How we learned about coffee delivery
heyinnovations.com
heyinnovations.com
At the risk of being naive, couldn’t you work out the margins of this business on a napkin, or by asking a few local coffee shops? Or by running a subscription pilot with an existing shop? It just feels like this endeavor was tech first and business second. Shiny apps don’t solve any of the above problems.
They actually teach the opposite, since humility doesn't bring in funding.
I consider 'reinventing wheels' to be a valuable educational experience, I often wonder about how could educational 'enterprises' (universities, and education companies?) leverage this to improve what they do, but then I remember that it doesn't matter what I think, just what I do, and I sure do not work for any such companies.
But it's kind of silly that "we" (as a society) are spending 300k USD to teach some of this "obvious" things to some random group of well connected americans.
then again, the dollar is made up so long as 'the future' pays back these money-creation loans we may as well spend the money this way. the alternative is going back to corporate backed research, instead of this strange contemporary VC-backed research
Reinventing wheels is good, ignoring any kind of domain knowledge/expertise is not.
If you’re running into problems that someone with a year or less experience in the area can point out and you don’t have good reason to do different then that’s incompetence not ingenuity.
Humility is the key trait that many CS grads are lacking. Personally, I attribute it to the explosion of CS popularity since ~2010. Most bio majors are still nerds (and I assume the same is true for education), whereas I think a minority of CS grads these days are motivated by passion and curiosity.
This seems to be the classic case of building much more than the stage of the company demands, and then not having the business-side be ready to bring in the revenue that level of commitment demands.
I like the contrast between great tech with no market fit and comically bad tech with great product market fit. I think Crave cookies is worth quite a bit now.
You ordered the night before, and then between 6-8am a thermos would show up in the lobby labeled with your name. Once done with the thermos, you would leave it at the pickup spot for the next day
We got a month of this for free (!!) and it was great. The thermos was reasonably good at keeping coffee warm, there was actually a good variety of coffee drinks to order, the delivery window was not a big deal (I could wander down at the end of the delivery window and it was always there).
That setup seems to lower the logistical challenges- you know all orders ahead of time, can brew in bulk, can deliver in extreme bulk. I'm not sure how/if they tracked thermos returns though.
But even that failed, the prices were quite steep (~200/month). After the free trial, I stopped using it, and I just checked and it seems like they are out of business. It seems like a difficult, low margin business to be in, in general
First, even at an outrageous $5/day, Starbucks or any other coffee chain is significantly cheaper - especially if you are someone who travels or can't be in the same place at the same time every day.
Second, you can get set up with everything you need to brew coffee at pretty much any budget, depending on your needs, level of interest and palette.
Third, this is not the sort of product where you should offer a free month up front. I can't blame anyone for taking a free month offered to them without obligation any more than I can blame them for not wanting to spend $200/month on delivered coffee.
If you have the capital to start this company, you would be far better off taking it to Vegas and putting it all on red.
If someone can spend $200/m on a warm coffee in a thermos then they surely can spend $25 on a drip coffee maker, a set of filters and whatever exotic ground coffee from Starbucks or just any other place, including Walmart.
And then just throw it in the bin when they need to move on.
plus the pandemic probably added to the problems.
seems like monthly price point is hard for consumers to gauge value.
#1. There was no need for the service. Don't make up things you like or want. Deliver on things that customers are hankering for. He skipped this step.
#2. Don't become a software company! Unless your business is software, stay out of the software business. This person built lovely software for... delivering coffee? That's expensive, not necessary, and puts you in the software development and maintenance business forever.
There's no mention of any prior industry experience by anyone on their team. They seem to be a digital agency with an expensive coffee habit.
They signed an expensive lease for office space before having any paying customers or other market validation of any kind?
They started with their chosen solution (pre-made gourmet coffee delivered in 15 minutes) before demonstrating that this was a problem their customers even had. Office managers and event planners all have a coffee budget, but rarely need anything with such immediacy. Their job is predicting demand and planning ahead so there's always coffee available, but it never has to be ordered at a moment's notice. There's no mention of talking to these potential buyers before investing in sunk costs like real estate, equipment, a bespoke software platform (!), payroll, etc.
They set their prices way too low. By anchoring to the cost of a takeaway coffee from a cafe, instead of to an on-demand delivered hot food/beverage (much more expensive!) they weren't able to cover their much higher overhead. Their insufficient margins lead them to be understaffed and unable to absorb any unplanned absences. Any amount of experience managing employees at this pay scale would have made it obvious that you can't expect military precision and perfectly consistent output.
>Don't become a software company!
They had six software engineers on staff! For a coffee delivery company! The (10+ year old) company that services my office employs zero software engineers. Their website is outsourced to a local web dev.
They seemed to have no financial projections whatsoever showing that this was a sustainable business at any level.
The shared experience seems to lead to the opposite, making money brewing and delivering coffee doesn't work, but the software can be re-purposed and re-sold (hopefully with some margin), so maybe it was a software company with a side-activity useful for field testing since the beginning.
But, honest question, aren't the resources used (and connected costs) too much?
6 or 7 programmers/engineers (including the post author) for three months (a part of them 24/7) to build the app and site?
Maybe it is ready to scale and what not, but it sounds (to me) like a pretty simple kind of software.
You can probably skip the backend person and just use firebase or app sync.
If you're doing order processing you need that backend/integration person.
The less platform integration you do the faster it'll go. If you use react native or flutter you can get that down to maybe 2 months for the three big platforms (web/iOS/android).
Their app is really nice, and they had an app on the barista side, so more people and more time.
They also had an admin dashboard = more time.
Three months is actually pretty good for everything they built. That means they had a designer on-staff, pretty good developers, and a product manager who could communicate. And it's true, their end-to-end system might actually be worth something.
Come on, you would see it if you just get to any other coffee point and sit for a day looking at how it works. Like, you know, the old, pre-Google way.
Or use that Google to find out the challenges in running a coffee point. It's not like they were the first one ever doing that.
If you want to sell premium coffee, you have to create a premium experience. If you're doing it online, you need a website/app that feels premium - whatever that means!
maybe if you were feeling ambitious add a krsipy cream knock off donut.
like the redbox of coffee except won't get disrupted by digital anytime soon
put the cost you would spend on labor into the product.
if you made a deal with one of those companies you could have a 1000 locations out in no time.
Nice idea. I have seen a novel (to me at least) system when visiting Boston, a city of traffic jams:
People wearing a metal contraption on their backs that makes them look like ghostbusters. In one hand is a hose from which they can fill your cup; on the other side is a tube of paper cups if you don’t have one. They just walk through the traffic jam (I saw this at the end of the tunnel leading to East Boston) and driver would wind down their windows.
On one hand your scheme has much less labor, but this approach can serve many more, and captive, customers at a high density time of day.
But I would definitely buy coffee from a vendor like this. What other captive markets could you sell coffee to ? Where do people wait in line a lot ... Texas DPS would be a gold mine.
Train stations and airports. Onboard trains. Amusement parks. Maybe not a lineup, but anywhere people gather, such as city parks and tourist attractions.
The first time I saw this setup was actually in the 80s. I was skiing and one of the hot chocolate companies was sampling a new product. There was a guy, on skis, at the entrance to the lift line handing out samples using one of these thermos backpacks. It was styrofoam cups in the cup dispenser back then of course too.
Either way, there is something really compelling about having a hot beverage brought to you right when you need something. I can see the appeal of having this service in a traffic jam, now only if they could figure out something similar for bathrooms.
Someone handing you individual sheets of paper on demand?
I can’t think of a place less congenial to anything edible/drinkable than a bathroom. Yuck!
Either someone would get hit by a car and the resulting lawsuit would end it, or the city/police would end it. While "it is done" as far as traffic vendors, it isn't done for very long for the forementioned reasons.
Because labor costs would be far lower than these competitors, prices could be very competitive and you could offer monthly passes and other loyalty programs.
I would consider office buildings where there is no onsite cafe. They would be relatively secure there and you could make them look really high end, for example having visible copper components like those high end Starbucks percolators that some cafes have. This might be important in selling the "quality" benefit over what people can get for free (or cheaper) in their office kitchen upstairs.
My guess is the market of people who want better coffee than a kcup/nespresso pod, are willing to drive to get it, and don't want to wait in line is quite small with low margins.
It was the perfect middle ground: it didn’t claim to be top of the line but it beat most chain coffee for espresso drinks.
They have these in big tech company kitchenettes. They're great. I'm sure whoever made them made a killing from all that big tech b2b money.
But it seems like a simple purchase of a big bag of coffee would trounce any delivery service. All the extra human labor costs are removed. No logistics issues. No timing issues on the delivery.
Yes you need to brew yourself, but that's pretty much a solved problem. You can make a high quality cup of coffee with a small upfront cost in equipment. The few minutes of time spent grinding/brewing might be less than the time spent looking for the delivery to arrive.
So, what I'm trying to say is.... yeah it sounds like a tough business to break into. You'd need to be Walmart-huge to make slim margins worth it.
So many tech startups think they are going to "disrupt the industry", never actually try to understand why the market is what it is today, why there are no major disruptors and if any such efforts succeeded, but instead go ahead with whatever plan they have. It turns out, unsurprisingly, that there isn't a big enough market or margin to make the business sustainable or survive, and the entire idea is a solution looking for a problem.
I don't think there is anything unexpected here.
This makes me appreciate services like Cometeer.com - high quality coffee delivered frozen for a little over $2/cup. I’m not affiliated, just a very happy customer. They address the two most important pain points for me in regards to coffee drinking: time and quality.
I’m too lazy to make my own (high quality) coffee. And I don’t have the patience, or frankly the counter space, for a grinder/roasting machine. Enter a service like Cometeer, one that immediately addressed my issues, and now I can’t fathom sustaining my addiction any other way.
I've had coffee concentrate before and it's been mixed results for me. What makes Cometeer great?
I don’t know. I love my morning espresso but it’s really fussy to make.
The issue is that I can’t get the same quality reasonably close by and speciality coffee shops charge extortionate prices anyway. So I’m stuck dealing with my scale and adjusting my grinder.
My wife is a serious coffee drinker so I got her a nice grinder, espresso machine, and Blue Bottle Coffee subscription in 2021. We canceled the subscription after a few months because it was hard to tune the deliveries just right. We either ended up with too many beans still on-hand when the next delivery arrived (and you don't want them to just sit there, because the whole point is freshness) or we'd run out a day or two before the next delivery, especially when the delivery arrived a day or two later than promised. It was easier to just pick up another bag of beans at a local store on the day when we needed them. My wife also said the beans at the local store were better, fresher, etc.
I've owned various home roasting equipment, and until I bought an Aillio Bullet (which, is a $3500 roaster nowadays) matching good professional roasters was not possible. You could get close, but consistency and quality was not quite there.
Also, home roasting is basically impossible in an apartment setting. The smoke is not great, and unless you have a balcony/porch it's going to be an issue.
Long story short: no, at least not for me. You can play around with roast level and get a variety of different flavors, depending on the bean. And at least for me, I keep a few large batches on hand (2-3 bags that are 65 lbs each). That's enough variety to keep me sated.
Also, for most folks, if you have a brand new bean, you need a few roasts (or maybe, many roasts) to actually dial in a good roast profile. If you only buy a few pounds, you will run out of coffee before you roast it well enough to fully enjoy it. Then you start over again with a new bean.
There are also services that will ship the same (or different based on you preferences) coffee beans to you every week or two.
It doesn't matter how better the equipment and barristas are compared with what the office has, coffee and frothed milk don't travel well in cardboard cup shipped on a bike.
Since you lived this journey I'm curious about your pricing: I always imagined that I'd be willing to pay a pretty huge premium for this kind of a service if it felt "luxury" enough. Kind of like how Uber started off at the high end with $18 minimums before it had to battle on the low end.
It looks like you were charging 10% over the nearest shop price, but if the experience was high quality enough could you have charged closer to $7-$10?
I would love if they had said where the money went (they said they made _3_ apps, but what amount of money was it) to see maybe where they could've tweaked expenditures.
I would also love to see where the money came from in the first place. They said $300k was allocated to this and it wasn't "their main business". What was that money allocated for originally and from who? Would love to hear the financiers opinion of the whole thing
man I wish I could loose 300k and still be winning
"how to fail at something and believe you now understand it"
1. People who obsess over coffee enough to care when their coffee was roasted
2. People who obsess over coffee so much that they don’t trust someone else to prepare it The Right Way
3. People who enjoy the ritual of making coffee as much as they do drinking it
…which, I think, probably makes any business like this unviable (but I would love to be proved wrong)
Maybe we're minority but we exist. There are dozens of us!
"I care!"
I am not sure your comment is helping...
Now, there's a market opportunity right there.
Not sure if this is what the author is going for, but -ika appears to be a czech suffix indicating a study or branch of science. Which makes this kind of a cool name, in my opinion.
Also, sometimes even if you don't make the association, once someone points it out, it's hard not to think about it.
Talking of coffee, using the Italian c instead of the k might have been more appropriate, while making the word seem less similar to swastika to the English/American user.