loader image
Skip to content

Mike Salguero, Founder & CEO of ButcherBox

This episode of the RETHINK Retail Podcast was recorded on Oct. 17, 2022.

In this episode, guest host Emily Pfeiffer is joined by Mike Salguero, founder and CEO of ButcherBox, a leading DTC brand that delivers humanely raised meat and sustainably sourced seafood to consumers across the U.S.

Since launching in 2015, ButcherBox has become B Corporation Certified, signaling the brand’s commitment to using its business as a force for good. In 2020, Mike was named an Entrepreneur Of The Year National Award winner by Ernst & Young.

During their conversation, Mike shares his story of how a hobby and a quest to transform the American beef industry got him into the business of selling meat through the mail. Mike also reveals how the company continued to grow and keep customers happy during the pandemic despite experiencing challenges related to increased demand, as well as how he turned a national dry ice shortage into a new revenue stream for the company.

If you enjoyed this episode, please let us know by subscribing to our channel and giving us a 5 star rating us on Spotify and Apple Podcasts.

Post Transcript

Emily Pfeiffer:

Hello, and welcome to another episode of the RETHINK Retail podcast. I’m your guest host Emily Pfeiffer. I’m a principal analyst for Commerce Technology at Forrester, one of RETHINK Retail’s top retail influencers, and today I have the pleasure of speaking with my guest, Mike Salguero. Mike is the founder and CEO of ButcherBox, a leading direct to consumer brand that delivers humanly raised meat and sustainably sourced seafood to consumers across the US. ButcherBox has become B Corporation certified signaling the brand’s commitment to using its business as a force for good. In 2020, Mike was named an Entrepreneur of the Year National Award winner by Ernst and Young. Welcome to the show, Mike.

Mike Salguero:
Thanks so much for having me.

Emily Pfeiffer:
From what I’ve read, you didn’t really have any meat industry experience before launching ButcherBox, so I’d love to start by having you tell our audience a little bit about the story of how and why you decided to get into the business of selling meat through the mail.

Mike Salguero:
Yeah. Before I started ButcherBox, I had been working at a venture backed business called CustomMade.com, which was a online marketplace for woodworkers and jewelers. I had been running online company for about seven years. That turned out not working out very well, and we ended up having to basically let everyone go, including myself. I was trying to figure out what was next. During the time I was at CustomMade my wife who has a thyroid condition, which is an autoimmune disease, we were following these elimination diets and each of these elimination diets said, “Eat grass fed beef.” We couldn’t find it. I lived in downtown Boston at the time, and we’d go to our local store and there might be ground like grass fed, ground beef but that was it. I just got really curious about like, “Huh, well we know we’re going to have to start eating differently, and everything I’ve read suggests that grass fed beef is better for the animal and the end consumer and the environment and where do you get this stuff?”

I just got obsessed with how do you find grass fed beef? And ended up finding a farmer and buying a half cow from a farmer, which ended up being too much meat. I started selling it to my friends, and then one of my friends was like, “This would be so much better if it was delivered to my house.” I was like, “Yeah. That would be better.” At the time I was really looking to start a hobby. I was not really ready to go back into running a company, running a big company. The idea with ButcherBox was we were going to start a company, we were going to raise no money. I was willing to put in $10,000 of my own money. The thought was, if we got a thousand subscribers getting a box every month and we made $20 on each subscriber, you’ve got a nice cool little lifestyle business on your hands.

I thought that that was a fun endeavor, and so decided to start it and see if I could make it work. Yeah, I had no meat experience before this. I didn’t really know how to put all the pieces together until I met somebody who had worked at Omaha Steaks, who really opened up a bunch of doors for us. I started with a lot of curiosity and a lot of naivete, and that really worked because what we ended up doing was we created a product and an offering that I don’t think anyone in the meat world thought would sell. This idea that you could sell a subscription.

This idea, when we started, we just had this curated box. You essentially picked your protein, do you want beef? Do you want beef and chicken? Do you want beef, chicken, and pork? Then we would send you whatever we wanted to with recipes on how to cook it. These concepts were like, we did it because we didn’t want to hold inventory and we wanted to be really careful with how much cash we were putting out there. Everyone who looked at this who was in the industry was like, “This will never work.” It turned out it did work. In many ways, the way in which we started the company really fueled the approach we took, which really helped us to grow and to thrive.

Emily Pfeiffer:
I feel like at some point in that story, you had some really good chest freezers in your garage or something. Did it go there?

Mike Salguero:
No, no. Well, we do have a very large freezer at our house now. Because one of the challenges of running the company is you’re always asked to sample new products. There’s always different products to sample. My kids love it. It’s like, “Okay, we have some new meatballs to sample.” We went third party everything right away. The idea was that this business was going to be a hobby that I was going to be able to go pursue something else, or I was going to be able to live in Argentina and just look at my numbers once a day. I built it with that in mind.

 

Emily Pfeiffer:
Sounds great.

Mike Salguero:
Yeah, sounds amazing. It’s the dream. I built it with that in mind. Everything was third party from the start. We had a third party cutting facility that would cut the meat and then a third party fulfillment facility that would take the meat, put it in a box and ship it out to the customer.

Emily Pfeiffer:
Got it.

Mike Salguero:
We really were careful about not building up too much stuff that I would have to do because I really wanted this to be a hobby.

Emily Pfeiffer:
It did though evolve from your personal challenges. You were struggling to find that grass fed beef. You launched in 2015 with just over $200,000 in pre-orders, right? That was kind of your plan through a kickstarter campaign. This has now grown to over half a billion dollars in revenue. Have you run into similar challenges in sourcing as when you started trying to find the grass fed meats and the quality meat that you’re looking for at this new scale?

Mike Salguero:
Yeah, for sure. First of all, I failed at the mission of creating a hobby business. That’s pretty clear. I can’t really…

Emily Pfeiffer:
Congratulations.

Mike Salguero:
Yeah, I can’t really sit back in Argentina and look at the numbers once a day. That’s okay. I mean, so what was very clear, very early on day one of the kickstarter was that we had struck a nerve that we were providing a product that lots and lots of other customers were looking for and needed and that we were solving a problem. We work in multiple species, beef, chicken, pork, various types of seafood, bison, lamb. In each of the species, we have to do an incredible amount of work to get to a level that we’re comfortable with providing to our customer. I’ll talk about beef because I think it’s the biggest mover within our mix.

Also it’s the most interesting, and probably from a meat perspective, the most controversial these days. Beef in this country, 98% of the beef in this country is finished in a feed lot. What does that mean? Basically, the last six months of its life, it’s living in a confined feeding operation where it’s fed grains and corn. 2% are grass fed, the type of thing that we work with. Now, the reality is that every cow starts out exactly the same. Six months is cow calf, so calf and its mother. A year where the cow is just on grass, and then six months of feedlot finishing for most of them. The other ones are just kept on grass. As long as you have good projections and what to expect, and because we’re a subscription business, we’re pretty good at being able to predict what’s going to happen.

There’s plenty of supply out there. It’s just about making the commitments to people to say, Hey, instead of feeding, sending it to the feed lot, which by the way, when you send to the feed lot, you’re at the whim of whatever the corn market is doing at that given time. These farmers are incredibly exposed to the commodity prices that are spiking. If the price of corn goes up, feedlot can’t pay as much because that’s the input that they’re going to use and so they drive the price down and all of a sudden the farmer doesn’t make any money on the cow that they raise for a year.

We are in the business of contracting with those farmers and contracting with people early to say, “Hey, raise it this way and we will be your buyer at the end.” There’s actually a tremendous amount of supply out there. We’ve had to build programs from scratch. Chicken and pigs are more have to be built from scratch. But as long as we can keep our commitments, understand how much we’re going to be needing, we’ve had a fairly easy time, with the exception of the few months of COVID where things went really bonkers. We’ve had a fairly good time for everybody. The product is out there. It’s really about getting people to change their practices.

Emily Pfeiffer:
Do you feel like you’re getting the industry to change its practices? Do you feel like that 2%, are you having an impact on how many cows?

Mike Salguero:
We hope so. Yeah. We have a mission to transform meat. In order to transform meat, you really need to play with the industry. You can’t just transform meat by working on the fringes. You have to work with the companies, the large companies. Many of these companies are willing to change provided that they have a buyer. The challenge is they’re like, “Well, I’m not going to do that because that’s too expensive or too much infrastructure, or nobody’s actually going to buy that.” We come in and we say, “Hey, if you raise this chicken to this standard, we’ll buy all of them. Or if you raise this pig to the standard, we’ll buy all of them.”

Emily Pfeiffer:
It’s a much easier to sell to the investors, isn’t it?

Mike Salguero:
It’s much easier to sell to those companies who are wanting to make changes. They see that there’s a customer. There’s definitely a big rise in the conscientious customer. They see that the rise of conscientious customers is happening, they want to do something about it. We kind of help them. We give them a leg up, we give them their first customer to be able to provide…

Emily Pfeiffer:
Yeah, that’s great.

Mike Salguero:
… a different quality than what they have currently.

 

Emily Pfeiffer:
Yeah, it really comes through when you talk about how you source your products, that you care about the welfare of the animals, this transparency. I know that Butcher Box is certified as a B-corp. At Forrester, we talk about values-based selling and how more consumers, especially younger ones, are looking for values like environmentally conscious business practices when they shop, that these things are getting more and more important to consumers. Do you think that these changes in consumer sentiment to create, Do you think that they’re going to create more competition as other meat companies maybe also start to focus on more sustainable practices?

Mike Salguero:
First of all, I totally agree that consumers are increasingly waking up to wanting a higher standard for the products, a lot of their products, but certainly in meat as well. The data suggests that there’s a group that is called Flexitarian, which is really, “Hey, I eat meat, but I’m also supplementing with vegetables. Meat is more of not the main thing on the plate.” That group has doubled in the past two years. Whereas people who define themselves as meat eaters has gone down. Meat eaters has gone down, Flexitarian has gone up. Those people are still eating meat, but they’re also making sure that they’re making conscientious choices.

When you ask them what they care about, they’re really in this intersection of how is the animal treated? How is the farmer treated? How is the environment treated? And all of it has to do with this feeling of feeling guilty, like I’m eating this and I feel bad about what I’m eating because I’m told that it’s bad for the environment, it’s bad for you, it’s a et cetera. And that wave is coming. That wave is already here, and meat companies for sure need to wake up to that. I think we are a good canary in the coal mine saying, “Hey, there is a customer over here, a really big customer. Look how big of a company we grew in seven years.”

These customers want something that you’re not providing. You can’t fake it anymore. Because what a lot of the companies do is they put a green leaf on there and hope for the best. They’re not actually making changes. We say, “Can’t fake it anymore.” To answer your question on competition, so I started Butcher Box as a hobby. We never raised outside funding. We’re fairly unique in terms of direct to consumer companies that haven’t raised anything outside. We have no investors, and I think that’s allowed us to take a pretty unique perspective on, for example, competition. My honest to goodness answer on Hey, are you worried about competition?

If all of these large meat companies start providing a much better product to the customer and change the way meat is raised in this country, hell no. I think that’d be great. Put me out of business. That’d be awesome. Because what that means is that a huge portion of the meat, it’s no longer 98% this way and 2% that way. It’s like, oh, it’s 10%, 20%, 40%. That would be amazing. And if that meant that we went out of business because everybody copied what we were doing, great.

Emily Pfeiffer:
But it’s actually better,

Mike Salguero:
Then we actually solved the mission of transforming meat.

Emily Pfeiffer:
So if only…

Mike Salguero:
It’s interesting…

Emily Pfeiffer:
Go ahead.

Mike Salguero:
It’s interesting because our mission is to transform meat and that might include us getting run over in the process and that just might be part of the journey that we’re on here.

Emily Pfeiffer:
Then you’d need a new hobby.

Mike Salguero:
That’s right. I need new hobby. You know, transforming meat was just one thing.

Emily Pfeiffer:
Very serious hobby. Yeah. I struggle with something. My dad is a very serious meat eater and he is one of those people who wants to go to the meat counter and personally select his cut of meat. How do you win over picky customers like him?

Mike Salguero:
Yeah, I’m not sure if we can, to be totally honest. I think people who have a relationship with a butcher where they’re going to the counter and choosing a cut of meat, that’s a very rare and special relationship. That’s fewer and farther between. There are very few places like that left. Most of the meat that you’re purchasing is no longer cut at a butcher shop. It’s prepackaged and sitting on the shelf. But if your dad is going somewhere and buying something and that he likes to pick it out, I think he should continue to do that.

Emily Pfeiffer:
I really appreciate how you made that sound almost romantic. Yep.

Mike Salguero:
It is. One of the things that’s like, I constantly remind our staff about this, is like, and I don’t want to gross out the audience, but people ingest this product. You think about the things that you sell or you could be selling, whether it’s software or it’s furniture. Yes, you’re going to sit on it, or yes, you’re going to have it in your home, but the amount of trust and intimacy that somebody has to take product that you provided and fuel their body with it and feed it to their families, that’s a huge responsibility. Yeah, if your dad has a little romance with a neighborhood butcher, I think that’s great.

Emily Pfeiffer:
Very strong feelings. Okay, that’s nice. Thanks. I’ll tell him he’s okay. Briefly just to talk about COVID times for a moment. We know that grocery has been increasing in terms of digital adoption over the past few years. More and more consumers are willing to buy food online than they have been before, my dad aside. Did you see an uptick in subscriptions when the pandemic hit? How did you meet that demand while simultaneously dodging the labor and supply chain challenges that everyone was facing along with it?

Mike Salguero:
Yeah, for sure. We had a very similar spike to what a lot of other toilet paper, food, rice, nuts, meat companies I saw. It was around St. Patrick’s day of 2020, so March 17th I think, we were adding thousands and thousands and thousands of people a day. We’re just getting slammed with orders. The other thing that was happening is our members were also asking for if they were getting a monthly box, all of a sudden they just got a box a week ago, but they want another box. There was this big wave of members moving their bill date in to get another box in their freezer.

Emily Pfeiffer:
So much for demand planning?

Mike Salguero:
Yeah, so much for demand planning. That’s right. We tried to ride the wave as long as we could. We lasted 10 days. Because again, this product, you need a plan. You can’t just manufacture the product. Then we made, I think the right decision, but I think possibly the different decision. What we said was, “Hey look.” This is what I said to my staff. “I only eat ButcherBox. At my house, we only eat ButcherBox. I am not about to go to the grocery store and I don’t think our customers should be either. They shouldn’t have to go to the grocery store either. What we’re going to do is we’re going to put up a wait list and not allow any more customers to sign up for a new box while we satisfy the current customers that we have.”

Because we have core value of being member obsessed, and we knew that our customers needed that box. They were fearful, they didn’t want to go to the store. Getting that box was really important to our members. Yeah, we rode the wave and then we realized, “Wow, this is way too much demand.” We put up a wait list, which we had up from April, beginning of April till the middle of July while we digested the new demand, new size. But we doubled the business that year. I think going into COVID, we were about 225 million and after COVID we were 450 million or 440 million. We doubled the business. The other thing that happened is we doubled the business with really no marketing spend because we didn’t need to market.

Emily Pfeiffer:
It came to you?

Mike Salguero:
It just came to us, which was very different than what we were used to.

Emily Pfeiffer:
Incredible. You talk a lot about sourcing the meat, the product you sell. I spend a lot of my time talking about logistics and digital operations. I have a question about the dry ice, right? This is sort of the magic that keeps your products frozen until they arrive. It’s got its own complex logistics. You have to source it.

Mike Salguero:
For sure.

Emily Pfeiffer:
Store it. Calculate the right amount in a package.

Mike Salguero:
Yup.

Emily Pfeiffer:
How did you work through all of that?

Mike Salguero:
Yeah, so first, I love that you care a lot about the logistics side. I think that’s oftentimes a side that people who work in e-commerce, who start companies in e-commerce don’t really pay attention to. It’s actually where all the money’s made. It turns out…

Emily Pfeiffer:
Or lost.

Mike Salguero:
Or lost. Right. It turns out that when you’re sending thousands or tens of thousands or hundreds of thousands of packet, a millions of packages a month, even the tape that closes the box is worth negotiating because you’re talking about millions of feet of tape. You really need to focus on everything and negotiate everything and be just doggedly trying to drive up quality and drive down costs all the time. I don’t think people do that. They don’t think about, “Hey, if we save a penny, a truckload is $400 cheaper and if we’re running hundreds of those a week, it’s a huge number.”

I believe that a lot of profit and success is gained by focusing on the operations. I think oftentimes people are like, “Eh. Yeah, no, it’s fine. It’s like it’s all set up. We make enough margin.” No, go for it. To your question on dry ice. Yes. Dry ice is very complicated. Not sure if you know, we actually started our own dry ice factory. We have a dry ice factory in Oklahoma City and we have a new dry ice factory launching in December. It was supposed to be open, but there was some part that we’ve been waiting for. Launching in December…

Emily Pfeiffer:
Please tell me you have a really good time at Halloween.

Mike Salguero:
Well, it’s so far away, but yes, the dry ice factory, you can definitely make some really good smoke. We’re going to have two driest factories. Why is a meat company involved in dry ice? Well, to your point, so we ship frozen and what that means is if we don’t have dry ice, we can’t ship the box. What we saw in 2020 was there was a run on carbon dioxide, which is an input into dry ice. All of the beverage companies were buying up all the CO2, which made dry ice short, and then the vaccines were going to be shipped with, they had to be shipped at negative a hundred degrees or whatever. They were using up all this dry ice. We were like, “Huh, maybe we should get into this dry ice game ourselves, because if we don’t have dry ice, we can’t ship and our customers can’t get product that they’re relying on us to provide.”

Yes, there is, we manufacture the dry ice out of Oklahoma City and run it to our distribution facilities. Sometimes we have to supplement with more dry ice. Dry ice dissipates at five pounds per day in transit. If you have a box and it’s going to be in transit for two days, you’re putting in 10 pounds of dry ice into that box. But then if it’s summer…

Emily Pfeiffer:
Paying for the weight, right?

Mike Salguero:
Paying for weight. Right.

Emily Pfeiffer:
Paying for the weight of shipping package.

Mike Salguero:
Then if it’s the summer or if there’s going to be a store. Yeah, so you’re basically on the fly real time calculating how many blocks of dry ice to put into the box based on the zip code, how likely is it to be on time. Because if it’s not likely to be on time, we should add another block in and you’re paying for more weight and dry ice also costs a bunch. It’s this dance of how much dry ice do you need?

Emily Pfeiffer:
Fascinating.

Mike Salguero:
Yeah, no, it’s fascinating. I think we were on track to do about 27 million pounds of dry ice or something like that. It’s a huge number. Yet again, it’s one of these things where the difference between really understanding dry ice and negotiating dry ice versus just buying it on the open market is night and day in terms of those, the value you can provide.

Emily Pfeiffer:
I have to say I was always impressed that my box would come in, when my box arrived, I would have just that little nugget left and I was like, “Somebody’s timing this really well.”

Mike Salguero:
Yeah, that’s perfect. If you have a little chip left, that’s perfect.

Emily Pfeiffer:
Just a little bit.

Mike Salguero:
Because if nothing’s left, then you’re like, “Well this didn’t get shipped with any ice.” It’s like, “Well why do you think it’s still cold? How does that work?” The customer doesn’t like it if there’s nothing left. A little bit left is the way to go. That all depends on when you opened it, how long could it stay on your doorstep, how full the box was. That has a really big impact on thermal.

Emily Pfeiffer:
Sure, just like your freezer.

Mike Salguero:
The thermal ability.

Emily Pfeiffer:
Yeah.

Mike Salguero:
Yep, exactly.

Emily Pfeiffer:
Interesting.

Mike Salguero:
Yeah, it’s a complicated piece of our business. We have about 15 employees and a director of dry ice who all they do all day long is think about dry ice. We’ve actually are now over producing, so we’re able to sell dry ice to other companies, which helps then turn what has been a cost center into a profit center.

Emily Pfeiffer:
That’s incredible. As the spouse of a mad scientist, I just want to make sure to tell you that lasers and dry ice are a very good combination.

Mike Salguero:
Yeah. Okay. I haven’t tried that.

Emily Pfeiffer:
Lasers. Okay. My job here is done. Forrester recently published that digital influenced offline retail sales will grow from 59% last year to 70% five years from now. These are offline sales in retailers that are influenced by a digital experience. As we think about what’s next for a digital native brand like ButcherBox, can we expect to see you following in the footsteps of some other digital natives and moving into physical retail locations?

Mike Salguero:
Yes. We are actually in one retail location currently soon to be many, many more. We won’t be opening our own stores anytime soon. A lot of the other digitally native brands, whether it’s Allbirds or Warby Parker, you name it, open their own stores. I currently don’t see a lot of good strategy in that for us. Here are the facts. Post COVID, grocery or the percentage of people who are regularly buying grocery online almost doubled and it’s at like 11.4%, at least according to, I think it’s the supermarket news report. 11.4% of customers are buying groceries online. When you actually dig into that number, a large percentage of that number north of 70% of that number is click and collect or kind of Instacart delivery or otherwise kind of shopping…

Emily Pfeiffer:
Still not shipping?

Mike Salguero:
Yeah. They are not shipping direct to consumer. If you look at the percentage of customers who are willing to buy the product that we’re providing, which is direct to consumer, shipped to your door, not from the grocery store is actually pretty small. As you get bigger and bigger, it’s like we’ve kind of tapped out that addressable market. Now we think that addressable market is going to grow, but there’s a lot more customers who are going to the grocery store or who are going to a specialty store to the local specialty store.

The next frontier for us is, “Hey, we have this great brand and we’re spending all this money to put our brand out in the world.” We put up a TV ad, you put up a TV ad and if only three to 4% of people would be willing to buy online direct to consumer, that means we could just make our marketing more effective by just opening up more channels. We’ve been in conversations with large retailers as well as really small specialty stores that want to provide a much better product and don’t really have anywhere to turn to.

We are looking at either taking over parts of somebody’s freezer, so like, “Hey, you have a freezer, maybe there’s some products that really aren’t moving, we’ll take over that.” Or putting up our own freezer, like a fully branded ButcherBox freezer with product in it. Like I said, we’re in one store, we should be in about 10 in the next couple of, well really a couple of weeks, but let’s say month or two. Then I think there’s there, there in ButcherBox being in retail and we’re really excited to push it forward over the next couple years.

Emily Pfeiffer:
That’s great. With a minute or so left, this has been a fascinating conversation. Is there anything you think I should have asked you that’s important for us to know?

Mike Salguero:
Well, one of the things that people sometimes ask is, why did we pursue B Corp certification? B Corp certification is you have to go through a lengthy process of documenting and answering questions about your practices, your business practices, et cetera. Really for me, the thing that was the most attractive about being a B Corp certified company is that we got to change our legal documents. When you start a company, when you run a company, you have a fiduciary duty to your shareholders to always act in their best interest to your job is to improve or increase shareholder value. When you’re B Corp certified, you actually get to change that. You get to not only be worried about shareholder value, but you get to be worried about the impact you’re having on the world.

For us, that’s a really big deal. We think that a meat company that cares deeply about the impact that they’re having on the environment, on the animals, on the farmers, on the workers in the supply chain, and are willing to take a lifetime to figure out the right way to do this and change the industry and possibly put ourselves out of business. I think that’s the type of meat company that we really need customers to get behind and help us to really make a dent in a very entrenched, hard to change industry.

Emily Pfeiffer:
Mike, thank you so much for joining me today. This was so interesting.

Mike Salguero:
Thank you for having me.

Emily Pfeiffer:
Now I want a steak.

Emily Pfeiffer:

Hello, and welcome to another episode of the RETHINK Retail podcast. I’m your guest host Emily Pfeiffer. I’m a principal analyst for Commerce Technology at Forrester, one of RETHINK Retail’s top retail influencers, and today I have the pleasure of speaking with my guest, Mike Salguero. Mike is the founder and CEO of ButcherBox, a leading direct to consumer brand that delivers humanly raised meat and sustainably sourced seafood to consumers across the US. ButcherBox has become B Corporation certified signaling the brand’s commitment to using its business as a force for good. In 2020, Mike was named an Entrepreneur of the Year National Award winner by Ernst and Young. Welcome to the show, Mike.

Mike Salguero:
Thanks so much for having me.

Emily Pfeiffer:
From what I’ve read, you didn’t really have any meat industry experience before launching ButcherBox, so I’d love to start by having you tell our audience a little bit about the story of how and why you decided to get into the business of selling meat through the mail.

Mike Salguero:
Yeah. Before I started ButcherBox, I had been working at a venture backed business called CustomMade.com, which was a online marketplace for woodworkers and jewelers. I had been running online company for about seven years. That turned out not working out very well, and we ended up having to basically let everyone go, including myself. I was trying to figure out what was next. During the time I was at CustomMade my wife who has a thyroid condition, which is an autoimmune disease, we were following these elimination diets and each of these elimination diets said, “Eat grass fed beef.” We couldn’t find it. I lived in downtown Boston at the time, and we’d go to our local store and there might be ground like grass fed, ground beef but that was it. I just got really curious about like, “Huh, well we know we’re going to have to start eating differently, and everything I’ve read suggests that grass fed beef is better for the animal and the end consumer and the environment and where do you get this stuff?”

I just got obsessed with how do you find grass fed beef? And ended up finding a farmer and buying a half cow from a farmer, which ended up being too much meat. I started selling it to my friends, and then one of my friends was like, “This would be so much better if it was delivered to my house.” I was like, “Yeah. That would be better.” At the time I was really looking to start a hobby. I was not really ready to go back into running a company, running a big company. The idea with ButcherBox was we were going to start a company, we were going to raise no money. I was willing to put in $10,000 of my own money. The thought was, if we got a thousand subscribers getting a box every month and we made $20 on each subscriber, you’ve got a nice cool little lifestyle business on your hands.

I thought that that was a fun endeavor, and so decided to start it and see if I could make it work. Yeah, I had no meat experience before this. I didn’t really know how to put all the pieces together until I met somebody who had worked at Omaha Steaks, who really opened up a bunch of doors for us. I started with a lot of curiosity and a lot of naivete, and that really worked because what we ended up doing was we created a product and an offering that I don’t think anyone in the meat world thought would sell. This idea that you could sell a subscription.

This idea, when we started, we just had this curated box. You essentially picked your protein, do you want beef? Do you want beef and chicken? Do you want beef, chicken, and pork? Then we would send you whatever we wanted to with recipes on how to cook it. These concepts were like, we did it because we didn’t want to hold inventory and we wanted to be really careful with how much cash we were putting out there. Everyone who looked at this who was in the industry was like, “This will never work.” It turned out it did work. In many ways, the way in which we started the company really fueled the approach we took, which really helped us to grow and to thrive.

Emily Pfeiffer:
I feel like at some point in that story, you had some really good chest freezers in your garage or something. Did it go there?

Mike Salguero:
No, no. Well, we do have a very large freezer at our house now. Because one of the challenges of running the company is you’re always asked to sample new products. There’s always different products to sample. My kids love it. It’s like, “Okay, we have some new meatballs to sample.” We went third party everything right away. The idea was that this business was going to be a hobby that I was going to be able to go pursue something else, or I was going to be able to live in Argentina and just look at my numbers once a day. I built it with that in mind.

 

Emily Pfeiffer:
Sounds great.

Mike Salguero:
Yeah, sounds amazing. It’s the dream. I built it with that in mind. Everything was third party from the start. We had a third party cutting facility that would cut the meat and then a third party fulfillment facility that would take the meat, put it in a box and ship it out to the customer.

Emily Pfeiffer:
Got it.

Mike Salguero:
We really were careful about not building up too much stuff that I would have to do because I really wanted this to be a hobby.

Emily Pfeiffer:
It did though evolve from your personal challenges. You were struggling to find that grass fed beef. You launched in 2015 with just over $200,000 in pre-orders, right? That was kind of your plan through a kickstarter campaign. This has now grown to over half a billion dollars in revenue. Have you run into similar challenges in sourcing as when you started trying to find the grass fed meats and the quality meat that you’re looking for at this new scale?

Mike Salguero:
Yeah, for sure. First of all, I failed at the mission of creating a hobby business. That’s pretty clear. I can’t really…

Emily Pfeiffer:
Congratulations.

Mike Salguero:
Yeah, I can’t really sit back in Argentina and look at the numbers once a day. That’s okay. I mean, so what was very clear, very early on day one of the kickstarter was that we had struck a nerve that we were providing a product that lots and lots of other customers were looking for and needed and that we were solving a problem. We work in multiple species, beef, chicken, pork, various types of seafood, bison, lamb. In each of the species, we have to do an incredible amount of work to get to a level that we’re comfortable with providing to our customer. I’ll talk about beef because I think it’s the biggest mover within our mix.

Also it’s the most interesting, and probably from a meat perspective, the most controversial these days. Beef in this country, 98% of the beef in this country is finished in a feed lot. What does that mean? Basically, the last six months of its life, it’s living in a confined feeding operation where it’s fed grains and corn. 2% are grass fed, the type of thing that we work with. Now, the reality is that every cow starts out exactly the same. Six months is cow calf, so calf and its mother. A year where the cow is just on grass, and then six months of feedlot finishing for most of them. The other ones are just kept on grass. As long as you have good projections and what to expect, and because we’re a subscription business, we’re pretty good at being able to predict what’s going to happen.

There’s plenty of supply out there. It’s just about making the commitments to people to say, Hey, instead of feeding, sending it to the feed lot, which by the way, when you send to the feed lot, you’re at the whim of whatever the corn market is doing at that given time. These farmers are incredibly exposed to the commodity prices that are spiking. If the price of corn goes up, feedlot can’t pay as much because that’s the input that they’re going to use and so they drive the price down and all of a sudden the farmer doesn’t make any money on the cow that they raise for a year.

We are in the business of contracting with those farmers and contracting with people early to say, “Hey, raise it this way and we will be your buyer at the end.” There’s actually a tremendous amount of supply out there. We’ve had to build programs from scratch. Chicken and pigs are more have to be built from scratch. But as long as we can keep our commitments, understand how much we’re going to be needing, we’ve had a fairly easy time, with the exception of the few months of COVID where things went really bonkers. We’ve had a fairly good time for everybody. The product is out there. It’s really about getting people to change their practices.

Emily Pfeiffer:
Do you feel like you’re getting the industry to change its practices? Do you feel like that 2%, are you having an impact on how many cows?

Mike Salguero:
We hope so. Yeah. We have a mission to transform meat. In order to transform meat, you really need to play with the industry. You can’t just transform meat by working on the fringes. You have to work with the companies, the large companies. Many of these companies are willing to change provided that they have a buyer. The challenge is they’re like, “Well, I’m not going to do that because that’s too expensive or too much infrastructure, or nobody’s actually going to buy that.” We come in and we say, “Hey, if you raise this chicken to this standard, we’ll buy all of them. Or if you raise this pig to the standard, we’ll buy all of them.”

Emily Pfeiffer:
It’s a much easier to sell to the investors, isn’t it?

Mike Salguero:
It’s much easier to sell to those companies who are wanting to make changes. They see that there’s a customer. There’s definitely a big rise in the conscientious customer. They see that the rise of conscientious customers is happening, they want to do something about it. We kind of help them. We give them a leg up, we give them their first customer to be able to provide…

Emily Pfeiffer:
Yeah, that’s great.

Mike Salguero:
… a different quality than what they have currently.

 

Emily Pfeiffer:
Yeah, it really comes through when you talk about how you source your products, that you care about the welfare of the animals, this transparency. I know that Butcher Box is certified as a B-corp. At Forrester, we talk about values-based selling and how more consumers, especially younger ones, are looking for values like environmentally conscious business practices when they shop, that these things are getting more and more important to consumers. Do you think that these changes in consumer sentiment to create, Do you think that they’re going to create more competition as other meat companies maybe also start to focus on more sustainable practices?

Mike Salguero:
First of all, I totally agree that consumers are increasingly waking up to wanting a higher standard for the products, a lot of their products, but certainly in meat as well. The data suggests that there’s a group that is called Flexitarian, which is really, “Hey, I eat meat, but I’m also supplementing with vegetables. Meat is more of not the main thing on the plate.” That group has doubled in the past two years. Whereas people who define themselves as meat eaters has gone down. Meat eaters has gone down, Flexitarian has gone up. Those people are still eating meat, but they’re also making sure that they’re making conscientious choices.

When you ask them what they care about, they’re really in this intersection of how is the animal treated? How is the farmer treated? How is the environment treated? And all of it has to do with this feeling of feeling guilty, like I’m eating this and I feel bad about what I’m eating because I’m told that it’s bad for the environment, it’s bad for you, it’s a et cetera. And that wave is coming. That wave is already here, and meat companies for sure need to wake up to that. I think we are a good canary in the coal mine saying, “Hey, there is a customer over here, a really big customer. Look how big of a company we grew in seven years.”

These customers want something that you’re not providing. You can’t fake it anymore. Because what a lot of the companies do is they put a green leaf on there and hope for the best. They’re not actually making changes. We say, “Can’t fake it anymore.” To answer your question on competition, so I started Butcher Box as a hobby. We never raised outside funding. We’re fairly unique in terms of direct to consumer companies that haven’t raised anything outside. We have no investors, and I think that’s allowed us to take a pretty unique perspective on, for example, competition. My honest to goodness answer on Hey, are you worried about competition?

If all of these large meat companies start providing a much better product to the customer and change the way meat is raised in this country, hell no. I think that’d be great. Put me out of business. That’d be awesome. Because what that means is that a huge portion of the meat, it’s no longer 98% this way and 2% that way. It’s like, oh, it’s 10%, 20%, 40%. That would be amazing. And if that meant that we went out of business because everybody copied what we were doing, great.

Emily Pfeiffer:
But it’s actually better,

Mike Salguero:
Then we actually solved the mission of transforming meat.

Emily Pfeiffer:
So if only…

Mike Salguero:
It’s interesting…

Emily Pfeiffer:
Go ahead.

Mike Salguero:
It’s interesting because our mission is to transform meat and that might include us getting run over in the process and that just might be part of the journey that we’re on here.

Emily Pfeiffer:
Then you’d need a new hobby.

Mike Salguero:
That’s right. I need new hobby. You know, transforming meat was just one thing.

Emily Pfeiffer:
Very serious hobby. Yeah. I struggle with something. My dad is a very serious meat eater and he is one of those people who wants to go to the meat counter and personally select his cut of meat. How do you win over picky customers like him?

Mike Salguero:
Yeah, I’m not sure if we can, to be totally honest. I think people who have a relationship with a butcher where they’re going to the counter and choosing a cut of meat, that’s a very rare and special relationship. That’s fewer and farther between. There are very few places like that left. Most of the meat that you’re purchasing is no longer cut at a butcher shop. It’s prepackaged and sitting on the shelf. But if your dad is going somewhere and buying something and that he likes to pick it out, I think he should continue to do that.

Emily Pfeiffer:
I really appreciate how you made that sound almost romantic. Yep.

Mike Salguero:
It is. One of the things that’s like, I constantly remind our staff about this, is like, and I don’t want to gross out the audience, but people ingest this product. You think about the things that you sell or you could be selling, whether it’s software or it’s furniture. Yes, you’re going to sit on it, or yes, you’re going to have it in your home, but the amount of trust and intimacy that somebody has to take product that you provided and fuel their body with it and feed it to their families, that’s a huge responsibility. Yeah, if your dad has a little romance with a neighborhood butcher, I think that’s great.

Emily Pfeiffer:
Very strong feelings. Okay, that’s nice. Thanks. I’ll tell him he’s okay. Briefly just to talk about COVID times for a moment. We know that grocery has been increasing in terms of digital adoption over the past few years. More and more consumers are willing to buy food online than they have been before, my dad aside. Did you see an uptick in subscriptions when the pandemic hit? How did you meet that demand while simultaneously dodging the labor and supply chain challenges that everyone was facing along with it?

Mike Salguero:
Yeah, for sure. We had a very similar spike to what a lot of other toilet paper, food, rice, nuts, meat companies I saw. It was around St. Patrick’s day of 2020, so March 17th I think, we were adding thousands and thousands and thousands of people a day. We’re just getting slammed with orders. The other thing that was happening is our members were also asking for if they were getting a monthly box, all of a sudden they just got a box a week ago, but they want another box. There was this big wave of members moving their bill date in to get another box in their freezer.

Emily Pfeiffer:
So much for demand planning?

Mike Salguero:
Yeah, so much for demand planning. That’s right. We tried to ride the wave as long as we could. We lasted 10 days. Because again, this product, you need a plan. You can’t just manufacture the product. Then we made, I think the right decision, but I think possibly the different decision. What we said was, “Hey look.” This is what I said to my staff. “I only eat ButcherBox. At my house, we only eat ButcherBox. I am not about to go to the grocery store and I don’t think our customers should be either. They shouldn’t have to go to the grocery store either. What we’re going to do is we’re going to put up a wait list and not allow any more customers to sign up for a new box while we satisfy the current customers that we have.”

Because we have core value of being member obsessed, and we knew that our customers needed that box. They were fearful, they didn’t want to go to the store. Getting that box was really important to our members. Yeah, we rode the wave and then we realized, “Wow, this is way too much demand.” We put up a wait list, which we had up from April, beginning of April till the middle of July while we digested the new demand, new size. But we doubled the business that year. I think going into COVID, we were about 225 million and after COVID we were 450 million or 440 million. We doubled the business. The other thing that happened is we doubled the business with really no marketing spend because we didn’t need to market.

Emily Pfeiffer:
It came to you?

Mike Salguero:
It just came to us, which was very different than what we were used to.

Emily Pfeiffer:
Incredible. You talk a lot about sourcing the meat, the product you sell. I spend a lot of my time talking about logistics and digital operations. I have a question about the dry ice, right? This is sort of the magic that keeps your products frozen until they arrive. It’s got its own complex logistics. You have to source it.

Mike Salguero:
For sure.

Emily Pfeiffer:
Store it. Calculate the right amount in a package.

Mike Salguero:
Yup.

Emily Pfeiffer:
How did you work through all of that?

Mike Salguero:
Yeah, so first, I love that you care a lot about the logistics side. I think that’s oftentimes a side that people who work in e-commerce, who start companies in e-commerce don’t really pay attention to. It’s actually where all the money’s made. It turns out…

Emily Pfeiffer:
Or lost.

Mike Salguero:
Or lost. Right. It turns out that when you’re sending thousands or tens of thousands or hundreds of thousands of packet, a millions of packages a month, even the tape that closes the box is worth negotiating because you’re talking about millions of feet of tape. You really need to focus on everything and negotiate everything and be just doggedly trying to drive up quality and drive down costs all the time. I don’t think people do that. They don’t think about, “Hey, if we save a penny, a truckload is $400 cheaper and if we’re running hundreds of those a week, it’s a huge number.”

I believe that a lot of profit and success is gained by focusing on the operations. I think oftentimes people are like, “Eh. Yeah, no, it’s fine. It’s like it’s all set up. We make enough margin.” No, go for it. To your question on dry ice. Yes. Dry ice is very complicated. Not sure if you know, we actually started our own dry ice factory. We have a dry ice factory in Oklahoma City and we have a new dry ice factory launching in December. It was supposed to be open, but there was some part that we’ve been waiting for. Launching in December…

Emily Pfeiffer:
Please tell me you have a really good time at Halloween.

Mike Salguero:
Well, it’s so far away, but yes, the dry ice factory, you can definitely make some really good smoke. We’re going to have two driest factories. Why is a meat company involved in dry ice? Well, to your point, so we ship frozen and what that means is if we don’t have dry ice, we can’t ship the box. What we saw in 2020 was there was a run on carbon dioxide, which is an input into dry ice. All of the beverage companies were buying up all the CO2, which made dry ice short, and then the vaccines were going to be shipped with, they had to be shipped at negative a hundred degrees or whatever. They were using up all this dry ice. We were like, “Huh, maybe we should get into this dry ice game ourselves, because if we don’t have dry ice, we can’t ship and our customers can’t get product that they’re relying on us to provide.”

Yes, there is, we manufacture the dry ice out of Oklahoma City and run it to our distribution facilities. Sometimes we have to supplement with more dry ice. Dry ice dissipates at five pounds per day in transit. If you have a box and it’s going to be in transit for two days, you’re putting in 10 pounds of dry ice into that box. But then if it’s summer…

Emily Pfeiffer:
Paying for the weight, right?

Mike Salguero:
Paying for weight. Right.

Emily Pfeiffer:
Paying for the weight of shipping package.

Mike Salguero:
Then if it’s the summer or if there’s going to be a store. Yeah, so you’re basically on the fly real time calculating how many blocks of dry ice to put into the box based on the zip code, how likely is it to be on time. Because if it’s not likely to be on time, we should add another block in and you’re paying for more weight and dry ice also costs a bunch. It’s this dance of how much dry ice do you need?

Emily Pfeiffer:
Fascinating.

Mike Salguero:
Yeah, no, it’s fascinating. I think we were on track to do about 27 million pounds of dry ice or something like that. It’s a huge number. Yet again, it’s one of these things where the difference between really understanding dry ice and negotiating dry ice versus just buying it on the open market is night and day in terms of those, the value you can provide.

Emily Pfeiffer:
I have to say I was always impressed that my box would come in, when my box arrived, I would have just that little nugget left and I was like, “Somebody’s timing this really well.”

Mike Salguero:
Yeah, that’s perfect. If you have a little chip left, that’s perfect.

Emily Pfeiffer:
Just a little bit.

Mike Salguero:
Because if nothing’s left, then you’re like, “Well this didn’t get shipped with any ice.” It’s like, “Well why do you think it’s still cold? How does that work?” The customer doesn’t like it if there’s nothing left. A little bit left is the way to go. That all depends on when you opened it, how long could it stay on your doorstep, how full the box was. That has a really big impact on thermal.

Emily Pfeiffer:
Sure, just like your freezer.

Mike Salguero:
The thermal ability.

Emily Pfeiffer:
Yeah.

Mike Salguero:
Yep, exactly.

Emily Pfeiffer:
Interesting.

Mike Salguero:
Yeah, it’s a complicated piece of our business. We have about 15 employees and a director of dry ice who all they do all day long is think about dry ice. We’ve actually are now over producing, so we’re able to sell dry ice to other companies, which helps then turn what has been a cost center into a profit center.

Emily Pfeiffer:
That’s incredible. As the spouse of a mad scientist, I just want to make sure to tell you that lasers and dry ice are a very good combination.

Mike Salguero:
Yeah. Okay. I haven’t tried that.

Emily Pfeiffer:
Lasers. Okay. My job here is done. Forrester recently published that digital influenced offline retail sales will grow from 59% last year to 70% five years from now. These are offline sales in retailers that are influenced by a digital experience. As we think about what’s next for a digital native brand like ButcherBox, can we expect to see you following in the footsteps of some other digital natives and moving into physical retail locations?

Mike Salguero:
Yes. We are actually in one retail location currently soon to be many, many more. We won’t be opening our own stores anytime soon. A lot of the other digitally native brands, whether it’s Allbirds or Warby Parker, you name it, open their own stores. I currently don’t see a lot of good strategy in that for us. Here are the facts. Post COVID, grocery or the percentage of people who are regularly buying grocery online almost doubled and it’s at like 11.4%, at least according to, I think it’s the supermarket news report. 11.4% of customers are buying groceries online. When you actually dig into that number, a large percentage of that number north of 70% of that number is click and collect or kind of Instacart delivery or otherwise kind of shopping…

Emily Pfeiffer:
Still not shipping?

Mike Salguero:
Yeah. They are not shipping direct to consumer. If you look at the percentage of customers who are willing to buy the product that we’re providing, which is direct to consumer, shipped to your door, not from the grocery store is actually pretty small. As you get bigger and bigger, it’s like we’ve kind of tapped out that addressable market. Now we think that addressable market is going to grow, but there’s a lot more customers who are going to the grocery store or who are going to a specialty store to the local specialty store.

The next frontier for us is, “Hey, we have this great brand and we’re spending all this money to put our brand out in the world.” We put up a TV ad, you put up a TV ad and if only three to 4% of people would be willing to buy online direct to consumer, that means we could just make our marketing more effective by just opening up more channels. We’ve been in conversations with large retailers as well as really small specialty stores that want to provide a much better product and don’t really have anywhere to turn to.

We are looking at either taking over parts of somebody’s freezer, so like, “Hey, you have a freezer, maybe there’s some products that really aren’t moving, we’ll take over that.” Or putting up our own freezer, like a fully branded ButcherBox freezer with product in it. Like I said, we’re in one store, we should be in about 10 in the next couple of, well really a couple of weeks, but let’s say month or two. Then I think there’s there, there in ButcherBox being in retail and we’re really excited to push it forward over the next couple years.

Emily Pfeiffer:
That’s great. With a minute or so left, this has been a fascinating conversation. Is there anything you think I should have asked you that’s important for us to know?

Mike Salguero:
Well, one of the things that people sometimes ask is, why did we pursue B Corp certification? B Corp certification is you have to go through a lengthy process of documenting and answering questions about your practices, your business practices, et cetera. Really for me, the thing that was the most attractive about being a B Corp certified company is that we got to change our legal documents. When you start a company, when you run a company, you have a fiduciary duty to your shareholders to always act in their best interest to your job is to improve or increase shareholder value. When you’re B Corp certified, you actually get to change that. You get to not only be worried about shareholder value, but you get to be worried about the impact you’re having on the world.

For us, that’s a really big deal. We think that a meat company that cares deeply about the impact that they’re having on the environment, on the animals, on the farmers, on the workers in the supply chain, and are willing to take a lifetime to figure out the right way to do this and change the industry and possibly put ourselves out of business. I think that’s the type of meat company that we really need customers to get behind and help us to really make a dent in a very entrenched, hard to change industry.

Emily Pfeiffer:
Mike, thank you so much for joining me today. This was so interesting.

Mike Salguero:
Thank you for having me.

Emily Pfeiffer:
Now I want a steak.