It’s also a strategy to cope with a consumer who is simultaneously getting more frugal about the groceries they buy while eating out more than they were in the thick of the COVID pandemic. Salguero said that 2023 will be ButcherBox’s first year when revenues will shrink; the company laid off 15 employees last week. After the cuts, it will still employ 200 people.
Founded in 2015, ButcherBox is one of the most successful businesses to launch from the funding site Kickstarter, which it used to attract early customers for a $129 box of frozen, grass-fed beef. (It has since expanded into humanely raised chicken and pork, as well as wild-caught seafood.) It has also achieved distinction among startups by making it without venture capital and earning profits consistently.
“It’s a hell of a story,” said Seth Rosen, who cofounded an earlier e-commerce startup, CustomMade, with Salguero. “I never would have expected it to get this large.”
But ButcherBox had incredible timing. First, it tapped into the paleo and CrossFit trends, which advocate a meat-heavy diet. Then COVID came, pushing many consumers to get groceries delivered, rather than going to the store. (At one point in 2020, demand was so intense that ButcherBox had to temporarily stop accepting new customers.)
The company also developed a marketing strategy that enabled it to attract customers very efficiently. That included sharing a cut of its revenues with bloggers and podcasters — so-called “affiliates” — who helped promote its monthly subscription product to their audiences.
But this year “has been rough,” Salguero said. The company doesn’t expect revenues to grow at the same pace. ButcherBox is facing tougher competition from other meat-by-mail companies. Changes in how web surfing can be tracked across sites make it harder for sites like ButcherBox to market efficiently. The company is also finding that consumers are scrutinizing their grocery budgets more carefully — even as they return to eating at restaurants after a COVID-induced pause.
When consumers are under financial pressure, Salguero said, they “tend to trade down on their food budget. If they were an organic shopper, suddenly they don’t care about that as much.” (He believes that they may still want to feed their pups a premium product, though.) And when people eat at restaurants, he adds, “we’re not making money.”
Walden Local, a meat delivery business in Tewksbury, is also experiencing “a more challenging economic environment” in 2023, said chief executive Nancy Pak. That includes “more travel than previous years” — meaning people are not at home to receive deliveries — “which has people reevaluating their subscription services overall.” Walden Local has about 100 employees in Massachusetts and Connecticut, according to Sir.
Last week’s layoffs were the first for the company, Salguero said. One issue was some managers were only managing a single employee — which was “incredibly inefficient,” Salguero said.
The layoffs, he said, weren’t “that we’re in financial trouble. We’re still profitable every month. It’s really to become scrappy and efficient again.”
Part of that efficiency will come from reducing the company’s office space. In 2021, ButcherBox leased 35,000 square feet in the former arsenal complex in Watertown, expecting to return to pre-COVID work patterns of employees coming in every day. But now, about 40 percent of employees live outside of Massachusetts and work remotely, Salguero said, and the company continues to hire for remote roles. When the company moves next year, it will occupy less than half the office space as it does now.
Earlier this year, ButcherBox began selling chicken- and beef-based dog treats, and Salguero said sales have already hit $1 million. The company chose to launch a dry food for dogs rather than a frozen food, because “we didn’t want to compete against ourselves” for space in the freezer, Salguero said.
Other entrepreneurs who have worked in the pet food sector say that could prove a smart experiment. “It’s so much easier to sell an existing customer additional merchandise that they may need, as opposed to going out to get a new customer,” said entrepreneur Paal Gisholt, who runs an animal-oriented e-commerce business, SmartPak. But Gisholt said he’s surprised ButcherBox isn’t launching more food products for humans first, like beef jerky.
The fourth quarter into January is an important stretch for ButcherBox — not necessarily because lots of people give the product as a gift, but more because “that’s when people do a lot of their shopping” for themselves, too, and at the start of the new year, people are “changing their eating patterns, focusing on eating healthier,” Salguero said.
As Salguero looks to 2024, he expects competition from new entrants to intensify and consumers to remain frugal.
“We’re not one of those companies that doesn’t know what we need to do,” he said. “It’s about execution.”
Pet food will be part of that, but so it will encourage customers to eat at home. “Your freezer is like a savings account,” he said. “We need to be top-of-mind, so you don’t order take-out, but you make dinner tonight.”
Scott Kirsner can be reached at [email protected]. Follow him @ScottKirsner.