Small Axe Peppers spices up traditional business model via community gardens

Small Axe Peppers aims to spice up the typical small business model via community gardens across the nation.

The Bronx-based business began in 2014 after it donated Serrano pepper seeds to seven community gardens in the Bronx. As of October 2022, it now donates seeds and then purchases back the locally grown-peppers from more than 122 community gardens across the nation, adding up to 15 tons of peppers.

Despite its local roots, Small Axe Peppers CEO says it's not immune to the major headwinds impacting some of its biggest competitors like Conagra (CAG), Kraft Heinz (KHC) and the Campbell Soup Company (CPB).

"Like many businesses in this era, transportation costs have gone up and we're in the process of adjusting some of that [cost]. We've had some upward price adjustment to our distribution partners, to make sure that our costs are keeping in line with the cost that we've had to absorb in this new environment," CEO John Crotty told Yahoo Finance (video above).

At the end of each harvesting season, the company then buys the peppers back for a price tag of roughly $83,000, but that number will likely increase this year as commodities, shipping and labor costs rise.

The cost of fresh vegetables are at an all-time high, according to the U.S. Bureau of Labor Statistics (BLS)'s latest Consumer Price Index (CPI) report for August 2022.

"The gardens are still getting a way bigger premium than they had been getting before and we've had more gardens come on this year than we've had in years past," Crotty explained.

The trek to transport all the peppers back to their production facility just north of the Bronx to create the hot sauce can be costly. In August, the cost of gas dropped 10.6% month-over-month, but was still up 25.6% year-over-year. Now, gas prices are on the rise once again, according to AAA, following Wednesday's OPEC+ meeting where it announced plans to cut crude production by 2 million barrels of oil per a day this fall. Currently, the national average sits at $3.89 per a gallon.

Despite the impact, Small Axe Peppers is determined to bring this model to more community gardens or as Crotty calls it "green oasis spaces" in urban cities. The peppers are now grown more than 42 cities including Chicago, Detroit, Atlanta, Los Angeles, Phoenix, among others. There is also an expanding list of regional product offerings, among other items including Serrano pepper seeds for customers to grow themselves.

According to Crotty, the word about its mission is spreading fast. "It's amazing how many gardeners around the country knew people in the Bronx, so as the model expanded, word of mouth expanded."

Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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