As a startup, if you’re trying to stay as lean as possible, outsourcing is the name of the game; if you can get someone else to do the work for you (and manage the team, deal with recruiting and HR, etc), that’s a win. The main exception is anything that creates intellectual property and technology, and things that are absolutely critical to the business. It turns out for ButcherBoxa company that ships hundreds of thousands of boxes of meat, dry ice is one of those things.
“During COVID, we ended up opening a dry ice factory, and we have now opened a second one,” said Mike Salguero, CEO of ButcherBox, during a talk at the Baukunst Creative Technologist conference last week in Boston.
There were a few macroeconomic reasons why that suddenly started making sense. The first was that the government passed a law in 2020 that made it beneficial to fund certain types of equipment.
“We bought these machines for $2 million each, on a five-year bill, with 0% interest, and we were able to deduct it all in the first year,” Salguero said, shaking his head. The tax and financial benefits were huge in a world where ButcherBox was making a lot of profit (the company had more than $440 million in revenue in 2021), directly related to COVID. “It was basically free. It’s like Trump paid us to buy these machines.”
Mike Salguero at the ButcherBox dry ice factory. Image Credits: ButcherBox
The purchase made financial sense, but it also reduced a hugely important part of the business.
“What we do is frozen meat by mail, which means we need dry ice. If we don’t have dry ice, we can’t ship,” Salguero said, suggesting that dry ice was the only thing that was really critical in his supply chain. “If we ran out of boxes, we could get other boxes. If we ran out of chicken breasts, we’d want replacements for anything, chicken thighs or turkey. If we run out of dry ice, we can’t ship and we’re dead.”
This seemed to be an increasing risk, especially in 2020, when the pandemic was gaining momentum. A vaccine was on its way that would require a lot of dry ice to be shipped across the country, and many other companies began shipping as well.
“We thought it was going to get worse, and these machines were really cheap for the amount of dry ice they could produce. Now we own our destiny when it comes to dry ice. The factory is just getting online, but we’re actually becoming sellers of dry ice,” says Salguero. “The real dream is that we can run these factories and make our own dry ice free because we sell so many of them.”
The first Oklahoma City factory, which will open in the summer of 2021, can make an average of 111,000 pounds of dry ice every day. A second plant in Muscatine, Iowa, is currently being ramped up.