coffee.
I then built on what we were doing for the consumer by asking the question: “Why should you have to go to a coffee bar or cafe for a good coffee? People love coffee, not the staff that serve it.”
In others areas of retail similar things were happening, with the old way of doing things being overturned. This included interactive multimedia kiosks (just appearing at that time), self-scanning in supermarkets, and food served on conveyors in YO! Sushi.
I then thought about the coffee market. The coffee bars were the vanguard of the revolution, awakening people to great coffee. Of course, there would be many high street locations for coffee bars, but I saw us as the evolution, putting gourmet coffee in tiny spaces, for example inside other retailers – only the largest of which could accommodate a full coffee bar offer. We were creating mass access – taking great coffee to the people, wherever they were in their day.
The final piece of the jigsaw was how this would work for the host location. Having come a long way in developing the concept I realised that we could never offer the highest margin to the retailer, which is what people looked at traditionally. I would set out that as creators of this new, self-serve gourmet coffee category, we would maximise the cash profits generated for the host site, not by giving them the highest margin but by actually maximising sales of coffee. Our focus was on real cash profits, not paper margins.
Making calls
I condensed all of this into a few key statements in the form of a crib sheet for making calls. The next job was to get names and phone numbers and get some appointments. I swallowed hard picking the phone up for the first time. My target was different now. I was after retail and development directors of some of the biggest names on the British retail and consumer landscape. I knew I had to get in at the top. New initiatives happen because they get senior buy-in; they can get stuck if introduced lower down as middle management usually lack the authority to take risks with new ideas.
Some days I didn’t make any calls if I didn’t feel in the right mindset. I had to defeat the inevitable “Thank you but we already have our coffee suppliers” and “You’ll need to speak to the buyer” responses. I combated these by recognising they weren’t trying to get rid of me, they just didn’t understand.
I explained that we were different and were carefully choosing which retailers we wanted to work with. They hadn’t seen our category before and I was certain their boss would want to talk to me. Slowly, things started to happen. I quite literally didn’t take no for an answer and when I finally got through to the key person I usually found we were talking the same language: how to wow customers, bring more people through the door, keep them inside for longer and get them spending. Most were interested in hearing what I had to say and across the summer of 1999 my diary was virtually full meeting potential customers.
I met with a long list of companies including Esso, BP, Marks & Spencer, B&Q, Waitrose, Safeway, Rank Leisure (Odeon Cinemas), Warner Village Cinemas (now Vue), Holiday Inn Express, Topnotch Health Clubs, Homebase, BAA (now Heathrow Airport Holdings), Boots, Currys, Our Price and London Underground.
Texaco and Welcome Break
One meeting was with Texaco at the end of May. As usual I had aimed high, attempting to get to the directors of the company, and although I had failed to reach them I had been referred to a manager who did have authority to make real decisions. I met her in Canary Wharf where Texaco was based. She liked the concept and explained that they already sold coffee but it was a bit of an amateurish operation and was with instant coffee anyway.
I explained that we were looking to undertake trials and if successful we were then seeking roll-out contracts. There was no commitment beyond the trial, but that was the game plan. “Great, ok, we’d love to work with you,” she said. I don’t think I heard this for some minutes as I continued to talk enthusiastically. She actually stopped me and said, “Er, Martyn, we’re in – let’s get the trial agreement from you and move forward.” This was the moment all entrepreneurs love – the thrill of the big breakthrough.
Our trial agreement was signed with Texaco and we then gained a commitment from the retail director of Welcome Break Motorway Service Areas (MSA) to trial Coffee Nation. Their immediate interest was to replace a low-price Kenco offer in their petrol forecourt stores. I could see another opportunity though, which was to position Coffee Nation within the main buildings of each MSA.
My thinking was that we could be in the general retail store that sold sandwiches, cold drinks, newspapers and all manner of motoring paraphernalia. That way if customers visited the main building wanting a coffee they could get a fast solution rather than lining up in the main catering area. Welcome Break liked the idea. This was our first trial where we were not replacing another coffee offer – instead we were potentially creating new demand.
Operations director comes onboard
It was time to recruit the next member of the team, an operations director. One of our suppliers suggested someone they knew who could be up for a new career challenge. I knew the man they were talking about. He was running a group within Unilever called Branded Concepts Group (BCG), which I had met the year before at the Alldays store in Edinburgh. In fact, I think I had asked him if BCG wanted to invest in Coffee Nation.
I called Scott and we agreed to meet at the Design Museum in Islington. We talked about him joining the company and he pretty much said right away that he’d love to. This meeting had not been arranged through expensive headhunters or recruitment firms and there was no brief or job description written. This was all put in place later but we agreed that he would join the company on a handshake. He shared my vision of what we could achieve with Coffee Nation and was ready to make the jump from big company life. He joined as operations director on 18 October 1999 and soon we were working well together as a team. Scott would go on to make an enormous contribution to the success of the company.
Part of the value that Derek brought right from the start was an appreciation of the steps that had to be taken and in what order to achieve the goal of getting the business established on a sound footing to enable rapid growth. Appointing an operations director early on was one step in this process.
Getting great people onboard once you have enough evidence that you are on to something is essential if you are going to truly seize the opportunity. Judging the timing is critical. Lou had been far too early and he’d paid the price for this with his job. It’s through the combined efforts of a passionate and aligned team that great start-ups become great businesses.
Having access to a sharp mind that had been through all of this before was so valuable. Derek was always positive in his outlook with me and was always a great sounding board. Risks are high at this stage and the lone entrepreneur is vulnerable to tackling the wrong issue at the wrong time or failing to address a potentially fatal risk.
Trials begin at service stations
As we progressed into the autumn, plans were coming together for the launch of our trials. There was to be one machine with Texaco in Clerkenwell, London, and two with Welcome Break, one at Oxford services on the M40 motorway in the petrol forecourt shop, where we would replace two Kenco machines, and one in the retail shop at Warwick Services also on the M40.
Clerkenwell Road opened on 27 October 1999. We had been furnished with sales data from the previous Nescafé instant coffee machine that Texaco had operated at that forecourt. The results were astonishing. Within one month of launch:
Weekly drink sales volumes were up 56% to around 500 cups per week.
Cash sales were up by 260% to £558 per week.
Profit for Texaco was up by 19% to £139 per week.
We had increased the selling price from 55p to £1.20. It’s funny now to think of how cautious I was of increasing the drink price when few coffee drinks are available for less than double that price today. This was the power