15 Sep September 18, 2019 – Gourmet Food David Hirschkop, Smith.ai Maddy Martin and Cetera’s Gene Goldman
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David Hirschkop – Founder of Dave’s Gourmet – Read interview highlights here
I have used revenue positive marketing. I create limited edition products
that I can sell, and get marketing out of it, but it ends
up being break even or a slight profit.
Dave Hirschkop is the founder and creative force behind Dave’s Gourmet. Dave’s Gourmet is a specialty foods company that makes a wide range of products including Gourmet Pasta Sauce, Hot Sauce, Condiments and Spices. When looking at the sea of similar red pasta sauces in the supermarket, Dave became determined to design innovative pasta sauces using the best tasting and highest quality ingredients he could find. His creations include Butternut Squash, Organic Red Heirloom, Wild Mushroom and golden Heirloom Pasta Sauces, earning him more than seventeen prestigious Specialty Outstanding Food Innovation awards, including “best in category” four times. Twice, his pasta sauces were honored as “best in the industry.” A man of multiple talents, Dave authored a cookbook and made numerous appearances on television, including the Food Network. Over the past twenty years, Dave and his team have worked tirelessly to save the world from blandness and banality.
Maddy Martin – Head of Growth & Education at Smith.ai
If you charge by the hour, your opportunity cost of spending time answering the phone, or doing accounting, or even the lack of sleep, is significant and you are probably not factoring it in.
Maddy Martin is the head of growth and education at Smith.ai, which provides integrated phone and web chat services for solo and small-firm attorneys, including virtual receptionist & intake service, live website chat, and Keypad cloud phone systems. She has spent the last decade growing tech startups from New York to California, and has expertise in digital marketing, small business communications, lead conversion, email marketing, SEO, and event marketing.
Gene Goldman – Chief Investment Officer and Director of Research, Cetera® Investment Management
Gene Goldman is responsible for the strategic direction and continued growth of the firm’s research offerings. His role includes setting the vision for superior capabilities and enabling the delivery of objective investment advice. He provides day-to-day oversight of Cetera Investment Management, with a focus on providing unbiased research about the economy and financial markets, asset allocation strategies, mutual funds and other investment related topics. Gene also helps oversee the investment committee and their commitment to delivering thought leadership on the economy, financial markets and investment strategies, as well as implementation and practice recommendations for advisors. Gene has more than 24 years of experience in the development of investment strategies, money manager research and overseeing investment analysts.
Highlights from David’s Interview
A long time ago, I owned a taqueria called Burrito Madness, sort of unusual wraps, Cajun shrimp. The heat is unusual stuff. And it was in a college town, University of Maryland, College Park. We had a lot of drunk people come in late at night and cause problems. I do not like drunk people. So I started messing with them by giving super hot sauces and putting and even more on there. We’ve actually hospitalized more people than any food product, but no one’s ever had permanent damage, and no one’s been in there overnight. So it’s a good track record. But at the restaurant, lots of people, we were having a lot of fun burning the heck out of people.
Somewhere along the line, I said, “I want to make the hottest sauce in the universe.” And I figured out how to do it. We did all sorts of experiments, and the strange thing was, people started coming in and asking for it in little soufflé cups. I thought they would be like, “Don’t! Get that away from me.” But aside from the drunk college kids are also this massive group of people called chili heads in the country who love the hotter, the better food. And they’re fun and incredible, like a gregarious group that is into food. And they just they love this new, incredibly insane sauce, which we then named insanity sauce. We put it in a bottle eventually and went to the national fiery Food Show. Some guy had a minor respiratory incident, and they banned us from the show. Then the New York Times picked up on that, and it just became this media storm. And my hobby of making sauce took off.
Somehow along the way, people started talking to me as Dave Insanity, not Dave’s Gourmet, which is the company. So we’re just a friendly, first name kind of bunch. I’m Dave, and that sauce’s Dave’s Insanity.
That’s interesting, when you create a product that’s really, powerful, because it’s so true to what it is. It’s so interesting, exciting, stuff just happens. There’s gazillions of videos of people eating it and burning their heads off and all sorts of things. And we have nothing to do with most of it. We’re just… we don’t even see a lot of it. But we get a giggle when we do get to see it.
In 1993, I sold the taqueria and moved back to California. I had this hobby making sausage on the side; I needed a job. So my buddy gave me a job as a mortgage broker. Nights and weekends, I was burning people’s faces off, and during the day I was refinancing people’s houses. And it just grew. I just couldn’t do both at a certain point, and it was pretty obvious that making sauce was a lot more fun. So I just made sauce.
Yeah, I only was that refinancing a year, a year plus, but it’s a tremendous way to do it. Because when you start off that way, there’s no financial pressure on the company to support me in any way. You could just let it do its thing. Admittedly, part of the difference is that I was just having fun. I didn’t have a five year plan or goals of taking over the sauce world or anything like that. But it’s really great. It’s a lot of work to do both, obviously. But you’re not beholden to anyone, because you’re not doing a lot of fundraising and all that. It took only about a year to grow big enough to take over.
We have about 40 or 50 products, we sell in about 8000 or 9000 stores nationwide. We do eight or nine other countries. Sales are definitely in the high single millions. We only have five employees. I’m a big lover of outsourcing. And the Five Hour Workweek, I love that book. I figured out a long time ago what I’m good at, not good at. I don’t like managing people that much. I don’t like to spend a lot of time in the details of managing a factory or its retail type things. We’ve always tried to keep our group small, a very talented, creative group. We just focus on creating items and getting them out there in the world. And that’s worked well for us.
A third party logistics house does the warehousing and shipping. We have several outsource manufacturing plants. In fact, in the next month or two, we’re going fully virtual. We’re actually getting rid of our office. Nobody wants to come here, everyone wants to work from home, and everything’s up in the cloud anyways. So then I’ll just do occasional collaborations with people when I need help designing a recipe base or a package on something or whatever. My internal staff will stay small, and hopefully it allows me to just be creative and create cool things.
All the ideas are always my ideas, but the recipes have been mine or collaborations or we have our R&D people sometimes come up with basic recipes, so it’s varied over time. And we stretch it with pasta sauces, we’ve got hot sauces, which is, of course, our core competency. But Dave’s Naturals, which is our little spin off, has overnight oats, and we’re working on a snack line, and then there’s bunches of things we’ve designed over time that we never launched, because they were a bad idea or people always tell you be strategic, very focused. We should have just been a hot sauce company, supposedly.
The idea I really loved it, but nobody else liked, was I wanted to do a line of Mexican bottled water called Montezuma Springs. We had a bunch of things that were cool, but we didn’t do that. We had adjustable heat hot sauce, so you could turn the cap of the sauce, and the heat coming out with change. That was one of my favorites. Then we had Lucky Nuts, where every tenth nut was really hot, but you couldn’t tell them apart. We had our Private Reserve. Those vary depending on the packaging. But some of them were $30 a bottle, and some sold for hundreds of dollars a bottle, all limited edition stuff. We had bunches of really unusual stuff we’ve done over time. The special edition is hotter. Every year we change the formula, so it gave us a chance to do something different.
Every pepper has the same basic ingredient inside, it’s an alkaloid ingredient. Habanero has more of it than a jalapeno. My innovation was to take the thing that’s hot, that chemical basically, and put it straight into the sauce. Because before that, you can only make a sauce hotter by putting in a hotter pepper. But everyone was using habaneros already in the 90s when I was doing this. So I was like, well, the extract is much hotter than the pepper, so let’s just use the extract. It’s the same thing pepper spray uses.
You could lay a foundation in your stomach by having a healthy, solid breakfast. That’s delicious. Then later, hammer yourself with some hot sauce. I thought the oats were a great idea. I still do. They’re a health food, a fun spin-off on oatmeal, because you soak them, you don’t cook them, so the liquid absorbs all this flavor. It’s little, there’s some digestive benefits, and it’s fun. If you Google overnight oats online, a lot of people make them at home and make these beautiful versions of them. We were trying to make it convenient for people, because there wasn’t anything like that out there.
If you’re on a budget, there’s different methods to build awareness. My method, which I have used on and off, the various success has always been… revenue positive marketing was my idea. How do I create limited edition products that I can sell, and get marketing out of it, but it actually ends up either being break even or slight profit. That was always what I tried to do, and that’s why we did the Private Reserves and Lucky Nuts and adjustable heat hot sauce and, probably 10 other products over time. The day of the presidential elections, we did hot sauces making fun of all the candidates. We always are trying to gain attention by doing things that we thought were noteworthy and special. I mean, the media has a lot of time to sell, and they want to fill it in the most interesting way, with things of substance. So we try to create items that would meet that need for the media, and be fun for consumers. That was our main method.
As you get into grocery, what you find is, you must spend a lot of money with these grocery stores. Partly because it’s a good idea, and part of because they want you to, so our biggest marketing expenses are promotions with the stores. The thing we like the most is the media and limited edition items and those sorts of things. Trades, off invoice promotions, something where you walk in the store and you see $1 off on the shelf, or an end cap or a demo or ad in a circular. A lot of that’s obviously gone digital now, so digital coupons. All those sorts of things end up being a huge chunk of your sales. And if you manage it really well, it really helps you. If you manage it poorly, they spend all their time complaining about how they’re forced to do it by the stores. But if you manage it well, it’s pretty good for everyone.
I think the way I have operated it and continue to operate it is not a lifestyle business, but it’s not how you operate a growth company either. I’m not going out and fundraising and hiring a bunch of people and doing this and that, but I don’t have an interest in that. I don’t need to make that much money. I’m not stressed, because I’m getting to spend my time creating items and doing a lot of things that after 20 some odd years, are somewhat easier for me. I mean, it’s great. I’m afraid that most Americans are so bought into bigger, bigger, bigger, better, better. We’re all so competitive about a company like mine. I know lots of people with companies like mine, who the founders, and are pretty darn happy. A lot of the people who work for them, there’s the stress of, “I’m not among a multinational billion dollar company.” Who cares? Sometimes it works out sometimes it doesn’t. But you have to go with open eyes. And no, I could be killing this. And if you do kill it, you have to be able to walk away and say, “You know what? I gave it a try. I’m okay with that.” Which is hard to do.
Four Hour Workweek, and quite frankly, Anthony Robbins materials, I think if you follow them too closely, they are dangerous. But if you think about the principle underneath them, I think the principle is good taken within one of two different things. Tim Ferriss’ type of work is that there’s a lot of ways to outsource, and folks with the 80-20 rule: focus on the 20% and let other people do the 80%. Most of the time, we spend a lot of time doing things that don’t make much difference, and a few things that make a lot of difference. I take that as a principle for the book, can you set it up exactly. And then with Andy Robbins, I like the whole principle of living with passion and being enthusiastic and this and that. I just think it’s unrealistic, because most people aren’t that passionate about things. Good is often good enough.
DavesGourmet.com, of course, is a great place. Amazon has all of our items, I think both through us and through many other people. Those are two great places. And then on our website, there’s also store finder, so you can find that store near you.
For years, we have had a lot of our great customers sell through Amazon. We didn’t focus on Amazon because we were mainly in selling pasta sauce, and heavy glass jars of pasta sauce are really difficult to sell through Amazon. So at this stage, we just didn’t really want to go in and take the profit away from some good customers. So we have lots of other places to go in the short term. Our oats we manage on Amazon and they’re doing well there. We have lots of opportunities, and we don’t need to have everything.