Wake Up and Sell the Coffee!. Martyn Dawes
them around that time: “Would you buy a coffee from a newsagent and what would you pay?” Simple market research indeed.
I envisaged the coffee dispenser sitting atop a small fabricated unit that would incorporate cups, lids and other consumables, and a bin for discarded sugar tubes and stirrers. I took some design cues from coffee bars. I remember newspaper articles from that time talking about this US import of drink-thru’ lids which were becoming popular in coffee bars, so I decided to use them as well.
One of the obvious ingredient suppliers for me to speak to was Nestlé, owners of the brand Nescafé. I figured that if I could use the world’s leading brand of instant coffee in the machine this would bring immediate credibility.
It turned out that Nestlé too recognised the development of a food-on-the-move culture in the UK and had an eye on the takeaway coffee market. I was soon meeting them in their head office tower in Croydon, South London. My revenue share business model appealed as they could see that by me owning the equipment and splitting the revenue with the retailer it opened up literally thousands of locations.
They were excited at the prospects of the Nescafé brand being able to penetrate this new market channel and quickly agreed to pay for point of sale material and in-store signage for each location. They also agreed to pay for each machine to be Nescafé branded. This was a real coup for me; all this marketing support at zero cost. I also negotiated great rates for the coffee prices. Nestlé had other brands in petrol station forecourts in central London and we went on a tour of those together. I figured I could learn a lot from these guys.
Despite my comfort with my own business model of selling instant coffee in small shops, I do recall thinking that perhaps Nestlé were being naive in not recognising the growth of roast and ground coffee, which was fuelling the growth of the new breed of coffee bars. This didn’t cause me much concern, however, as I felt people would not be prepared to pay the price for ground coffee in a corner shop or petrol forecourt.
Early business planning
My planning continued. I met with the National Federation of Retail Newsagents and the Association of Convenience Stores. All saw the need for my business and welcomed anything that helped the small retailer. I lined up Dynorod (a franchise-based, nationwide plumbing company) to install mains water into each location. They provided me with detailed costs and I decided that I would pass this on as a set-up cost to the retailer. This was all they would pay up front.
The coffee machines would require maintenance. This was simple and would take less than an hour a week, so I decided that the staff in the shop could and should do this. An early – and accurate – realisation was that getting the retailer to play their part in the enterprise, i.e. by cleaning the machines, would be critical to success. For technical maintenance of the machines I met with a company called Neopost who maintained franking machines and were keen to diversify.
I thought long and hard about undertaking formal market research and had a number of proposals for face-to-face street interviews with consumers outside of newsagents and other potential locations. With my limited funds though, to blow £5k on a market study seemed like a big chunk to spend. I also questioned what market research could really tell me. My concern was that until the product was there, available to buy, all consumers could tell me was what they might do. This was not factual research.
So I abandoned this plan and instead spent a fraction of £5000 with a company called Verdict Research, asking them to look at each channel to market (e.g. CTNs, dry cleaners, doctor’s surgeries, estate agent’s offices, etc.). How many locations did they see per channel and what was the best way to target them?
With the thinking really taking shape I started to put together a business plan and worked out that each machine needed to sell a minimum of 100 cups per week. A typical newsagent was open for around 80 hours per week so 100 cups sold would mean 1.25 per hour. Surely this was realistic?
My plan dictated 190 machines installed across 1997. On that basis the business would turn profitable by the end of the year and with 500 machines by the end of 1998 it would achieve sales of around £1.5m and make 7% net profit.
What to name the business didn’t seem that important, particularly as we were using Nescafé as the public face and brand to the consumer. But a name was needed. A few mates congregated in our front room for the purposes of a brainstorming session. Trudi agreed to do supper, I supplied a few bottles of wine and we were off. Someone came up with West 1 Coffee (this sounded too much like a courier company) and Power Coffee (for bodybuilders?). Trudi’s leftfield response was Climax Coffee; after a few bottles of wine we loved this. In reality though… coffee that makes you orgasm? Not sure about that one.
I reminded those assembled that this was really about making coffee-to-go part of everyday life across the nation. I’m not sure who finally suggested Coffee Nation but it stuck and epitomised what we were about. Within weeks I had a logo to boot; a cheerful coffee pot going around the world in a smart blue and yellow colour scheme.
Knocking on doors
The only reliable way to secure locations quickly was to get out on the street and literally knock on doors. I bought a cheap A4 presentation folder and knocked up some simple sales pages.
I practised my sales pitch – “High quality drinks at affordable prices for your customers” – and worked out what share of the revenues the shop could keep depending on how many drinks they sold. The more they sold the more they kept. There was a digital drinks counter in the machine so once a month I would visit, take a reading and then invoice them for my share of the sales.
In South London I started walking in off the street and asking to speak with store owners. There were lots of responses such as “Not interested”, “It won’t work” or “I have no space”, but after several weeks I had a small list of independent stores who were willing to try it out. I had prepared a checklist to assess their suitability. Did they sell morning goods? Did they have a lottery terminal to bring in footfall?
I figured that for all the No’s, the Yes’s would come, but I do remember days of getting absolutely nowhere. Many of these small shops were not modern retail to say the least and I did think that many of them lacked the motivation to develop their offer to be more attractive to the consumer. One winter’s day in particular stands out – it was so cold, it started to snow and I thought to myself that there must be an easier way to make money.
Despite this – and several of the stores who at first said yes then backing out – as 1996 drew to a close I had the first machines installed and trading. I scribbled in my notebook “We are a retailer not a vending machine operator.”
Professional business support
So I had live sites, a business plan I had researched thoroughly and I had also met with my bank to talk about asset finance for the machines. The Baker Tilly business card was still sitting on my desk and it was time to call them. A meeting was arranged with a lady called Christine Corner.
I thought about what I wanted from the meeting. Feedback on the business plan, how they could help me secure finance of the right type, how they can support me now, through growth and to a stock market float (AIM was all the rage at the time) and how they could help me think and act big were all on my mind.
My calculations showed I needed about £150K at the time so a Small Firms Loans (SFL) combined with my own funds and perhaps a bank overdraft would be sufficient. Christine agreed to write to me with a proposal. This was to be for one year, for a fixed fee and would include support in helping me develop the business plan and line up funding. She agreed to a three month payment holiday, though she wanted the fee to increase as the business became successful. I wasted no time in signing them up. I felt they were genuinely interested in seeing my fledgling business succeed.
Spar
As well as targeting individual retailers, I also approached larger convenience store chains Spar and Alldays. I