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Smoothie operators

Tuesday, 15 March 2011 | By Oliver Milman

Like most aspiring entrepreneurs, Emma Welsh and Tom Griffith had lofty ambitions when they ditched their corporate careers to launch their start-up. However, as is often the case, they were soon rudely awoken to the harsh realities of building a business from scratch.

 

As Griffith admits, several early assumptions about the duo’s smoothie brand Emma and Tom’s rapidly flew out of the window. A first year sales projection of $3 million was one of the first targets to be crossed out in red ink.

 

“We were wrong by about triple, I’d say,” Griffith concedes. “You make every assumption and future forecast and invariably it’s wrong. It takes three times as long and twice as much money as you think it will.”

 

“We came from reasonably aware backgrounds. We were and are realists. And yet it was a much bigger deal than we thought it would be. I never thought it would be as difficult as it has been. We’ve had to duck and weave through the years, but you think about why you’ve done it and it keeps you going.”

 

Completing the business journey

 

Griffith says he’s a big believer in the maxim of the last kilometre being the hardest in the entire journey of getting a product from idea stage into customers’ hands.

 

“We wanted square bottles for Emma and Tom’s, much like the premium juices in the US,” he explains. “We met someone who believed in us and the business to do the bottling, which probably saved us around $30,000.”

 

“(But) one month from launch, the bottler said that they couldn’t put the label on the bottle, because of its shape. I drove up there and said ‘You are going to do this. This isn’t even funny.’”

 

“We had to have a contract with the bottler and then take them to another labeller for a whole year until the bottler got the right equipment to be able to put labels onto square bottles. That cost us $110,000 in just one year, even with a seven cent a bottle discount.”

 

Griffith says: “It really is all about distribution and delivery. Getting the product from the warehouse to the shelf is very hard. It’s a very competitive sector. We thought, once you’re into a retailer, you’re in, but you can get delisted because they consider you too dear and you go broke.”

 

Griffith says that price pressures were particularly tough during Emma and Tom’s first year. Margins were slim.

 

A price point of $3.50 a bottle, around a dollar more than the average competitor, was necessary due to the premium nature of the product and the cost of ingredients: “We use the whole of a mango, for example, in the product, which is very expensive – it’s not like an energy drink,” says Griffith.

 

Starting out

 

The business may have had to endure initial pain but Welsh and Griffith’s vision to introduce a new kind of juice drink to Australians is now taking shape. Founded in 2004, Emma and Tom’s is now an international brand with sales anticipated to hit $5 million this year, employing 20 staff.

 

The business’ rise is at odds with the backgrounds of Welsh and Griffiths. Although undeniably successful in their careers – Welsh held senior commercial and marketing roles at Uncle Ben’s and NAB, and Griffith was an investment banker and chartered accountant who was a UN Security Council consultant for Iraq’s reparations from the first Gulf War – neither had started up their own business before.

 

“We definitely weren’t natural entrepreneurs,” says Griffith. “I was 42 years old and naïve, rather than 22 years old and naïve.”

 

The idea for Emma and Tom’s came to Griffith during a skiing holiday in Canada, where he was confronted by a range of premium juices that weren’t evident in Australia at the time.

 

Having just received a pay-out from the UK-based firm he was working at, Griffith decided that he wanted to take a crack at the idea in Australia. He turned to Welsh, a long-term wannabe entrepreneur who Griffith had met aged 12 at a swimming lesson.

 

“I knew I had a solid friendship with Emma, so I told her about the idea, she thought about it for five days and then said yes,” he recalls. “We hired a truck and did it. As for the name, we decided to use our weakness, the fact there were just two of us, as a strength.”

 

So, what’s the secret to a successful business partnership? “We’ve always got on amicably,” says Griffith. “We have a good understanding of what we do. Very broadly speaking, Emma makes it and I sell it.”

 

“We’ve barely had a gruff word in seven years. It’s about respect and communication. Emma’s husband works at the business too – we’ve tried to create a company that is fun to work at.”

The competition in the juice and smoothie marketplace, already fierce, intensified further before Emma and Tom’s even launched.

 

“Nudie launched the weekend I had the idea for Emma and Tom’s,” says Griffith. “It wasn’t a deal breaker as we took a year to set up rather than three months. I’d walk around, look into shops and think ‘Lucky Nudie.’ But I also thought ‘Bring it on.’”

 

“Nudie is very different to us. They focus on the major supermarkets, while we focused on the high-end trade.”

 

“Customers who tried Nudie were very enthusiastic about Emma and Tom’s. We’re a fun brand with a healthy angle to it. If you aren’t confident about what you can offer, you just run away and hide.”

 

Finding a point of difference

 

Griffith says that Emma and Tom’s has several points of difference – the unadulterated amount of fruit, the above-average size of the bottle, the premium price point and a shorter pasteurisation process that gives the product a short, three-week shelf life but, crucially, a claim to greater freshness than its peers.

 

Convinced the product would fare well, Welsh and Griffith put in $500,000 of their own money to start the business. They drew up a “hit list” of high-end delis in Melbourne to target.

 

“The retailers were like us, in a way. They were entrepreneurial and they knew what they wanted,” says Griffith. “We didn’t spend money willy nilly. There was a level of desperation there to make the product saleable. Within a few months, we were selling our minimum order.”

 

“We launched in September and by Christmas we had 400 customers, which was a nice effort. We sponsored a lot of events and retained PR agency to generate publicity for us.”

 

Welsh recalled the initial push in an interview with SmartCompany in 2007: “We started walking the pavements, presenting every shop with a six-pack holder and asked them to taste it, returning in three days.”

 

“We focused on selling into stores owned by people like ourselves. That way we could have direct interface with the customer and it was good brand association.”

 

“We also gave away free samples at amateur sporting events such as fun runs, ocean events and gallery openings. It was difficult to guess the results but we felt that if we gave away juice to 2,000 runners we knew that every single one of them had tasted it; if we put an ad in the paper it was far less targeted.”

 

Building the brand

 

In order to get into more locations, and to increase the chances of being picked up by consumers, Emma and Tom’s has greatly expanded its range in recent years.

 

Adding to its portfolio of eight juices, the brand has now moved into bottled water and energy bars.

 

“We’ve got to keep innovating,” insists Griffith. “We’re a bit like the English rugby team used to be – we have to do everything 1% better than everyone else.”

 

“We’ve got eight juices – anymore and you cannibalise yourself. In July last year we brought in the raw fruit and nut bars as we realised people might buy them with a coffee. We get people emailing us asking where they can get them.”

 

“Our sales team upsell the water. It’s marginal sales and it’s ambient too. You always want to sell what you haven’t got and it’s easy to lose focus, so we took a long time deciding how to add to the range.”

 

“We have focus groups and we trust ourselves a bit when we do something new. There’s not a great cost in launching something – the challenge is getting out there.”

 

“You have to be ubiquitous to do what we do. We’re in 2,500 stores in Australia. If you’re in a couple of hundred, it’s not enough to sustain you.”

 

Future growth

 

Emma and Tom’s sales grew by 20% last year and, with a bit of luck, Griffith feels that trend can continue. He calls the brand a fast-growing “minnow” in a $800 million market. Following successful forays into Sydney, Adelaide and even France, the aim is to increase the brand’s presence beyond 40 supermarkets.

 

While Griffith is sanguine over the future, he is adamant that the company’s progress wouldn’t have been possible without the partnership with Welsh.

 

“It’s great having a business partner,” he says. “It’s a great comfort. I would’ve hated doing it by myself. It’s great to have someone there to disagree with you and someone to enjoy it with.”

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