’m just going to hang out with my daughter.”
So I tried to build in breathing room and space as I was starting the company. When you start a company, in my experience at least, there’s not that much to do right out of the gate. During that summer, I was working out twice a day and spending a ton of time with my family.

BERMAN: This is completely counter to most people’s idea, and I think a lot of people’s experience, of starting a company.

SALGUERO: Yes.

BERMAN: Because it’s not like you were pre-product. You at least had some of your supply chain teed up.

SALGUERO: The big unlock for the business was that I met the former head of operations of Omaha Steaks, who was like, “I can introduce you to some people.” And he introduced me to one place in Wisconsin that cut meat and also shipped it out. So it was a one-stop shop. We spent the summer trying to figure out what a Kickstarter campaign would look like. So we launched on Kickstarter. My idea was, I’ll put $10,000 into this business for everything, and if it doesn’t work, it doesn’t work. The Kickstarter will tell us whether this is something customers want or not.

BERMAN: Right. We’ll get some product-market-fit signal very quickly here.

SALGUERO: Yes. When we launched, fast-forward to September, we went out to raise $25,000. I think on the first day we raised $50,000 and did $210,000 within 30 days. So it was like, whoa, there’s a there there.

BERMAN: Looking back on it, can you see what hit? Why did the Kickstarter community leap on this?

SALGUERO: For one, our timing was incredible. I think that’s an often not-talked-about thing in entrepreneurship: timing is a big component of your success. Two days before we launched the Kickstarter, Consumer Reports’ cover story was “The Case for Grass-Fed Beef.” So it was like —

BERMAN: Pretty good timing.

SALGUERO: Yeah, pretty good timing.

Copy LinkBuilding an early team at ButcherBox

BERMAN: So you launch on Kickstarter, and you have this pretty exceptional momentum. What had you learned from CustomMade, aside from the investors piece, which I want to come back to next, that informed how you built culture and team at ButcherBox?

SALGUERO: The first thing I did that I think was really important was hire an intern. On that Tuesday after Memorial Day weekend, I had a college freshman knocking on my door at 8:30 in the morning saying, “OK, what are we doing?” He was going to work all summer for me for $10 an hour. It turns out that Bobby now tells the story that the only reason he applied was that I was the only job that didn’t require a cover letter. So he’s like, “Perfect.”

He sent in a resume. I think it might’ve been the only resume I got, but I met him and was like, “This’ll work.”

And we started working together. I think it’s important because I oftentimes meet founders who believe they have to do everything. And if you believe you have to do everything and you aren’t willing to outsource anything to anybody else, you will work 24/7. The trick, I believe, even when you’re starting out, is to bring people around you. Know what you’re good at, and bring people around you. So I had the benefit of having been the CEO of a 60-person company. I kind of knew what that was like. I knew what I didn’t want to repeat this time, certainly culturally. But I also knew myself well enough that if I had just started working on Tuesday by myself, I don’t think I would’ve launched this thing. I needed energy and people around me to push me through the doubt, the failure, and all the things I was carrying with me.

BERMAN: If the ButcherBox story were starting today, would a Bobby GPT be as valuable for you as Bobby the Babson student was?

SALGUERO: One of Bobby’s biggest ahas for the business was this: as I said, we were going to ship grass-fed beef in the mail. And I was like, “Why don’t you stand outside Whole Foods, pretend you’re a student, and just ask people whether they’d ever get this delivered to their door?”
And he came back and was like, “Yeah, no. No one’s going to spend…” The price was $129. “No one’s going to spend $129 a month on beef. But if you offer chicken or pork or seafood, they will.”
And all of a sudden we went from, “We’re doing grass-fed beef,” to, “Actually, we’re doing everything, and we’re going to compete against the butcher.” I don’t think Bobby GPT would’ve gotten that. I think you needed a human being to figure that one out.

BERMAN: You said that you started building cultural principles that included what you learned from CustomMade. What was key in terms of what was different there?

SALGUERO: There’s this idea that start-ups are hacking through a jungle with a machete. At the very beginning, what you need are people who are willing to hack aimlessly because you don’t know where you’re going, but who will work night and day and keep hacking until you find a path. Then you’re like, “Ooh, OK, here’s a path. Let’s take the path.” And then you start needing some people with a little more experience. Maybe they know how to use a compass. Then eventually you get to a road. And when you get on a road, you kind of need people who know how to drive cars. If you just go for the car drivers, then you lose the hacking culture. And not hacking like computer coding, hacking like being willing to do whatever it takes to get this thing off the ground.

At my first company, CustomMade, when we raised venture capital, we essentially turned around to our team and were like, “None of you know how to drive a car, do you? We have to leave you here in the jungle.”

So all these people who had worked for three or four years to help us build something really great and fundable, we left them. And we went and hired people who had worked at AOL and had really fancy resumes. And the reality is, you need a mixture of the two. That’s the big lesson that I learned at ButcherBox. You don’t want to just have people who have a lot of grit and no experience, but you also don’t want just people with a lot of experience, because they kind of forget the grit as they go along.

BERMAN: Particularly if it’s big-company experience and they’re used to, like, “Oh, I did one thing this week.”

SALGUERO: Hierarchy, meetings, process. It’s like we hired people as if we had product-market fit, and we didn’t have product-market fit. So this time around, I was very focused on taking risks on people. The group of people who started with me, no one had any experience. We had no experience with meat. We were just like, “Let’s do this.”

And for whatever reason, I sniffed out grit in each of them, whether they were a D1 athlete or had some sort of chip on their shoulder. I hired my first meat person a year into the business, and he was 65 and had retired. He had worked at BJ’s for 27 years. He represented a ton of experience. But what I found with older people, and I still think this is a great way to run a business, is there’s really no ego.

He’s not trying to build his career. He’s just trying to do something meaningful and fun. And so pairing him with somebody with no experience and a lot of grit was magical. I called that the barbell strategy. You have two ends of the barbell and really nothing in between. There were very few people who were midcareer at the beginning. It was either early career or end career.

Copy LinkWhy product constraints helped ButcherBox scale

BERMAN: It sounds like the initial thesis, none of this is easy, but it is more of a straight line to say, “We’re doing grass-fed beef. That’s what we’re doing.”

Bobby comes back from his Whole Foods survey trip and is like, “Mike, we kind of got a problem here. We need to do chicken, we need to do fish. That’s what people are saying they’ll buy.” It feels like that is orders of magnitude, if not exponentially, more complicated. How did you approach that expansion? It doesn’t sound easy.

SALGUERO: The question became, what’s the equivalent to grass-fed beef in other species? There’s a better way to raise an animal, so people were looking for that back then. We actually didn’t start with seafood. We launched seafood maybe a year later because it was too complicated. It was pretty clear what claims people were looking for. But the facility in Wisconsin that was doing all of our product was able to do all three of those species.

BERMAN: Oh, okay.

SALGUERO: So when we launched with a Kickstarter, you could prebuy a box, and we had some other goodies and prizes as well, but you could prebuy a box and choose your species. So it would be either all beef, or beef and chicken, or beef, chicken, and pork. Those were the three options. And because we didn’t raise any money, the idea was that we were just going to send you whatever we wanted to. We were going to send you what we thought was a great value for your subscription. But really, the reason I did that was because I believe you need to constrain yourself. Constraining yourself is really important in entrepreneurship. I didn’t want to have, “Hey, you can just choose whatever you want,” because then you have to have inventory. We had seen Blue Apron, we had seen the HelloFreshes and the Blue Apron lookalikes that were all shipping whatever they wanted to. And I thought that could work. So we launched with a curated box, the butcher selections, and all people chose was the species.

BERMAN: Right. But ultimately it was a you-get-what-you-get-and-you-don’t-get-upset model.

SALGUERO: Yeah. And if you do get upset, then we’ll do better next time. Because for us as a subscription business, subscription businesses are great because if you delight the customer, you keep them, and then you get that revenue next month. So all we were trying to do was build the best boxes possible so that people stayed.

BERMAN: Committed monthly recurring revenue is a really beautiful business model.

SALGUERO: It sure is. It’s tough to delight your customer, but it certainly puts your focus on the exact same thing the customer wants.

BERMAN: Well, and it’s not truly committed, right? You have to earn it every month.

SALGUERO: Right. That’s right.

Copy LinkHow bootstrapping forced profitable growth

BERMAN: What happens next? You have this successful Kickstarter campaign. You’ve got money in the bank. You’ve got a facility in Wisconsin that’s able to fulfill. Now you’ve got to build and run a business. So what happens next?

SALGUERO: The Kickstarter was a 30-day campaign, and then we immediately launched our website, and it just kind of started working right away. The first week we probably had, I don’t know, 30 people who signed up, and then it was 50, and then it was a couple hundred. We shipped out our boxes early to all of our Kickstarter people and then called them all up, which I didn’t do because, again, I wouldn’t have done that. But I found some guy who made 400 phone calls or whatever it was. And he’s like, “Just checking in. Do you need any recipes? By the way, we’re a subscription business. Do you want another subscription?”

And so he was able to convert 30 percent of them. It took, I don’t know, four or five months to get to 1,000 subscribers. And at 1,000 subscribers, when you’re doing $129 a box, you’re already over a million-dollar business.

BERMAN: Right. And so at that moment, I have to imagine you’ve got some investors who are going, “Well, there are some early signs of product-market fit here. You’ve got a million-dollar run rate and growing.” Are venture capitalists starting to reach out?

SALGUERO: Yes, for sure, including the ones who had just lost their money. Actually, that was a really important moment for me, and I think for people to really understand. You talk to these venture capitalists afterward, and they’re like, “No, don’t worry about it. Most of these go to zero anyway.” They didn’t care at all. All this guilt I felt about how I was losing everyone’s money — they’re like, “Yeah, it happens. Can I invest in your next thing?” It’s literally that easy. Yes, there was a lot of external interest in the early years of ButcherBox.

BERMAN: So whose money did you take?

SALGUERO: I didn’t take any money.

BERMAN: Oh, you didn’t take anyone’s money?

SALGUERO: No.

BERMAN: Why not?

SALGUERO: We were unfunded. At the very beginning, I had such a bad experience, and I felt so burned, and I lost myself. As you said, I lost my integrity. I didn’t want to introduce that. Then, as time went on, we figured out how to build a positive cash conversion cycle, so we didn’t need a lot of cash. We were growing well. We were having a great time. It just kind of became, “Well, maybe this is what we’re supposed to do.”

Then you fast-forward a few years after that, and Blue Apron went public, and they proceeded to… In 2017, so this is two years after I launched, they went public, and then their stock crashed. So any money that was available for box subscription food companies —

BERMAN: Disappeared.

SALGUERO: Disappeared.

BERMAN: Yeah.

SALGUERO: Actually, I don’t think I’d be around right now if I had raised money.

BERMAN: Why?

SALGUERO: I would’ve raised money in 2015, and I would’ve been on an 18- to 24-month runway where I’m supposed to spend all that money. So I would’ve been out looking right when Blue Apron went under.

BERMAN: What would you have done with the money such that you would’ve been in such a hole and not have been profitable two years later?

SALGUERO: Marketing. That’s where most of the money goes in these businesses. At the time, there was Blue Apron and a hundred Blue Apron lookalikes, and they were all spending gobs and gobs of money on Facebook. So if I had raised money, it’d be like, “Where should we advertise? Facebook.”

We would’ve just plowed money into Facebook. Instead, what we did—again, the constraint helps—we said, “OK, we’re making $20 on every box we’re shipping, so we need to be box-one profitable.” Meaning the first box that leaves a facility, I need to have marketed it for less than $20. That forced us to find very different acquisition channels.

BERMAN: What did you find?

SALGUERO: Influencers. We went out to all of these nutritionists and paleo enthusiasts, the people whose blogs I was reading when my wife and I were trying to clean up our diets, and we said, “Hey, I started this company because I read your blog, and then I couldn’t find a source for grass-fed beef. Would you send an email to your audience and tell them about this product? Here are all the attributes, and here’s why we’re doing what we’re doing. And, by the way, we can’t pay you upfront, but we can pay you residuals.”

BERMAN: Like an affiliate fee, basically.

SALGUERO: But instead of an upfront one, it was like every month that customer stays, you get a check.

BERMAN: OK. So it was an affiliate fee with a tail. Basically, you acquire us a customer who’s a three-, four-year lifetime customer or longer, and the money’s just going to keep coming to you.

SALGUERO: You’re getting 10 bucks a month. Lots of people said yes to that. The first year we did $5 million. The second year we did $35 million, and then $100 million. Pretty much up to $50 million, that was our only marketing. The constraint of not having money forced discipline both on the acquisition side and on the operational side, where it’s like, if we’re only making $20, how do we make $21? Well, I just negotiated a new box price, and it’s a dollar cheaper, or I just negotiated new dry ice, or I just negotiated the price of the tape that seals the box. That’s one of the things I still love about the business. There’s a lot of creative marketing stuff, and then there’s a lot of hardcore operational work, which is where all the money’s made, where you need to be ruthless about negotiating and dropping costs that don’t hurt the customer at the end of the day.

The best moves are the ones where you can get the same product for cheaper and you don’t hurt the customer. Ultimately, what we’ve built over the past 11 years is a brand that people trust. We’ve never cut a corner, and we always are transparent with our customer. We’re constantly trying to do something different than the meat industry has done. The meat industry is pretty broken in this country. A lot of the labels are just confusing, and people don’t understand what they’re eating. The industry has really been built since the 1950s on cheap, food-safe protein, and don’t ask a lot of questions about what’s actually happening behind the scenes. With a more educated customer, a more health-conscious customer, that doesn’t work anymore. Customers want, first of all, something that they feel meets their ethics and their integrity. Second, they want more information than just “trust us, it’s good.”

Copy LinkWhy ButcherBox became B Corp certified

BERMAN: Mike, as you’re scaling to $650 million in revenue and beyond, how are you ensuring that this “we don’t cut corners, these are core values for us” stays in the organization?

SALGUERO: Yeah, I think it’s easier if I’m still in charge. But if I were to step down or if I were to get hit by a bus, that’s where I started to get concerned. So in 2020, we became B Corp certified, which is a rigorous third-party audit of your business—what you do, what you stand for, who your partners are, what your impact is on the environment and community—a whole bunch of different questions. That is the thing that I fall back on now. As part of the B Corp certification, you can change your corporate bylaws to specifically state that you are not making decisions just for shareholders. I don’t see how a company that wants to do the right thing can be built the right way if you are only supposed to make decisions to make people more money.

BERMAN: Is going public an option?

SALGUERO: It is, but no.

BERMAN: Why not?

SALGUERO: There are very few publicly traded companies that are B Corps or take that path. I think it’s a hard path to take when you’re not going to just care about your shareholders. If we did it, it would really be a very small piece. But then I come to the question of why. Why would you sell the company? Why would you go public? Generally, either you’re sick of the business and you’re like, “Get me out of this thing,” or you need liquidity.

BERMAN: I just finished reading Eric Ries’ new book, which will be out by the time this episode drops. In one section of the book, he talks about companies like Patagonia and Costco that, because of their high standards and their sourcing, their ethical sourcing, have changed entire industries. To your point about the meat industry not being the cleanest in the world, how are you seeing the impact in the overall ecosystem because you all are now generating hundreds of millions of dollars of better-raised beef?

SALGUERO: Yeah, it’s great. The industry is changing. The large companies are paying attention. Like I said earlier, when we started, people couldn’t find pasture-raised, grass-fed beef in their local grocery store. It’s actually become easier for people to find that. We still think ours is higher quality, but the industry has responded. There’s a meat conference every year, which is a fun conference to go to.

BERMAN: It’s high steaks.

SALGUERO: Yeah, high steaks.

BERMAN: Sorry. Dad jokes.

SALGUERO: It’s good. For the first three to five years that we went to the meat conference, people had no idea who we were. Now we’re being asked to be on committees, we’re being asked to speak, and we’re being asked to talk about claims-based marketing — why this is both important and, as it turns out, creates a better, more resilient customer. So the industry is changing. We like to say that we want to help small family farmers grow their businesses and also guide large companies. We’re willing to work with everybody as long as they’re willing to do the right thing. We can help smaller producers scale up their businesses, and we can help larger companies do the right thing.

Copy LinkExpanding from direct to consumer into retail

BERMAN: What drove the decision to expand into retail from DTC, and how has that experience been for you?

SALGUERO: The reality is lots of people get groceries online. It’s about 14% to 20% of the market, depending on how you look at it. But even our customers go to the grocery store two times a week. The grocery store is where people go to buy meat, produce, and all the other things they need. So if we want to be a brand — an iconic, beloved brand — we need to be in retail. That’s been the party line for several years. We found an amazing partner in Target. Target is really focused on bringing well-known brands into the store and highlighting them, so that was a great first step into retail. Now we’re talking to lots of other retailers who are interested in carrying our product. We actually represent something pretty interesting to retailers, because most meat companies they deal with sell chicken. For us, we offer a wide assortment of different species and different products all under one label, so that’s pretty interesting. The thinking was — and it’s turning out to be correct — that we spend all this money on advertising and do a lot to get the word out about ButcherBox. We wondered if that would resonate with somebody who goes to their local store and says, “Oh, ButcherBox — I’ve heard of this. Let me try it.” It turns out that’s working really well. We already have the marketing dollars in the market. We just need to be closer to where the customer is shopping.

BERMAN: Are you seeing an uptick in your subscriptions since you started launching in Target and Costco?

SALGUERO: Yeah, it’s hard to track, especially when you go nationwide. If we had started in a region, that would have been easier to track. But because we went nationwide, it’s harder to track.

BERMAN: Good problem.

SALGUERO: Good problem. The markers that would suggest people are trying our product and then purchasing are all up.

BERMAN: Awesome. Mike, thanks for being on Masters of Scale.

SALGUERO: Thanks for having me.

BERMAN: Thanks again to Mike Salguero for joining us. It’s incredible to see how Mike took the hard-won lessons from his first business and turned them into the fuel and wisdom it took to build ButcherBox. I’m eager to see how his thoughtful leadership can help ButcherBox continue to grow and help the broader meat industry evolve. I’m Jeff Berman. Thank you for listening.