Burlap and Barrel – Herbal and Natural Spice
NO DEAL
EPISODE SUMMARY
🕓 Air Date: April 7, 2023
Asking For:
$500,000 for 5%
Investor:
No Deal
Deal:
No Deal
PRODUCT SUMMARY
Burlap & Barrel is a single-origin spice company that works directly with spice farmers around the world to offer high-quality, traceable spices to consumers.
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Background Story
Burlap & Barrel was founded by Ethan and Ori, with Ethan having a culinary background and Ori having worked as a marketing executive. Their friendship was built over a shared love for food, and the idea for the company started when Ethan traveled to Afghanistan and discovered unique spices. He started carrying these spices back to the United States and sharing them with friends, which led to an overwhelmingly positive response. In 2017, they officially launched the company, initially running it out of Ethan’s living room.
The Product
Burlap & Barrel offers a diverse range of spices, including heirloom royal cinnamon from Vietnam, sun-dried black lime powder from Guatemala, and wild cumin handpicked in the mountains of northeastern Afghanistan.
These spices are sourced directly from partner farmers, ensuring freshness, higher quality, and traceability to their origin. The company primarily operates as an 85% direct-to-consumer business, with the remaining 15% of sales distributed among bulk, restaurant, and grocery wholesalers.
The spices are known for their exceptional quality and unique flavors, making them a secret ingredient in the kitchen for food enthusiasts. With approximately 75 individual spices in their portfolio, Burlap & Barrel’s products are priced at $9.99, with an average margin of 75%.
Over the course of six years, they have generated $12 million in revenue, with a consistent growth trajectory, from $100,000 in the first year to $5.1 million in 2021. Their 2022 sales are projected to range between $6 million and $7 million, with a net margin of approximately 10%.
How It Went
The company’s position before Shark Tank
Burlap & Barrel’s success is evident in its impressive growth over the years, increasing revenue from $100,000 in their first year to $5.1 million in 2021, and projected sales of $6-7 million for 2022. The company maintains a solid profit margin, with a 75% margin on its products and an overall net margin of around 10%. This substantial growth is driven by their unique and high-quality products, as well as their business model that supports spice farmers and provides consumers with a direct source of exceptional spices.
The company primarily operates as a direct-to-consumer business, and they also distributes to wholesalers in bulk, restaurants, and grocery stores. Burlap & Barrel’s success in providing traceable, top-quality spices has led to their thriving business. They also leverage collaborations and influencer endorsements, offering a standard 20% royalty on an $11.99 retail product for such partnerships.
The Negotiations:
The founders asked for $500,000 in exchange for 5% equity in the company. While the sharks were impressed with the quality of the spices, the valuation did not sit well with most of them. Lori Greiner and Mark Cuban were both complimentary of the product. Still, they ultimately decided not to invest due to a lack of expertise in the spice industry and concerns about market saturation.
Gwyneth Paltrow expressed her admiration for the product but questioned its potential for rapid growth, ultimately declining to invest as well. Kevin O’Leary made an offer, with O’Leary offering $500,000 for 10% equity and a 20% royalty until he recoups a million dollars.
However, the founders countered with a proposal for a 20% royalty on a “Mr. Wonderful” branded line of spices and a 10% affiliate cut for all sales generated through O’Leary’s promotion, in exchange for 5% equity. O’Leary declined the counteroffer, leaving the founders without a deal. Despite not securing a deal, the founders left the tank determined to continue their impressive growth trajectory and market expansion.
