I love eating the many varieties of hot sauces out there today and I love making my own special mixtures using unique ingredients to make my own signature sauce. I have always been intrigued with the desire to become an entrepreneur, so the question came up…Is there money to be made in the hot sauce industry?
Hot sauce as a condiment is more popular than it has ever been, and the hot sauce market is only increasing. The hot sauce market is saturated with many varieties of sauces which proves the desire for consumption and demand for exotic new flavors. Projections show the hot sauce market will be increasing to 3.77 billion by 2026 which would be a global expansion of the industry. Continue reading for some factors to consider if you want to enter the hot sauce business.
Is there a demand for hot sauce?
In any business there needs to be a demand for the product. With hot sauces popping up in both sit down and fast food restaurants and spicy foods becoming more mainstream, there is an increased demand for hot sauce. Business models show if there is a demand then there is the potential for a business and this leads to profit. The demand has stretched to cultural flavors, unique flavor combinations and private label products.
Hot sauce has a high profit margin
All businesses want a large profit margin. Meaning they want to receive the most money they can by producing a product for the least amount of money. A hot sauce can be produced and manufactured relatively inexpensively and is partly why there are so many smaller companies making and producing these sauces themselves. The artisan and gourmet sauces are priced higher as the ingredients tend to be costlier but the staple ingredients of hot sauce, peppers and vinegar, can be relatively inexpensive. According to founderactivity.com the profit margin for a hot sauce is 40%.
What type of hot sauce sells the best?
A cayenne pepper sauce such as Franks RedHot or Tabasco are the best selling types of hot sauces globally and domestically. They are easy to produce (aside from the time peppers are aged) and consumers love them. Would it be wise to make a hot sauce like this and try to compete? The hot sauce market has room for competition but taking on global leader could prove to be difficult.
What is the best distribution method for selling sauce?
Globally hot sauces are distributed through large well-known merchandisers. Online distribution is on the lower end of the scale of how hot sauce products are distributed but it is rapidly increasing. Surprisingly, convenience stores rank above online purchases which only validates the popularity and demand for sauces. Five years ago 56% of the population in the US had hot sauce in their household and today that number is only increasing.
Is there money to be made in the hot sauce business?
There is money to be made in the hot sauce business and this is for several reasons. It is fairly easy to create a hot sauce product right in your own kitchen, there is a high profit margin and you can begin selling hot sauce a farmers markets with out any legal implications.
Business models project an increase demand for hot sauce over the next five years. This demand will continue through 2026 as hot sauce gains popularity among other condiments. Start up costs can be low and setting up operations can be done in a fairly limited amount of space.
Research from Fortune Business Insights boast the increase in market share is due to new product development. There were over 20,000 new hot sauce products introduced to 2017 alone. This indicates the consumers interest in spicy foods.
5 great reasons to start a hot sauce business!
1. Hot sauce is inexpensive to produce
The ingredients to make hot sauce are inexpensive and readily available. You can grow peppers in your garden and make your own vinegar right at home. All the ingredients are typically available at your local market and are also available through online locations. Buy in bulk and you will cut expenses even more. Compared to other business ideas such as automobile manufacturing with high overhead cost, a bottle of hot sauce can be produced for around $1.00.
2. Hot sauce (including new recipes) can me produced quickly
Making a batch of hot sauce can be done in 15 minutes or less. The more you make the longer it will take, obviously but hot sauce has a high potency so a typical bottle could be a small amount of 5, 8 or 10 ounces. One batch produced in an afternoon could results in 5 gallons or 5 cases of 5 ounce bottles of sauce.
3. There continues to be a market demand for hot sauce
The demand for hot sauces is stronger than ever and predictions show it increasing for the next five years. Sales are shown to increase in Asia, South America and the US as well. With this demand comes the opportunity for a start up business with implications to expand in the near future.
4. Setting up an online store
Setting up an online store can costs under $4.00 a month and allows your product to be marketed globally. Research shows this to be an effective means of distribution and is on the rise. Because of the product size and weight shipping costs can usually be kept to a minimum.
5. Several different varieties can be introduced
With the combination of ingredients available you could have several different varieties of sauces to reach several different markets. This would only broaden your ability to distribute to a global market. An excellent way to expand your market share is to have another product introduced that is “piggy backed” on another already great selling item.
What are other ways to break into the hot sauce market?
Use private label manufacturers to break into the business
Private label marketing is selling and distributing someone else’s products with your own label on them. These products are often sold as a promotional marketing but can be set up on a larger scale through the manufacturer. This is great if you are more into sales than being in the kitchen. Check out this 5 pack from Branded Sauces.
The quickest way to sell your private label hot sauce product is through a web site store. You can set up a web site within a few hours and pay as little as $3.95 a month. Typically, website hosts will advertise their pricing per month, but you will be charged a year subscription so be prepared to pay $50 or more up front.
You control inventory. If you are going to enter private label sales, depending on who you partner with, you could be doing all of the inventory. Companies like Amazon FBA can provide this on a larger scale. If you are just getting into private label hot sauce sales the products can be stored in just a few square feet of space and there are companies that offer a smaller amount of products. Some of the larger sites for private labels are Alibaba but you typically have to purchase a large quantity.
Try affiliate marketing to sell someone else’s products
Selling someone else’s products is less expensive than manufacturing your own. You can sign up for affiliate marketing programs with many online retailers. They provide you with a link and you copy it onto your site. You then get a commission every time a sale is made. The profit margin per bottle of sauce will be much lower than producing your own but there isn’t any upfront costs.
Use your own unique recipe
If you have a great unique hot sauce recipe you have step number one completed. As mentioned above there are many ways of selling a product, but nothing puts more passion into your business then creating everything from scratch from the ground up. Perhaps you have Grandma’s hot sauce recipe and it is time to introduce it to the world.
Packaging and shipping will become a large part of the cost necessary to distribute your hot sauce product. There are many companies that will provide these services for you. Due to the size and weight of the product shipping costs will be minimal compared to other products.
Once you have perfected your hot sauce recipe and created a large stock you are now ready to sell. You have come up with a logo, labels and packaging and I have created a FREE Profit Calculator that adds the individual costs of each bottle so you can adjust the sale price of your product. Let’s Sell! Marketing is a huge factor in making any sale, but that topic is far too large to me tackled here so I’ve listed 3 ways to sell your hot sauce.
3 ways to sell your hot sauce
1. Use the internet to sell hot sauce
The internet is a HUGE opportunity to make sales on a global level and can be done through many different avenues at little or no costs. Here are a few of the more popular social media sites and larger sales based sites.
Personal web site
A web site is so obtainable and inexpensive that it can be set up in a matter of minutes. If you have a hot sauce, here is your opportunity to reach a mass audience. These sites can be created by yourself with little or no computer programing experience.
Similar to your own web site but so much easier and quicker to do. Facebook Marketplace is on fire but know your cottage laws by state. These are the terms that regulate the production and sales of foods out of your home. Your state may not have any.
Not easy to do with your own sauce unless you are making large sales. There are upfront costs and you will be more profitable if you have several products. However, the popularity of Amazon could be used to increase sales exponentially.
There are already thousands of products listed under hot sauce but that just validates the popularity of hot sauces. Etsy is almost just as popular as Facebook and Amazon and is certainly as secure. There may be other regulations on selling food on Etsy and the other sites listed above as well.
2. Set up a stand at a festival
This does not have to be one of the many festivals annually across the country but any craft or food-based festival would be appropriate. Aside from the costs of a table and tent there are probably renting costs to obtain the space. Farmers markets are a great opportunity to sell fresh hot sauce and there are not any permits or legal fees to take care of.
3. Approach your local store
I love to see the sections inside of grocery stores where they have local products for sale. I always purchase at least one item from here to replace my staple items from huge national manufacturers. The locally produced products may not always be better but I feel better knowing that my money is being circulated to the local market. Approach the manager of your local store about the possibility of introducing you product to the local section.
Whether you are only beginning to thick about it or you have perfected a recipe there are many reasons to enter the hot sauce business. All business is risky so do your research, perform a market analysis and work hard at what you love.