Hot sauce is one of the cheapest and easiest condiments to make. Because of the simplicity of the manufacturing process, the production cost will remain at a minimum as well. If you produce hot sauce on a large scale these costs can add up. Figuring out the costs from the bottom up, one bottle at a time is a necessity.
If you keep the ingredient combination simple hot sauce can be made for about $.16 an ounce. Adding additional ingredients will add costs but most spices that are typically included in hot sauces are less than $.04 an ounce. Manufacturing costs can be figured by listing the resources used.
Buy ingredients for one batch of hot sauce and keep the receipt
Start small and make a list of all the ingredients in your hot sauce and shop for just those items. Once you have a recipe for a hot sauce you can carefully and methodically break down the cost of each item and ingredient in your sauce.
Use all of the ingredients purchased and make a batch of hot sauce. How much hot sauce can you make with the ingredients purchased? If you spent $5.00 on a simple list of ingredients and made 5 ounces of hot sauce then it costs you $1.00 per ounce…but it is not that simple (and costs should be much lower than that if you want to make a profit).
If you are only using a portion of an ingredient but need to purchase it in a larger quantity, then costs will need to be broken down even further. Here’s an example: A gallon bottle (128 oz) of distilled vinegar costs $12.99 but you are only using 4 ounces ( ½ cup ) so the cost of vinegar in your recipe is only $.40. How much of that $.40 is used in one bottle of hot sauce?
You can eventually calculate the amount and weight of the products in your recipe to produce a certain amount of sauce. Large manufacturing companies know how many hot peppers are needed for an exact amount of product. It begins with a breakdown of the cost of ingredients in your hot sauce recipe.
A simple breakdown of bulk costs
The beginning stages of determining the cost of making a single bottle of hot sauce can be figured from the bulk cost of ingredients, making the sauce, and then dividing it into bottles using the three-question rule. Using the ingredients list below from a Jalapeno Lime Hot Sauce recipe example…answer these three questions.
- How much was spent on each ingredient?
- How much of that cost was used in the recipe?
- How much did the recipe produce?
This will give individualized costs of each item in the recipe and this can be totaled for the cost of one bottle. This method also indicates the highest individual cost in a single bottle. If your sauce requires only 4 oz of peppers it may be difficult to purchase such a minimal amount. Simply break down these costs also with simple math but be methodical about documenting. This can be done on a simple piece of paper, Word Doc, Excel spreadsheet or other software and apps.
|Item||Total Cost||Cost in Recipe|
|1 (3.7 oz) Green Bell Peppers||$2.89 for a bag of three||$.96 ea|
|3 (3.5 oz) Jalapeno||$.89 for 8 oz bag||$.29|
|¼ (2 oz) Cup Lime Juice||$4.99 for 2.5 oz bottle||$4.50|
|¼ (2 oz) Cup Pineapple Juice||$8.40 for 64 oz bottle||$.26|
|3 (.4 oz) Cloves Garlic||$1.65 a head||$.13|
Total cost = Cost used in recipe = How much produced?
Once you have these questions answered a simple equation can be made. This recipe produces about one (1) 5 oz bottle of hot sauce. Also notice the high cost of lime juice in the recipe. These cost can be reduced but be careful about changing the recipe.
Cutting cost with compromising the recipe
Cutting costs for any business is not easy and is always at the forefront of every start-up business. One thing that a business owner does not want to do is compromise the quality of their product or service. However, if you can cut the costs before the product is introduced to the market then there isn’t any change to the product from the consumer’s point of view.
This simple breakdown of ingredients from the example in the Jalapeno and Lime Hot Sauce recipe shows that the most expensive item is lime juice. The pricing includes a product called Real Lime which is one of the more expensive brands but it is a high-quality product. The amount purchased for this recipe was a 2.5 ounce bottle. Smaller amounts of products will be much more expensive than large quantities.
Buy hot sauce ingredients in bulk to save costs
The most probable solution would be to purchase a less expensive product and buy that product in a large quantity. There is not a lot of lime juice in this recipe but it is a prominent flavor so you will need to use a comparable product. Lucy’s Lime Juice can be purchased from Amazon for $14.99 a gallon so only make this purchase if you will use the additional lime juice. That’s about $.12 an ounce or $.24 for this recipe instead of $2.00 an ounce. That makes the cost of making this sauce only $1.88 instead of $6.14. That’s a significant savings of over 70% a bottle just by buying in bulk.
A second solution to cut costs on a hot sauce recipe would be to purchase fresh limes and squeeze your own juice. This is known as make or buy. Much of the cost of bottled lime juice is the manufacturing process. 2 limes can produce a ¼ cup of juice needed for this recipe. At $.33 each from Walmart, that’s only $66 worth of lime juice saving over $1.00 a bottle. If the price point of this hot sauce can be lowered by a dollar your profit margin becomes much higher.
A 5-ounce bottle of hot sauce using the Jalapeno Lime Hot Sauce recipe can be made for $.37 oz. Eliminating some of these ingredients (therefore completely changing the recipe) will reduce costs even more. Traditional or classic hot sauces can be made with hot peppers vinegar and garlic.
|Item||Cost of Product||Cost in Recipe|
|6 (7 oz) Jalapeno||$.89 for 8 oz bag||$.29|
|½ (4 oz) Vinegar||$12.99 for a gallon||$.40|
|3 (.4 oz) Cloves Garlic||$1.65 a head||$.13|
Reducing the hot sauce recipe into three simple ingredients reduces the cost to produce a bottle significantly. A simple jalapeno hot sauce can be made for about $.16 an ounce or $.82 for a 5 oz bottle. These costs can be reduced even more by seeking less expensive products.
Shop around for cheaper (but good quality) product
Simply put, buying the same ingredients for less cost from a different vendor is a great option. This can be common practice but so is loyalty so don’t jump from manufacturer to manufacturer only to save a few cents. However, a few cents can add up over time and across hundreds or thousands of bottles of hot sauce. Don’t let these costs slip away by not measuring properly.
Measure and weigh the ingredients in hot sauce
Measuring tools are essential in a kitchen. I will often use a teaspoon as a unit of measurement instead of a standard used measuring device. Don’t do this. Although it may be close, you will want precise measurements when you increase the quantity.
Additional ingredients can drive up costs
Like the hot peppers, this may be difficult to purchase in smaller amounts, but these costs can be minimal compared to other contents because there will be fewer amounts involved. Gourmet or artisan hot sauces may use complex recipes with nontraditional ingredients, and this will drive up the cost.
Vinegar is a common ingredient in many varieties of hot sauce but is also inexpensive. Don’t worry about purchasing high-priced gourmet ingredients in the beginning stages of making and bottling hot sauce. There’s sucha thing as gourmet vinegar? Unless of course, the idea of a gourmet hot sauce will be your sales pitch. Most standard types of vinegar used in a hot sauce such as a distilled white vinegar should all be relatively the same. Buy the cheapest one.
Balsamic vinegar will be much more expensive than some other types of vinegar but if that’s what your recipe calls for, don’t change it to save a few dollars. The overall price of your hot sauce will be much higher.
Water (some water is free)
Water is another very inexpensive additive to a hot sauce and some tap water is free. Consider using water if you are not concerned with the acid level and are using another means of preservation to extend the shelf life. Water mixes well with other ingredients in hot sauce but remember that it is tasteless.
Don’t leave out spices from your hot sauce recipe simply because it gives the end product of your sauce a higher cost. Like peppers and other ingredients, there are ways to grow or make these items as well to save money. Spices will be the least expensive items in your hot sauce.
Dried spices can last over 6 months
Items like hot peppers or other produce items will need to be used right away to ensure they don’t rot and become useless. Dried or dehydrated peppers will last much longer than fresh peppers and still maintain their essence. Keep dried hot peppers in an even temperature room without any moisture and they may last up to a year.
Make (grow) or buy ingredients in hot sauce?
In business and manufacturing, there is a principle known as make or buy in which the company does a cost analysis of making some of the products to use in their product or purchasing to save on time for their production.
In the case of making hot sauce, the scenario would be whether to buy hot peppers and other ingredients or grow your own. You are probably not in a position to make your own bottles, but it would certainly be cheaper.
The jalapeno lime hot sauce recipe above reduced costs significantly by squeezing fresh lime juice (producing your own) instead of purchasing. In smaller production this can be time consuming and in larger production there can be high up front costs for equipment that will produce the products.
Glass woozy bottles can get expensive
There are many manufacturers domestically and globally that produce glass bottles. This is the most common bottle shape for a hot sauce. Saving $.04 on a single bottle is not worth finding another distributor but $1.00 certainly is and that can add up over a month or years, especially if you are selling hundreds of bottles a month. Decide on the shape before you go shopping around for another supplier.
Purchase bottles…how much is each bottle?
There are many places to purchase 5 oz and 10 oz woozy bottles for your hot sauce. This will be one of the higher expenses for your sauce before you begin to sell it. Some bottles can be as low as $.44 depending on the source and if you are purchasing hundreds or thousands at a time the cost will be even less. A plastic bottle will be much less expensive than glass.
If your sales projections show sales of 1,200 bottles of hot sauce a year, don’t buy 100 bottles a month…buy 6,000 for the next 5 years. Glass hot sauce bottles will not “go bad” and they won’t go out of style. This is a big investment but a lot of money can be saved by buying larger quantities. Items like glass bottles can always be resold.
Performing a lot of the work yourself will keep you from having to pay for labor and this will keep costs down and that should be one of your most important objectives. Don’t spend money on labor until you are making sales.
Perhaps you have a friend, neighbor, or college roommate who could help you with free labor until (or even after) product launch. Family members are always a great option. A lot of hot sauce can be bottled for sale in just a short period of time.
The cost of manufacturing hot sauce
Aside from the ingredients and bottling of a hot sauce, there are costs associated directly with the production of the sauce. At the very minimum, there are costs for using electricity to power kitchen equipment like blenders, food processors, or stoves.
Calculating the cost of hot sauce production can be very difficult in minimal increments and these costs may need to be separated. Breaking them down into smaller increments be also be easier to determine the minimal costs.
What are the other costs associated with production?
You should have a solid understanding of the cost of sauce before you start to sell but also remember the additional cost once you begin to make sales. Manufacturing and production cost will increase as operations increase but that allows practicing Economies of Scale which is a proportional cost is savings due to increased production.
Factor in waste cost
You may not think of some amount of hot sauce being discarded during production due to residual amounts clinging to processing equipment and other kitchen tools. Factor in about 2% to 5% on each bottle and add this to the cost.
Thankfully a hot sauce is not a very heavy item therefore shipping costs can be minimal per bottle. Don’t wait until you have a price point for your hot sauce only to find out the shipping costs gobble up all of the profit.
Transportation and storage costs
There are many costs associated with any business that will fall under the category of operations. These will be broad costs calculated monthly and yearly. You are certainly not going to be storing and transporting a single bottle of hot sauce.Now that you have calculated the cost of making a single bottle of hot sauce the next step would be your operations cost.