of Spar:
“Coffee and food to go represent a huge opportunity for UK independents. Cappuccino machines offer a real profit opportunity that require little maintenance. Wawa sells over 2600 cups per day per store and refer to it as liquid gold.”
If ever I needed proof that I was on to something this was it! Wawa was a US convenience store chain and it appeared Spar had spotted the same opportunity I had. They were clearly open to the idea of selling takeaway coffee from their stores.
Within days I had penned a letter to Spar setting out how Coffee Nation was the only company set up to provide a bespoke coffee service exclusively for the c-store market. I didn’t have to wait long for an answer. They called me and on 23 December I was in their offices. Spar, by volume of locations, was actually the largest retailer in the world. There were no nerves though – I couldn’t wait to get in there.
I diligently talked through the Coffee Nation offer and how Spar could basically outsource coffee to us. I painted a picture of how we would make coffee-to-go from the local c-store an everyday part of life for the British public by emphasising quality, speed, value for money and the complementary nature of coffee to other products. By the end of the afternoon he had agreed that we should map out a programme of trials in various stores across the UK and if successful Spar would start rolling-out Coffee Nation across their estate.
Those breakthrough moments are extraordinary in the life of the entrepreneur and are like stepping stones across a pond. I was so excited when I left the Spar offices in Harrow and drove back into London.
On the way out of town to the meeting I had noticed a car dealer called Sparks on the A40 near Shepherd’s Bush, they had a beautiful Aston Martin Virage in the window. On the way home I couldn’t resist popping in and soon I was sitting behind the wheel. The car was not for now, but it made my dream real. I was sure I was going in the right direction.
Learning points
Recognise that winning ideas often come in different forms – for me it was the business model that came first, not the product or customer need.
Look for evidence that your idea is low risk and that elements of it are already proven. Coffee bars were becoming trendy in the UK and takeaway coffee was sold in enormous volumes in US c-stores.
Beware of tie ups with other parties at an early stage. They complicate the business and can go wrong. The other guys’ priorities can also change and deals between tiny businesses and global corporations are very unlikely to be on an equitable basis.
Watch for secondary priorities that are noble causes but utterly pointless and simply serve to distract from what actually generates the revenue. Helping small retailers fight back against supermarkets was all well and good but how did that help me?
Get the best possible advice early on when risks are at their highest. If accountants and advisers want big fees up front, they don’t get you or your business. Find ones that do and offer them loyalty in the long term in lieu of fees today – if they demonstrate commitment to you.
Market research can be dangerous if you are trying to discover what people might do in the future.
Passion kills fear. They cannot co-exist. An entrepreneur that knows their idea from every angle and knows deep down they are really on to something can skip into that first sales pitch.
Be able to tell the story of your business in one sentence. Does it light people up or do you get a sarcastic “Oh, that’s interesting,” in response? In 1996 I was able to say I was going to make coffee-to-go an everyday part of life for the British public even before I had one machine live.
1997 – One Step Forward, Two Steps Back
If I was excited at the way 1996 had ended, by the end of 1997 I was able to look back and see 1996 as my time of beginner’s luck. With any endeavour requiring serious commitment, there will often be an initial flush of success, but almost without fail the true test comes after. I found this out the hard way in 1997.
Letters from Spar, Alldays and Nestlé
At the start of the year I had two sites trading, both small independent stores, one in South London and the other in Wandsworth. Results were hardly spectacular, with sales of 40 to 50 cups per week. I realised that I needed to be in more professional retail environments and the meeting just before Christmas with Spar could not have come sooner. I was keen to get what we had discussed formalised on paper.
By March I had a letter of commitment from Spar to working “in partnership over a trial period to bring the best coffee offer to the consumer.” The plan involved me undertaking assessments of a list of potential locations in order to identify a minimum of ten trial sites. If all went well we expected to be reviewing the trials in the autumn and planning a 100 store roll-out.
Spar was excited to bring convenience coffee to the British marketplace and they sent me their internal scoping document. It was highly complimentary to my little company. They had met with four other businesses and selected Coffee Nation for a number of reasons: knowledge of the independent sector; willingness to work with Spar to develop the offer; and vision and skill in looking to develop the concept.
With an initial list of 30 Spar stores from which to work – all keen to sell coffee – I clocked up the miles visiting them around the UK. I was armed with data on store size, weekly footfall and sales turnover, and I felt I was going about this in a professional manner.
I had also been introduced to the Alldays convenience store group. I thought I would start at the top so I wrote a letter to the CEO, feeling that as I was the managing director of Coffee Nation I could talk to the MD of any other business.
By mid-February I had met with the Alldays CEO and new business development director. They wrote to me setting out their goal of hot drinks becoming “a valuable high margin revenue generator featured as a standard offer across our estate. We have both seen coffee approaching 10% of store turnover in the US and this remains the target we must aim for.” They also agreed to work with me exclusively on the trials.
Alldays had an estate of 700 stores and Spar some 2500. The potential seemed almost limitless and I had commitments in writing from both these groups. Alldays agreed to pilot 20 machines in grab’n’go locations. This was bloody exciting!
I was keen to get something on paper with Nestlé too. They wrote to me describing Coffee Nation as innovative and entrepreneurial. They set out how consumers were starting to embrace quality food solutions available out of home and how “Coffee Nation offers the retailer an ideal way of exploiting this trend.”
I relocated the business away from my tiny office in Soho and for about the same price I rented a two room office in a managed workspace building called Leroy House in Islington, North London.
Quest for funding
Baker Tilly were delighted with the progress I was making and they (Christine specifically) became a trusted friend on the journey. They suggested I set up a factoring facility as I was going to be invoicing small retail businesses (Spar and Alldays were the names over the door but they were essentially independents offering broadly the same offer under an umbrella brand).
Factoring would mean I would get up to 90% of the value of an invoice paid to me within seven days. The factor also provided a full credit management facility to collect payment from each location. Their fee was a reasonable £6k in year one, which seemed a small price for the peace of mind it would bring.
My £50k that I had invested into the business was only going to go so far and with a commitment of 30 trial locations and each machine costing around £1000, not to mention the cost of the cabinet the machine would sit on that would house the cups and lids, I was going to require additional funds.
The first port of call was to meet a bank and my accountant