016 – From Ethical eCommerce Coffee to Mainstream Retail with Colin Pyle from Cru Kafe
Notes and Links
- Cru Kafe
- The Food Busker
- Soho House
- Fairtrade Foundation
- Soil Association
- Resource of the Week: the Profit First book
- The Profit First podcast
- Rich Dad, Poor Dad
- The Richest Man in Babylon
Episode TranscriptGuy: [00:00:01] You’re listening to Good Foodies and this is episode 16. Today we’re talking about the merits of building your brand direct to consumer first before going into retail. We’ve also got an amazing Resource of the Week which is going to make your business profitable instantly. So stay tuned. Kylie: [00:00:19] This is the Good Foodies podcast, a weekly show about people, brands and businesses doing good in the world. Guy: [00:00:29] Hello and welcome to the show, my name is Guy Routledge from Sapling Digital and The Food Rush and I’m joined in the studio today by my co-host Kylie Ackers. Kylie welcome to the show. Kylie: [00:00:39] Hello! Guy: [00:00:41] Hi. You’re a bit slow on the draw there, sounds like you need some coffee this morning. Kylie: [00:00:45] Yes, I just haven’t woken up properly yet. Guy: [00:00:47] How many coffees have you had so far? Kylie: [00:00:50] Two Guy: [00:00:50] Wow, that’s not too bad. Kylie: [00:00:52] That’s why I’m still only half awake. Guy: [00:00:54] Fair enough. The reason that I’m asking about coffee this morning is because we’ve got a fantastic coffee related guest today. We’re going to be talking to Colin Pyle from Cru Kafe. He’s one of the nicest guys that I’ve ever met and he’s got so many amazing stories to tell and so many amazing things to talk. Some really great stuff and really looking forward to playing this interview for you. But before we dive into that. Tell me, how do you like your coffee? Kylie: [00:01:21] I’m a bit of a latte girl. I quite like a good big mug of hot steamy milky coffee. Guy: [00:01:29] I think we may need to put an explicit rating on this show. Kylie: [00:01:32] Don’t let your mind go to the gutter. I’m not just talking about nice big cups of latte. Guy: [00:01:38] I do love a good coffee in the morning especially when you just get out of bed and you get that nice warm mug. Kylie: [00:01:43] Or the Sunday morning cup when you can stay in bed for a little while chatting and having your coffee in bed. That’s a special of mine for the week. Guy: [00:01:51] For sure, although unfortunately we tend to have meetings in bed which is just miserable isn’t it? Kylie: [00:01:56] Or cats. Guy: [00:01:57] Also cats. I’m not sure how relevant this is but perhaps it’s a small window of insight into the way that we run things over here. But as I said we’ve got an amazing interview lined up today. Colin is such great guy and he really is so honest and transparent in this discussion. He talks about real numbers, he talks about the struggles that they’ve had as they were growing a business. But we started off the discussion by talking about coffee in general and why it’s such a big deal.
The InverviewColin: [00:02:29] It’s been a massive trend over the last 10 to 15 years, especially in this country as people move away from instant coffee, which is still drunk by about 75% of this country, which is amazing and blows people away. It’s really the whole idea of people getting more into what they consume. Whether that’s understanding the steak that they buy at the grocery store or whether vegetables are organic or really digging into the wines that they drink.
People want to know more and more and more about everything these days and access to information gives them that ability. So coffee is just another product that people can really geek out on. And if you think about the complexities of coffee, the stories, where they come from, it’s a marketer’s dream.Guy: [00:03:16] Yeah, it really is. You guys make a whole range of different coffees and words that come to mind when talking about coffee, you might talk about the way that it’s roasted or where it’s come from and whether it’s single origin. Can you speak a little bit to some of the product range that you guys have and how that fits into some of that terminology? Colin: [00:03:37] We built the business around trying to provide great tasting high quality coffee to to our consumers in the most convenient way. But we took our coffee loving, from a love of the third wave scene in Shoreditch and Covent Garden and Monmouth and all these guys.
A lot of that coffee is arabica coffee right. So there’s two types of coffee, arabica and robusta. Arabica coffee is the coffee that’s growing at high altitudes, so typically at the higher peaks of the mountain – really pulls in the different flavours with the cold nights and the hot days. And then you get the robusta that’s generally grown at the lower end of the mountains or even on flatter ground – bigger beans and generally seen as not as good coffee.
However, there is some great robusta and there is some shitty arabica. So you have to take it with a grain of salt, but most of this whole third wave scene is around arabica coffee.Colin: [00:04:40] I think single origin is definitely a massive trend, a lot of that’s around the story. People love to know direct trade and want to understand the farmers they buy from and that great single origin story. But it all comes down to how you drink it. If you’re doing a pour over or a chemex, then the beautiful flavours that come out of a single origin is great. But if you’re just doing an espresso or a flat white, or dumping in a bunch of milk then that blend makes a bit more sense because it needs to be a bit stronger to really punch through through the milk. And so almost all of our coffees were arabica, and then we’ve thrown in robusta over the years, because we built this business for our customers. And so we listen to them very closely and we really develop our new products around what they want. Guy: [00:05:37] And so is that decision because they wanted something that was a cheaper price point or because they wanted a different flavour, or what was the deal there? Colin: [00:05:46] I never wanted to be the geeky coffee guy that said: “you’re stupid for drinking it that way, that’s disgusting, I’m not giving you milk or sugar”. And so we listen. A lot of people have been historically been drinking very burnt better cheap coffee. And so you’re not going to get them over the line to a really light fruity arabica very quickly. I remember I was taking phone calls, early days from customers and they’d be like: “no, my husband likes it stronger”, and so we tried to develop the best tasting stronger coffee that we could.
Also at the beginning we were only Nespresso capsules, and if you think about a Nespresso capsule there’s really not much coffee in it. So if your customer is pouring in loads of hot water with it, or heaven forbid a ton of milk, then that 5.2 grams of coffee really is going to taste quite weak. So there is little sort of tricks and tweaks you need to do to your Nespresso range, and it really depends on how people drink it.Guy: [00:06:58] Yeah. And I think I need to take a lesson or a leaf out of your book as well because I tend to have a like a slightly longer coffee. We’ve been a customer of yours for many many years now. I like a nice long drink in the morning and to have that wake up call you need that slightly stronger version as well to cut through the water in the milk. So can you tell me a little bit about where your coffee comes from, because I think it comes from a few different places does it not? Colin: [00:07:20] Yeah we buy coffee from all over the world. We are still tiny in the coffee world, right, coffee is just a monstrous commodity. So we still generally buy through brokers around Europe, just to get better pricing, better financing and and to be honest some guidance around the really good stuff that we should get our hands on.
Currently most of our blends are from Southeast Asia, Africa, the coffee belt. We’ve done single origins from the Galapagos Islands which was a one off, which was really cool. We’ve done some stuff in Columbia, Mexico, Indonesia. We’ve got some interesting stuff in the pipeline and I think telling great stories through coffee is something we’d like to do as we get bigger, have a bigger audience, have a bit more money to produce some great quality content.Guy: [00:08:13] Yeah I think there’s a lot of things in there that we can perhaps touch on a bit later on in terms of some of the stories, and the amazing content that you guys create, as well as some of the trips that you’ve done to various parts of the world to find the coffee. But it’s interesting that you ended up in coffee because that’s not where you started.
I think the short version is that you’re from Canada, as we might have heard from your accent, and you started off in the finance world. You then left that to go into TV and media with your brother, you created a TV series and all sorts of stuff, and then you’ve ended up in coffee. I think that’s the very short version but I’m sure you can add a bit more flavour to it. So can you give us a little bit of the backstory as well?Colin: [00:08:52] Yeah, you’re right. I’ve been an entrepreneur my whole life, tried and failed at many companies early on, even dropped out of school and then jumped back in. Coming right out of undergrad with a major in finance, I started up a currency trading business, sold it 18 months later to a publicly traded company. I thought that’s how it was done. Turns out I was horribly wrong.
So after that early bit of success I remember meeting my brother in Central Park in New York, he was a photographer, and he was doing a gallery and showing in New York. I was 28 years old, I’d never camped, and it was like this real sort of moment of “I need to rethink life”. So I resigned from the now publicly traded company that I ran their FX division and decided to hit the road.Colin: [00:09:46] So my brother and I grabbed some motorcycles and rode around China, filmed it, produced it ourselves, and then sold it to the Travel Channel. It was super successful, we did another one in India. And then I came to the UK to do my MBA, and post MBA I really didn’t want to dive back into that corporate world.
I really wanted to do something good, create something that people loved, and in FX specifically it’s a zero sum game, for every winner there’s a loser. We are so much about collaborations win-win scenarios in every way we can, and so I really started to look at the market, met a whole bunch of people, and then met John and Bodil.Guy: [00:10:29] And so John and Bodil, your co-founders. And that was the route into coffee. So it wasn’t like a passion of yours from the early days? It was almost like a very calculated decision I guess, it makes sense coming from a finance background, to say look there’s an opportunity here. So are you saying that the opportunity was to do a quality version of Nespresso effectively, for perhaps quite a niche audience who care about their coffee? Colin: [00:10:52] Yeah we loved what Nespresso has done, in terms of creating a great piece of machinery that is in millions of people’s kitchen, and allows to in a way democratise coffee, allows people to taste a whole bunch of different coffee for a very low price. We didn’t love the coffee they developed and we also didn’t love Nestle as a brand, and it was very masculine brand – I love George Clooney but he’s a little old for me.
But we thought there was a better way to do it. There is this new wave of business around openness and transparency and education, taking our customers on a journey across this coffee education, that we anticipate and still anticipate, is going to be the next wave of education and food.Guy: [00:11:45] And that good business practice, it’s the kind of thing that we like to talk about here on the show all the time, is that idea of being honest and transparent and open. That goes deeper through the whole brand and the business that you guys are building, in terms of being an ethical business as much as possible, being organic as well. Can you talk a little bit about some of those values that you guys have? Colin: [00:12:07] Yeah. When we started the business, immediately it had to be organic, had to be Fairtrade. Those were just things that were important to us and important to our customers or who are perceived customers we thought would be. And so all of our coffee is organic, all of our coffee is Fairtrade. I think as we’ve grown the business, as I’ve learned and become an expert in terms of coffee, that organic is incredible. People don’t realise how much work goes into making sure that stuff is actually organic. And it costs a lot more, but it’s worth it.
The Fairtrade stuff, we do lots of stuff with Fairtrade. Depending on who you talk to, they’ll have a different opinion of Fairtrade, I won’t get political at the moment. But I think there are lots of different ways to achieve what you’re trying to accomplish with fair trade through direct trade or a Rainforest Alliance and all sorts of stuff. So that’s one thing, that as we get bigger I’d love to do direct trade and actually give money back to the local communities and create that circular economy, that is more and more common these days with bigger companies. We’re just doing a couple of million a year in revenue, right. It’s so hard to really get those projects off the ground. But we hope that’s in our near future, for sure.Guy: [00:13:31] And yet the whole fair trade argument is an interesting one because there’s Fairtrade the organisation, which is probably quite well known with the green and blue logo, but then there’s also the business practice of fairly trading things. But you guys are part of the Fairtrade organisation. Colin: [00:13:48] Yeah yeah. All of our coffee is Fairtrade certified. We are buying some of the best coffee around the world, so by nature because the coffee we buy is so good and so highly priced, that all of it is well over the fair trade price. But as an early stage company, and anyone out there looking to start up their own business, your customer looks for trust in a brand new business and having emblems of trust is really important.
In the early days we got into Harrods, and in the early days we got into every room of the Soho House, in the early days we were organic and Fairtrade. So you think about it: boom Soho House, you guys are cool; boom Harrods, you guys are premium; boom organic, you guys are healthy and clean; and boom Fairtrade, you guys are ethical. Those were four emblems that you could see on our website or our packaging that made you trust and try us out. And it was super important.Guy: [00:14:40] Yeah absolutely, and those shortcuts – there’s a popular term these days called growth hacking – these aren’t really growth hacks, but they’re ways to shortcut through to ‘know, like and trust’ which is the cornerstone of any business, particularly one that is selling direct to consumer which is the majority of what you guys do. We’ll move on to talk about that a little bit later on, because it’s quite interesting the transition that you guys have gone on over the years. But another transition that’s quite interesting is the format for the product. So you mentioned that you use Nespresso capsules or Nespresso-style capsules, is that all you guys do at the moment?
[00:15:18] Initially, I remember the Kickstarter campaign we did back in late 2013. It was just Nespresso capsules. And that is still the vast majority of our business. Over time, we’ve even dabbled with coffee flour – which is the waste byproduct of the cherry – which I think is brilliant, and we’ll probably get back into. There was a bit of a setback with the Europeans, they made it illegal temporarily because it’s such a product and it hadn’t been regulated, and we just said, we’re not going to tackle this, so we’ll let someone else tackle it, once it clears up we’ll get selling it again.
We now do beans and grounds and we’re launching a coffee bag, which is like a tea bag, that is super convenient super high quality fresh coffee. We don’t want our customers to sacrifice quality for convenience. And that’s where we really try to get our customers the best coffee we can find in the most convenient way. Whereas all the old school second wave competitors, big big companies, they’re just not buying that good coffee, right. I remember back in the day, we just really bought the best coffee, we bought the same coffee as those third wave coffee shops, put it into a capsule and it tasted pretty good.Guy: [00:16:37] Tell me about the coffee teabag. Because with a lot of the news at the moment with things like plastic – which is very much on everyone’s minds – a lot of tea companies have been realising, or maybe not realising, but maybe their consumers have been realising, that there is plastic in teabags to make them more pliable or what have you. So is that something that is a concern for you guys or is your bag made of cotton or something? Colin: [00:17:02] The environmental issue is through and through our whole business. And in the single serve coffee industry there’s so much waste, and there’s lots bad press. Nespresso and Keurig the cake up in the States really get a lot of bad press around it. So we’re always always trying to be the most environmentally forward thinking as we can. In the capsule journey, I’ll talk a little bit about it. The Kickstarter campaign was about a compostable capsule. Then we couldn’t get one to work in time, you have to survive, and so we came out with a plastic one. We thought that was good, it was recyclable and worked pretty well for a while.
Then we did a big fundraise to develop a compostable capsule – still couldn’t get one that worked. And we said we would never compromise on taste and the user experience. And the reality is that all the compostable capsules don’t work very well in the machines. And there’s a lot of fake news around combustibility. There’s two types of compostable, industrial and home compost, and almost all of them are industrial compost. And if that capsule doesn’t wind up in an industrial composting facility, then guess what, it’s not that much better than garbage. And so we felt that we wanted to really make it easy on the customer to get that capsule back to work or into the ground as fast as possible.
And that’s why we’re moving to 100 percent aluminium capsules, because it works perfectly in the machines. Those machines were designed to pierce aluminium, not hard plastic, not hard cornstarch or compostable materials. It keeps the coffee incredibly fresh. So the taste is held in stasis for 18 to 24 months which is fantastic. And then at the end of the day, you pour out your coffee and it can go in your kerbside recycling because our aluminium capsules are 100% aluminium. Some of the other aluminium capsules on the market have some plastic in it, which makes it slightly more difficult to recycle.Colin: [00:19:07] On the coffee tea bag concept, the teabag itself is actually 100% compostable. The problem with the coffee industry, and us we’re part of that, is that the outer bags are still not recyclable and the primary reason for that is to keep the coffee fresh. It requires two layers and those layers are different. And so the separation of those materials is too costly, so they end up just going into the garbage. We’ve looked at compostable packaging. Generally they’re about 4-5 times more expensive, from a packaging cost, and we have talked to so many customers, I’ve had so many interviews, thousands of customers, they are just not prepared, yet, to pay a significant premium for a super environmentally friendly product. Colin: [00:20:05] It’s something that makes me upset, it’s something that that keeps me up at night, it’s something that I worry about. But it’s the reality, that the vast majority of the consumers out there are just trying to get by in many ways. Life is hard and and things are expensive. And to add 50% on the price of a capsule, or on the price of some beans and grounds, to have it environmentally friendly, unfortunately most people will pass. Guy: [00:20:35] Yeah, it’s interesting that you are always listening to the customers. I guess there’s a little bit of a conflict here in terms of your values, and the values of the company and the brand that you’re creating, and then what is viable, what is financially viable, what customers want, what they’re looking for, what they’re willing to pay for. Really interesting, but great that there is that undertone of trying to make the right decisions and then just trying to find the right balance I guess.
So you’ve gone on this journey of changing the plan – the original plan being compostable packaging which you did a Kickstarter to raise funds for – and you’ve adapted to the consumer. One of the other things that you’ve changed is your sales strategy. If I’m right in thinking, it started off as you were going to be purely e-commerce and almost be like a tech company that sold coffee. But I hear that you’re now going into retail and you’re going to be sold in Waitrose and Tesco. Can you tell us a little bit about that journey and the transition that has transpired?Colin: [00:21:37] At the very beginning I thought we’d be a vertically integrated subscription business, and actually our first website you just had three options to subscribe. Quickly realised that the Nespresso market was geared, at the time, it’s come down a little bit, but at the time was geared to 45+, or 40+. It was that era of ‘subscriptions are nasty things’, right, ‘they lock you in, they’re going to screw you’. Whereas our generation and the millennial generation are totally cool with subscriptions. They’re really just recurring orders essentially, and so I quickly realised that I needed to provide an ability for my older customer base to buy a one-off.
The other big thing is that we were selling a compatible product, which means customers are fearful, they want to make sure it works. There had been some other compatible capsule companies that didn’t produce high quality products and so they didn’t perform very well, and you might even get a 50% failure rate with some of them. So they didn’t want to subscribe if they didn’t know it would work, so there was that fear. So we had to get over that fear barrier – so we then created tester packs and starter packs and all sort of stuff. So anyways once we figured out the model, of this hybrid between subscription and one-off purchases, we built up the business direct to consumer. Bodil, my co-founder, is close friends with Nick Jones and has been for a long time.Guy: [00:23:12] Sorry, who is Nick Jones? For the benefit of anyone who doesn’t know. Colin: [00:23:14] He’s the brilliant entrepreneur that founded Soho House. He had Nespresso machines in most of his rooms. And he said, “I don’t really like Nespresso as a brand, I’d love to work with a small startup, a cool brand. So why don’t we have a big meeting with my coffee guys and we’ll do a blind tasting and if you guys win then the business is yours”. So very, could be written into a Hollywood movie, down in Soho we had this blind tasting and we won. And all of a sudden it’s like, well now I’m not going to say no to being in every room of Soho House. So all of a sudden now we’re direct to consumer and we’re in hotels. And then Nespresso pulled out of Harrods, and so Harrods were looking around and they thought our branding was good and that we could actually do well inside of Harrods. And you don’t really say no to Harrods as a small brand either.
So now all of a sudden I’m away from direct consumer, I’m now in a bit of retail, I’m now in a bit of B2B. And we built that omni-channel quite well, and against a lot of the advice of some of my shareholders. And it has kept us alive during periods of struggle with our product. Direct to consumer is very challenging when your product isn’t perfect. It’s really hard to get that CPA to a place that is good unit economics with your lifetime value. So Cost Per Acquisition for those that don’t know the lingo, and lifetime value. If you’re not getting the retention on a habitual product like coffee, then you’re just not going to make any money. And our unit economics weren’t necessarily adding up for a good chunk of the last couple years.
And it came down to our product if I really want to be completely honest. And we’ve completely radically changed that. And so, why now? I think now we’re going into mainstream retail because – it’s still a beast, right – it really is still the way to build a brand. I think anywhere. I think in the States you have a much larger audience, but e-commerce rates here are just as high as anywhere else in the world. But you’ve seen Graze, I know Anthony over at Graze well, he’s been a mentor to me over the last couple of years and really given me a lot of his time. They’ve gone into retail.Colin: [00:25:49] I really believe that we’ve done it in the right way. Time will tell. We’re going into retail in a couple months. I think we’ve built our brand well, we’ve developed our products in such a way that we’re extremely confident now with them, and we’re not beholden to the retailers which was extremely important in our negotiations. Our margins are smaller in retail, but they’re not to a point where they they don’t even make sense. With that volume, with that revenue, with that economies of scale, with the ability to spread your marketing out and be seen all over the country, was an extremely valuable opportunity for us and one that we weren’t about to turn down. Guy: [00:26:34] It’s interesting to hear the way you talk about the initial stage of being direct to consumer, and then a little bit of stuff in the middle to keep it going, and now into retail. If you were to do it all again would you try and go straight into retail or would you first try and build the brand direct to consumer to get that valuable feedback and to be less reliant on the retailers? Colin: [00:26:53] If we went directly into retail, like say year 1, we’d be bankrupt. Your ability to tweak and change your product in retail is very difficult. You want to change the slightest thing in a Tesco listing and it’s like, “Okay well come talk to us in 8 months”. Whereas our ability to tweak and change our product over the last four years with direct to consumer, and call up customers, and talk to them on email or through chat, has allowed us to hone our product to a point where we’ve essentially built a product that our customers want. Not that we think they want!
And now we’re ready to go into retail, and now I’m extremely confident that we’ll do very well in retail. If we had done that year 1 our product was not even close to good enough, it would’ve just sat on shelves. No-one would have known us, no-one would have bought us again perhaps, and so it would have been a really really slow death. We wouldn’t have had a second chance.Guy: [00:27:47] And because you have this existing brand before you go into retail, you’ve got an existing list of customers. You know what they want, you have their email addresses, you have a big social media following, you do lots and lots of content marketing as well, I guess you can then take that huge asset and then start pushing people into offers and promotions in the supermarket which is only going to win you more favour with the supermarket as well. Is that right? Colin: [00:28:12] Yeah yeah. Your following that you have on social, your email database (post GDP, slightly smaller), but also John my other co-founder he’s got almost 200,000 subs on YouTube helping to push people. It’s big win right. I think retailers are struggling, retailers need to change and innovate. They’re stocking smaller brands because that’s what their customers want. And I think there’s a long way that they can go in partnering with those smaller brands, to leverage the social reach that these smaller brands have, to get those people away from Amazon or away from e-commerce back into the stores.
And I think we are really going to try to push Tesco and Waitrose, and innovate as much as we can on how we can do that, through content, through collaborations, through interesting and innovative ways of coupon-ing and gifting and all that sort of stuff. There’s lots that we can do, we are very quick and entrepreneurial and I hope they’re very open to that, because I think it could be a win-win.Guy: [00:29:19] Yeah. Very exciting. And let’s talk a little bit about the content. You’ve mentioned John, your co-founder or one of your co-founders, who is also known by another name, the Food Busker, and he has a channel on Jamie Oliver’s Food Tube. And I guess that has been hugely instrumental in building some of that brand awareness and bringing people to Cru Kafe. Can you tell us a little bit about some of the amazing content that you guys do?
[00:29:44] Yeah, John’s been huge. Right around when we started Cru he was this emerging celebrity chef and originally he did the partnership with Jamie’s Food Tube channel. And then in the last couple of years he’s become such a big channel himself, that it’s his own channel now. He’s still close mates with Jamie and still collaborates with the Jamie Oliver group of companies, they do some amazing stuff. But the ability of John to present, to think video first, the ability of both his background and my background of producing shows has been so valuable to this business.
And our ability to create content for such a low cost really gives us a leg up. I think that’s just about to really take off because we’re going to redo all of our content, we’re going to continue to do short documentaries. We did one in Columbia, a three part documentary series that Jamie put out on his YouTube channel, to the 4 million subs. And so we can shoot that for like £10 grand, right. For Nespresso it might cost them a quarter of a million. Like I’m not joking right. Right. And I think that our ability to continue to move quickly, create great content, great relevant content, will really give us a leg up in the marketplace over the next couple years.Guy: [00:31:13] Yeah, and it’s all in the right formats as well, video is so popular and is only going to grow in popularity with live video as well as the pre-recorded stuff. And I guess it brings us full circle to talking about the stories and the stories of coffee. I think you even said earlier, it’s like a marketers dream. So what are some of the storylines that you guys are telling at the moment? Colin: [00:31:33] We’re got a host of interesting single origins that we might look to go to source and create another doc next year. We’re looking at a coffee out of the Congo, that’s sort of developed into, call it conflict coffee if you want. It’s not available yet, maybe sometime soon. But it’s grown by all women, right, so empowering women and creating better lives for them and for their families.
When we went to Columbia, we spent the night with the farmer at his house, really understanding how he came to this part of Columbia when he was 16 and he’s now in his 70s. And how his focus and love of coffee, and focus on quality, has changed his life and his family’s life. We’re looking at, there’s a valley in Ecuador where people tend to live quite long – quite a few people over 100 years old – and they think it is from the water. And of course they grow coffee in this valley, so we may look at doing some stuff around coffee that makes you live longer.Guy: [00:32:41] That sounds brilliant, it certainly helps me go longer on a long hard day, because there’s this entrepreneurial journey is definitely no walk in the park. I was going to ask, has this latest venture Cru Kafe, been easier than some of the things you’ve done previously, because of the experience that you’ve got, or is it been just a whole load of different problems and different challenges? Colin: [00:33:03] It’s been really really hard. I think you never go into an entrepreneurial journey and it’s going to be easy. My experience has helped me survive through it. Entrepreneurship is 100%, it’s not a marathon it’s an ultra marathon, and I think if you’ve never done a 5K, or a half marathon, or a marathon, then it’s really going to wane on you.
I can pinpoint multiple times through this journey that a lot of people probably would have quit or given up, but having that stamina, having that experience, and being like “I’ve actually been here before”, because often success is on the other side of near failure. You hear so many great stories about that. Hopefully, hopefully we’re one of them. But it’s a tough slog. My great co-founders, great shareholders, an incredible team, is so important to get you through those tough times.Guy: [00:34:08] Yeah it’s no mean feat and it’s great to see so many interesting things happening. I personally find it really interesting to see the journey, and to see how things have changed and adapted either because of challenges you’ve faced or because of the customer preferences. So what’s next for Cru? I know that we’ve talked a little bit about some of it throughout. What are you focusing on now? Colin: [00:34:30] Really growing up as a business. We’re going to go from a couple of million in revenue to a couple more million in revenue. I think retail is a big won for us, it really opens the door to a lot more customers. Big growth in revenue and a big opportunity for us to be a much more known brand, really get in front of a lot of different customers from across the country. We’re starting to dabble in different parts of the world, looking at new territories to go after. Nespresso has laid the groundwork, so we just need to follow with a great product. Hopefully we’ll be rewarded for that. Guy: [00:35:10] Sounds great. And I know that you’re very passionate about entrepreneurship and helping people and teaching people, and we have a lot of people listening to this show who are doing the same thing, maybe they’re a bit further on in their journey maybe they’re a bit earlier in their journey. What’s one piece of advice that you would give to the listeners who are pursuing something like this that they’re really passionate about? Colin: [00:35:33] Always raise more money than you think you need. Because I spend a lot of my time raising money, things always go wrong, and the reality is .. Funny I was catching up with a friend of mine that runs a quite a successful high street chain, we’ll leave his name out of it for now. But we were just joking and said: I think both of us are really good at raising money and if we weren’t so good at raising money we may not have businesses to run.
Money makes things go round, and you can grow things organically, but if you’re going the other route of really trying to go after a market and go after growth, then fundraising is super important. Don’t be too focused on dilution, don’t be too focused on some terms, some terms are very important but others, I see people spend months negotiating term sheets and those months you’ll never get back. And so get the cash, and get great investors that are going to help you with your vision and be there and that downtimes, and go for it!Guy: [00:36:44] That was Colin Pyle from Cru Kafe. And you can find out more about them and buy their amazing coffee at crukafe.com. That’s C R U K A F E.com. Still to come today, our Resource of the Week, but up next is our Lessons Learned.
Lessons LearnedKylie: [00:37:09] One of the things that I really liked that Colin said there was that the Cru aren’t dependent on going into retail. So what he means there is that, he has an audience. He’s built a massive audience, he’s got recurring customers, he’s gone into hotels, he’s already got a business that’s up and running and doing quite well. And so going to retail is just an added bonus, it’s not the entirety of his business model. And I think that puts him in such a good position of power in terms of being able to negotiate with retailers. So in terms of what that means for other small businesses, is have a think about that, have a think about, if that’s your starting point, what implications that has. Maybe actually building your own audience and building your own platform is a better first step. Guy: [00:38:01] Yeah absolutely. There’s so much in that interview that we could talk about and if we did talk about all of it we’d be here all day. But I think that aspect, the fact that they started going direct and then have gone through a number of different variations and permutations to stay alive at one stage. But now it all seems to be coming together in a perfect storm. That idea of first building the brand and iterating on the product to get it right, before going into retail, seems to have worked out really really well for Cru. Kylie: [00:38:35] And two things off the back that, he said that once you go into retail your ability to iterate and change the product, ie. once your product is on the shelves, is very very difficult and almost impossible. And that’s a massive lesson for anyone who is still developing their product. But the other one he said was when you asked that question, if you went back and did it again, he said that Cru would have died a very slow and painful death had they gone straight into retail. That says a lot for any startup who’s thinking that the supermarket is their first step. That’s a very very real consequence of going straight into retail if your product is not developed and you don’t have any people who pick your product off the shelf. Guy: [00:39:23] Something that I often hear, is people talk about getting into the supermarket or onto the shelf somewhere as their end goal. They’re building, and everything is pointing towards that, because they think that is where the money just starts flying. But getting into the supermarkets or getting onto the shelf somewhere is really just the first step, and that’s the beginning of then trying to get everything to fly off the shelves again.
Something that is really interesting from what Colin was saying is the ability to have the dialogue with customers, and to be able to listen to them, to be able to get their feedback and then build a product that they actually want, rather than a product that you think they want, is so valuable. And also from what he was saying about how difficult it is to adjust the product when it gets into a supermarket listing, it seems like really the only way is to do lots and lots of testing ahead of time. But how much better would it be if you could do that testing whilst also making sales in the short term as well.Kylie: [00:40:20] Yeah and that’s clearly what they’ve done by design. The other thing too, as he was saying, is the margins from supermarkets are much much less than obviously the margins that they sell on their own platform. And so when you’re growing a business you actually want the biggest margin possible. That’s another lesson, you’re more likely to make more money if you build your own platform and go direct to customer, rather than going to a supermarket who are going to take the biggest slice of the pie. Guy: [00:40:51] And I think getting into retail is a scaling type activity and you want to make sure that you’re scaling something that is tried and tested and that works. Otherwise you end up scaling the problems instead of scaling the good bits. Kylie: [00:41:06] And that starts then to talk to the other thing that Colin talked a lot about, and which I loved this expression which was ’emblems of trust’. So they had a particular challenge which was that they were doing a compatible product, and those products had already existed on the market and weren’t very good. So there was already this negative … Guy: [00:41:27] connotation. Kylie: [00:41:27] Yeah, or association with these compatible pods. And so they had to find a way to convince people effectively that theirs was a good product and to convince someone to give them a try. So they did that with these emblems of trust, for Cru that was Fairtrade and the Soil Association certifications, but also that they had to listen and create this sample pack. And I know when we first tried Cru we were exactly the same, I was like “we’ve tried every compatible Nespresso pod that’s in the supermarket”, and they were all pretty shit. And so we had that same thing of “mm, I don’t want to put in a massive order because I don’t want to have to throw it all out”. And so we tried a sample box, which I think had two of three different varieties or something, and they worked really well. So went: okay we’ll give them a slightly bigger order next time and make sure that it’s consistent. And that growing trust, or having products that can scale people up in their trust levels, is really important. Guy: [00:42:33] Absolutely. And I think it’s time to move on to our resource. But one last thing that Colin said to me off the air, which is a great opportunity for anyone listening. We touched on briefly about how he’s hugely supportive of entrepreneurs, and the entrepreneurs journey, and he was saying to me that he he always makes some time every week or every couple of weeks to sit down with a fellow startup entrepreneur for a coffee.
And so if anybody’s interested in having a bit of time with Colin, he said just to to let you know that he is open and available. So if you’re interested in getting in touch with an amazing expert, someone who’s got lots of experience in the industry, then get in touch with us and we can connect you. So the best way to do that is via the website, goodfoodies.co.uk.Kylie: [00:43:20] A super nice gesture, and I think he’s passing that on from the help that he’s had from other brands along his journey. Guy: [00:43:26] Absolutely, yeah. Great stuff. Right, let’s wrap this up and move on to our Resource of the Week.
Resource of the WeekGuy: [00:43:35] Alright, the Resource of the Week this week is something a little bit different. Kylie: [00:43:40] And finally, for once, not a tech product. Guy: [00:43:43] Finally for once it’s not a tech product, or an app, or a tool, or a gadget, or something. So Colin was talking about listening to customers, I’ve been listening to you for a change. Kylie: [00:43:51] Yay. Guy: [00:43:53] So the resource this week is a book, and it’s a book called Profit First by a guy called Mike Michalowicz, which I tell you what is a very difficult name to say, but this book is pure gold. And the reason that we’ve chosen it for the resource this week is for a few reasons. Firstly Colin comes from a finance background so we thought it might be interesting to tie together with that. Secondly, there was lots of gold in his interview in terms of talking about turnover and CPA, cost per acquisition of a customer, lifetime value and all sorts of stuff like that.
But this book is something that is completely revolutionised our business, and the way that we approach money and accounting. Kylie can you give us the highlights of what Profit First is?Kylie: [00:44:40] It is a system for calculating the profitability, or making sure really that your business is profitable. The way that that’s done is by allocating a small percent of every sale, or every piece of income, into a profit bucket and that profit bucket doesn’t get touched – it is for profit, it’s not to then go and spend on operating expenses or to pay your staff. It is already allocated as profit. So every time a piece of money comes in you take a small slice out and put it towards profit. Guy: [00:45:16] Yeah, I think the initial concept for the book came from the fact that the traditional accounting method is a bit broken – in that you make a load of money, then you spend a load of money to run the business, and then whatever is leftover is your profit and you can distribute that however, to yourself, to your shareholders, whatever it is. Whereas the approach in this book is the other way around it’s income minus profit equals expenses.
So you take the profit out first and then spend whatever is left on running the business. So it means that from day one as soon as you implement this system, which is all explained in the book, which we’ll link up in the show notes of course, you become instantly a profitable business even if you aren’t want to begin with. I have to say that when I first read that on the front of the book I was like, “get out of here – this is a bit of an over overstated benefit of a book”. Like just trying to sell some copies, but it genuinely works. It’s brilliant.Kylie: [00:46:16] And for anyone who’s ever read ‘Rich Dad, Poor Dad’ or ‘The Richest Man in Babylon’ it’s taking the same concept that both those books talk about, paying yourself first. As a person you would put aside 10% ideally of your income, and use that for investment, and then whatever’s left after that you’re free to spend. So it’s taking the same concept but applying it to a business and the system, while can be a little bit overwhelming when you first hear about it, actually gets really simple. You effectively take any money coming in, and you divide it up into a series of buckets, or accounts, or columns in a spreadsheet, depending how you implement it, and then those amount stay allocated to those things and you shouldn’t touch them for anything else. Guy: [00:47:06] Yeah, while it’s not a particularly complicated system there is quite a lot to discuss about it and I think we’ll probably do a whole episode about profit, and margins and all sorts of stuff like this because it is so important. Sometimes it’s something that people don’t like talking about, or they go “oh, that’s not for me, I don’t really get the money side, I just want to make my delicious product”, but it’s so important to ensure that you are profitable so that you can keep doing what you’re doing and particularly if you’re one of those businesses doing good. If you don’t have a profit, you don’t stay in business, you can no longer do good. Kylie: [00:47:40] If you can’t afford to pay yourself, and make a profit, then in the long run as Colin said, you’re on a slow road to death. Guy: [00:47:49] Yeah, which is a lovely way to end it isn’t it? So that we don’t have to end it on such a downer, in addition to the book Profit First, Mike also has a great podcast also called Profit First, and I tell you what it’s hilarious. Kylie: [00:48:02] It’s really really good. It’s not like any of the business-y podcasts you’ll have ever heard of before. Guy: [00:48:07] You mean like this one? Kylie: [00:48:09] Yeah, like this one. It’s really quite funky and there they have a lot of fun on the show. Guy: [00:48:12] Yeah I would describe him as a bit like the class clown but also really really smart, really switched on. Kylie: [00:48:19] And some great guests and really good stories about how they’ve taken Profit First to their business and turned it around. Guy: [00:48:24] Yeah. And so not a food podcast but a great business podcast and really worth a listen. Well obviously once you’re done with this show. But we are done with the show. It’s time to wrap it up. Thank you so much for listening. We do really appreciate it as always. Guy: [00:48:38] For any details of anything we talked about, links to the book Profit First and their podcast, and links to Cru Kafe and Colin, and all that stuff you can find at the show notes. Just had to goodfoodies.co.uk and you’ll get all the details over there. If you’re enjoying the show we’d love to hear about it. We’d love some feedback. We’d love a review. However you’d like to get in touch with us all our details are on the website. You can drop us an email or you can chat to us via our messenger bot. However you want to get in touch we’d love to hear from you. So I think that’s pretty much it from us. Thanks so much for listening. We’ll see you next time. Cheers. Kylie: [00:49:16] See you later.