How Super Coffee went from $0 to $400m valuation in 5 years

Jimmy DeCicco:

But this coffee that he brewed for himself that had the protein, the healthy fats, zero sugar, it worked so well for him that he started selling it to his teammates, and his classmates, and his coaches. And before long, he said, “Wow, this is a problem that goes well beyond me and my campus. I can’t be a full-time student athlete and share this solution with the world.” So he called me and our middle brother, Jake, and said, “Fellas, I’m dropping out of school to sell coffee.” And that’s how we got started. There he is behind me trying to play hoops.

Jimmy DeCicco:

At first, he didn’t want to make money from his friends, but it was expensive to make with the protein and the coffee. He bought a couple of blenders. So he was just charging people his costs. But that turned into like 500 bucks a week, then $1,000 a week, which for a college student, that’s a lot of money.

Jimmy DeCicco:

It must’ve been several hundred bottles per week, and then that’s when he said, “Hey, let’s see if we can get this into commerce.”

Jimmy DeCicco:

Literally, exactly what you think. They were blenders that you buy at any Target or a grocery store. So we had blenders, he would brew the coffee, so he’d have a hot pot of coffee, dump it in. And then we ordered these bottles from China, and we’d fill them up and we’d cap them. And then we’d stick like a sticky label on them from FedEx or something like this. And that’s what we were selling. So it was a lot of manual labour. And then once we got into our first store, we showed up at a Whole Foods market in Washington, DC, right near Georgetown’s campus. And we said, “Hey, we’re Super Coffee, and you guys don’t carry anything like this.”

And the store manager tried it, he said, “Hey, this is pretty good. Bring your fellow student athletes up to my store to shop and I’ll give your product a shot.” So just like that, we got into one Whole Foods and we didn’t leave that store. We poured samples at that store every day until we became the best selling bottle of coffee. And that’s when we realised we’d need some type of culinary kitchen, some larger facilities rather than just the blender in the dorm room.

Jimmy DeCicco:

Totally.

Jimmy DeCicco:

This was before Amazon owned Whole Foods, this was towards the end of 2015. Whole Foods splits up the US into 11 different regions, each region has its own local programme where they bring in like farmer’s market goods, local purveyors of different items. So we pitched into that local programme. We got a hold of the right store manager, and he gave us a shot. And then you could go store by store. So we took the data from that first store that we went to and we brought it to the store down the street and said, “Hey, we’re the best-selling bottle of coffee at your store up the street.” Like, “You guys should bring it in here.” So that’s what we did.

We went store by store. We wouldn’t leave an existing store until we were the best selling coffee, and then we’d move on to the next one. And by the end of that first year, we had a pretty good data story saying like, “Hey, in these 20 stores in the greater Washington DC area, we’re the best selling bottle of coffee, and now if you invest in Super Coffee with your capital, we can take that from DC to Baltimore, to Philadelphia.” And that’s really what we did, we went city by city.

Jimmy DeCicco:

We learned early on and this fundamental belief still holds true to this day is that our jobs begin once our product gets on the shelf. A lot of brands think that they can have a good product or good packaging, good branding, and it’ll sell itself. It’s just not the case. There’s so much noise in today’s world, there’s so many promotions and advertisements and things like that that we really needed… It’s a lot of hard work, it’s good old fashioned elbow grease where we would show up…. It’s like a real estate game of space. There’s limited real estate within a cooler that holds all the beverages, so we wanted as much space in that cooler as we can, and that space is earned.

So the best-selling products have the most space because it makes the most money for the store. So we figured that out early on and we’re like, “Wow, let’s pump up these numbers by showing up every day to pour samples for customers, educate them on the flavours, teach them about the story.” And back then, the product wasn’t very good, it was clumpy and didn’t taste great, but people loved the hustle, they loved the story, so they supported local business. And the best part about it was, we were collecting real-time feedback from real people and we turned that feedback into product innovations and renovations.

Jimmy DeCicco:

He didn’t always say yes, sometimes we had to ask for forgiveness instead of permission. But it was really just a sampling table. And it’s good for them because it provides value to the customers, it’s a free sample. It’s kind of like Costco, you know how Costco always has the tasting booths and things like that? Whole Foods used to that a tonne. This was long before COVID. They encouraged it because during a sampling event for any product, every brand would see a big sales spike because people were buying what they were tasting. And then for us, it’s like, if they gave us two feet on a shelf, we would take four feet.

And if he told us we could sample for two hours, we would sample for four hours. And it was just one of those things where it was like, “Oh, sorry, we lost track of time. We were passionate about it.” And it wasn’t easy. It’s a lot to set up a table and bring in your product, clean up and do it all the right way. But we knew that was the only way we had, because we didn’t have money to advertise, but we did have time and three guys to show up and work hard.

Jimmy DeCicco:

We broke that store’s weekly sales record in the first four hours. We called everybody we knew in DC, we had every sports team coming through there. The numbers were off the charts that first week, but I don’t think we moved to the second store until two weeks later. The first store was on Georgetown’s campus, and then the second store was on George Washington’s campus. So two universities, we kind of made them rivals against each other.

Jimmy DeCicco:

Totally. Once we were in that first store, it wasn’t feasible because we were selling a couple of hundred bottles a day at that point. It wasn’t feasible to just do it in blenders. There was a Domino Sugar factory up in Baltimore and they actually had a bottling line in the back that they didn’t use, which is ironic because our products are sugar-free. But the manager was like, “Yeah, come on in. My last shift ends at 8:00 PM and my first shift gets in at 6:00 AM, you guys can work here all night, just clean up and be out by 6:00 AM.”

So we would basically lease this equipment from some guy and we’d produce… It was still a grind. We were working just like… It was probably a 100 gallon kettle versus a little blender that we had in the dorm room.

Jimmy DeCicco:

Too much.

Jimmy DeCicco:

Oh man. On nights where we had production, we would produce until 2:00 or 3:00 in the morning, and then at 4:00 or 5:00 in the morning, we would basically roll the dice and whatever brother drew the short stick would make deliveries. So one of us was going from production, taking that product to eight to 10 Whole Foods the next day. It was all we had. No jobs, no families. Obviously, mom and dad love us and support us, but no wives or mortgages or anything like that.

Jimmy DeCicco:

That was it. That was everything we had, 18 months. And we leased a little van from Nissan, a delivery van, a white one, and we put our branding on the outside of that. So we would drive that all around DC and Maryland and Virginia making deliveries, but then we’d pour samples. We didn’t even do things like street fairs or festivals. Our belief was our impact needed to be really close to the point of sale, basically where we could hand it to somebody and they’d check it out with their eggs or their bread, their groceries, because like a farmer’s market or a 5K or a local street festival, you’re banking on that person to remember your product and then buy it the next time they’re in a store.

The conversion rate is a lot lower than when you’re actually in the store.

Jimmy DeCicco:

Yeah. It all stemmed from this Whole Foods puzzle that we had in the early days where everybody we’d meet, was like, “Oh, this story is so good. You guys are so cute. You should go on Shark Tank.” And we would roll our eyes and smile politely. We looked at it, Shark Tank was, 40,000 companies applied every year for 100 spots. So for us, we were so damn busy making product and making deliveries that it just felt like a gamble, a distraction, if you will. And then 18 months in, I saw on LinkedIn some second degree connection, commented on somebody else’s page and said like, “Hey, my friend’s a producer for Shark Tank, they’re looking for companies.”

Had nothing to do with us, but I slid in there and I DMed the guy, I was like, “Hey, this is who I am. We’re Super Coffee. My brothers and I started this.” And the next day, I was on the phone with the producer. So it’s basically like our application was at the top of the list. And then our episode of Shark Tank aired in February of 2018.

Jimmy DeCicco:

Yeah. We actually needed the money, we were raising money from-

Jimmy DeCicco:

Yeah. We needed the cash. So we were out there, not desperate to get a deal, but we wanted a deal. And the guest shark on our episode was a gentleman named Rohan Oza. Rohan was the chief marketing officer at vitaminwater.

Jimmy DeCicco:

$4 billion?

Jimmy DeCicco:

That’s right.

Jimmy DeCicco:

He was on the show, exactly. And he’s done it time and time again. He was an early investor in Bai, B-A-I. Bai sold to Dr. Pepper for 1.7 billion. So Rohan is the guy in beverage. We were sort of myopically focused on him. Mark Cuban’s cool, Barbara, they’re all cool, but we’re like, “We want Rohan.” The disadvantage that we had was we filmed our episode at 7:00 AM on a Saturday morning, and that the Sharks were going to record all day long, there were maybe a dozen other companies after us. So it was Rohan’s first episode ever. So I think he was a little nervous, a little star struck maybe, and didn’t want to come out of the gate strong and do a deal.

After the show aired, we didn’t even get an offer from any of the Sharks. They thought the valuation was too high. Rohan liked the taste, but he was conflicted in a couple other beverage brands. So I didn’t get an offer. We felt disappointed. We felt like we just lost the national championship on television. But people didn’t care about what happened, they just were excited that they saw us on Shark Tank. So we were hanging signs on grocery stores, we were building even bigger displays now. We would go to all the store managers, at this point, we’re probably in, I don’t know, maybe 1,000 or 2000 grocery stores, and we would say, “Hey, we were just on Shark Tank, all of your customers are looking for us. We need better placement. We need the end caps and cooler displays.”

And they gave it to us, and it really helped blow up the brand from that point. So I guess long story short, Shark Tank is what you make it, because some people will see it the night that it airs. But like for us, we’re humble and like embarrassing when it comes to talking about accolades, we were not shy saying, “We went on Shark Tank. You guys got to put us out there.” So we definitely leveraged that.”

Jimmy DeCicco:

Totally. Totally. And I think that’s the athletes in us. We grew up, sports was such a big part of our identity. Both mom and dad played sports in college. I remember our mom would drop us off to school in kindergarten, and she would say, “Boys, go kick today’s ass.” We’d be like, “Yes, mommy, we will.” So that’s just the mentality. And we were always polite about it. Our mantra at Super Coffee is, work hard and be nice to people, but we’re not ashamed or we’re not afraid to work hard, and if that pisses some people off, then I’m sorry.

Jimmy DeCicco:

Yeah. Our episode of Shark Tank aired in February, and we were asking for $1 million for 10% of the company, so we put a $10 million valuation on the business. Later that year in December of 2018, we raised $15 million at a 50 million post-money valuation. So once Shark Tank aired, we got some inbound from different investors, but we had enough cash in the bank to really push up sales, so Shark Tank helped with that. And you started to see massive growth month over month, year over year just following the Shark Tank exposure. It exposed us to a different level of institutional investors.

Because up until this point, it was just friends and family. We don’t come from money, so mom and dad couldn’t invest. As we were pouring samples at Whole Foods, one guy was like, “I’m a lawyer. How can I help you?” It’s like, “Well, do you have any wealthy clients who would like to invest in a coffee company?” That’s literally how we raised our first money from angel investors. But now Shark Tank exposed us to a wider, broader audience. And then we brought on our first institutional capital, we raised our series A in December of 2018, and that $15 million really fueled our growth from four million in sales in 2018 to 26 million in sales in 2019.

Alex Cleanthous:

And so what did you learn about the raising finance process? Because it’s series A, series B, you have celebrity investors like Jennifer Lopez, Alex Rodriguez and Patrick Schwartzenegger. There’s so many questions I have, but let’s just start off by, what’s the big lesson that you’ve learned from the fundraising process?

Alex Cleanthous:

What did you use the series a for? What was that first big chunk of cash that came into the company, like, “Damn, cool. We got like 15 mil now, roughly. We should spend some to scale”? How did you make the first investment?

Alex Cleanthous:

And so you wanted to really make that first investment successful, because that’s a series A and you wanted to go to series B and obviously to show the investors that, “Hey, we might be young, but we’re going to make this work.” What were some of the things that you did to really make sure that that investment was going to be successful? Because obviously, it’s easy to pay fees here, here, here, here. It’s easy to spend money. And everyone that has a business actually knows that. But it’s harder to take that and actually have that return exactly what you think is going to return. So what were some of the things that you did to really make sure that investment performed?

Alex Cleanthous:

And going from four million to 26 million is still a pretty good feat. And what’s interesting is that you maintained the strategy, which you started off in that first Whole Foods store, pour samples, talk to people, care, listen, the feedback loops. It’s really interesting to hear it because you think, well, if I had 15 mill, I would do everything differently, but actually you’re just doing the same thing at scale, the same thing that’s working at scale.” When did you start to expand out the distribution channels, the promotional tactics, like the ecommerce store? At what point did you start to say, “Hey, do you need to have these other streams of revenue as well?”

Alex Cleanthous:

Yeah. And it’s really hard to track what people see and what people think, because they’ve seen the ad so many times with all the different versions and all the messaging. And so all we do is we track last click conversions, sometimes search click conversions, but it’s really hard to go all the way sometimes to get where they saw the ad 28 times across the platform. But you spent a million dollars on Facebook ads, and then I’m sure you probably would have spent more last year since the sales were at 55 mil. What do you find works best for your company from a Facebook ads promotional strategy perspective?

Alex Cleanthous:

It’s that mass market. So it sounds like in the beginning, you were focusing on more health conscious consumers, more the athlete crowds and stuff like that, right? And so the first thing, is that true?

Alex Cleanthous:

The target in the beginning were athletes and health conscious people?

Alex Cleanthous:

Yeah. And what’s so good about that is that that’s what people are going to buy because people know calories. Everyone knows calories, but MCT oils and all that type of stuff, which I love, and I’m going to get some of your coffee. Well, I don’t think it’s in Australia, is it? Is it in Australia?

Alex Cleanthous:

Man, I’ve got to ship it through a post office box or something to taste it. But anyway, it sounds like it’s been sold on the simple things, but then there’s all these other advanced benefits to the product. Now, how did you change your strategy in the beginning? Because it sounds like in the beginning, you’d be leveraging a lot more influencers talking about the health benefits and how it tastes and stuff like that. Is that true?

Alex Cleanthous:

So was one of your strategies then, and forgive me, because the market of it is coming out of me now, as you were stocked in particular stores into particular areas, let’s say, for example, the Walmart in some location that you would launch some Facebook ads to that area to promote that stock in that store? Is that one of the tactics which you may have used?

Alex Cleanthous:

Yeah. That’s awesome. And there’s so many applications to Facebook ads that are for all the people that are listening, there’s so much which you can do that’s really strategic in terms of trying to get the message out that’s not maybe the direct sale. I think that’s a fantastic example of that. Let’s jump quickly now to the celebrity investors, because that sounds like a real game changer in terms of attracting funding, but also promotion. It’s a combination of things. How did you get that idea? And how did you actually launch it?

Alex Cleanthous:

And so it’s a combination of, they have to put in some funds and they also get stock options on performance. Is that right?

Alex Cleanthous:

It’s a combination?

Alex Cleanthous:

And it seems like it’s a fantastic way to get the message out because all of a sudden, you have all these celebrities promoting it through their marketing services agreement to get the stock options, but now there’s a lot of people that people have heard talking about this product. And so how has that helped the growth of the company of Super Coffee?

Alex Cleanthous:

That’s a good statement.

Alex Cleanthous:

That’s interesting, because I think a lot of brands out there, they want to get the celebrity to do a post because they think if I do one post, because you probably heard about the Kardashians have done a post and then they’ve sold everything out, but this is a perfectly good example where it’s not that simple. It’s never that simple. It’s not like, “Well, if they post, all of a sudden, I can make a million dollars in sales.” It’s far more complex, but it does sound like the brand equity across all those celebrities is helping the brand. So has, what’s it called? The brand search increased on Google significantly since this whole celebrity strategy launched?

Alex Cleanthous:

That’s fantastic. You have such a good strategy and a good story, and the digital things just on the side, but obviously that’s 20% of your revenue, but the strategy is in-person, is out of taste tests, is the celebrity endorsements, is the marketing service, is with the stock options approach. And so it’s a really cool journey. And the valuation is not about 400 mil. I’m probably wrong, but that’s the latest thing I saw. Would you do anything differently in terms of that strategy if you had to start again?

Alex Cleanthous:

Yeah, sure. And from a personal side of things, because obviously you started this thing when you were 22, is that right?

Alex Cleanthous:

Now you’re 28, is that right?

Alex Cleanthous:

If I can do simple math, which is good. Cool. So you’ve been doing this for six years right now. I think I started my first company when I was 21, 22, nowhere near to the success of yours, by the way, to be very clear. But as a younger entrepreneur, you feel like you’re not worthy or something, it’s like the imposter syndrome is a big thing. And so how did you overcome that thing, because obviously, you have overcome it and you’ve surpassed most people in the world right now. But how did you overcome that in the beginning?

Alex Cleanthous:

In terms of the lessons, because obviously, you just spoke about a few lessons, but to go from the three brothers that are pouring samples in Whole Foods, just hustling and then trying to work at night to get all the bottling thing from the factory to 110 staff at $55 million in sales, that’s got to be hard. So how did you just handle that scale, that recruitment? We have like 100 and something staff as well, but we got there slower than you got there. So you’re there quickly. And so how did you manage that speed of recruitment, ensuring there’s a good culture, ensuring you’ve got good people, because at that size, it’s all about the people?

Jimmy DeCicco:

Again, it’s not a perfect process, everything is iterative and you want to get hiring right because it’s much more expensive to hire somebody and fire them than it is to spend the right time hiring the right people. What we learned is that the ship breaks at 20 people, the systems break at 50 people, the systems break at 100 people, the system breaks. We’ve learned that throughout the way and we weren’t ready for the 100 people when we went from 50 to 100. We had to build those systems. We say all the time, “We’re building the ship as it’s flying.”

And I think you learn from mistakes pretty quickly, we can start to get intuitive. We tap some of our investors and our advisors and say, “Hey, what should we expect?” And I think now the business is at a point where we can really attract top talent. My brother, Jordan, our youngest brother, he’s super passionate about hiring people who are smarter than we are. So we’re surrounding ourselves with those folks, and everybody brings some new knowledge, some new systems, some new processes to the business. And that’s what’s so great about building a company is it’s a reflection of the diverse people that you have within it.

And I think for my brothers and I, our number one goal right now is surrounding ourselves with the right people, but also maintaining the culture and the values. And not just in a way that’s like Wildwood, like integrity, respect, not stuff like that. It’s leading by example and really articulating and showing where this energy is rather than telling, is super helpful in recruiting the right folks to join this mission with us.

Jimmy DeCicco:

I would say, first, you are qualified to do this. There’s nothing special about me and my brothers. We were decent students at a lower middle-class high school, we’re very normal people. So I think get that out of your head that entrepreneurs are uniquely qualified to do something that others can’t. I think it’s about how long can you stay in there? How gritty are you to do it? And then the second thing that stays true from day one through now, even harder now is, people management requires a lot of work, a lot of intentional effort.

And it’s not in a bad way, I think if somebody is not acting in accordance with your values or where you want them to act, or how you want them to act, that just requires conversation and development and work together. So I think one thing that we established early on is this commitment to trust, or this commitment to transparency. And it’s a culture where everybody provides feedback and accepts it. And that’s an uncomfortable thing to overcome. The easy thing to do is to say nothing, or to talk shit behind somebody’s back, which happens at a lot of companies.

But for me to say, “Alex, man, I saw the way you showed up in that meeting, and you were distracted, you were on your phone. Next time, I’d love for you to be there.” One, that’s uncomfortable for me to say that to you. And two, you’re like, “Damn it. Jim caught me, I feel bad now.” There’s definitely an awkwardness that comes to that, but we’ve created a culture that where that’s acceptable. And when you understand that the person providing the feedback is coming from a good place, you accept it as a gift, you don’t get defensive. I think it’s a natural instinct to defend yourself and say, “Well, I was on my phone because I had an emergency, fuck you, Jim.”

Jimmy DeCicco:

Yeah. What’s next right now we’re raising more capital, we’re raising our series C, bringing on another $50 million this summer. It’s going well so far, but that’s going to fuel growth. And the disadvantage we have right now is we’re still laying the distribution foundation. We’re not even in half of the accounts that Starbucks is available in or Dunkin’ Donut is available. And so we’re trying to level the playing field by chipping away at just generally where we’re available. And what’s difficult is all of our resources are dedicated to getting product on shelf and supporting the product where it’s currently distributed, versus Starbucks and Dunkin’, who all of their resources are focused on the accounts that they’ve been in for a decade or decades.

And their efforts are now on repeat purchases and retention, and new flavours, and discounts, and things like that. So we’re starting at a bit of a disadvantage there. I think building out the distribution, continuing to win at the account level, the good old fashioned way. There’s no substitute for a human being going into a store and building a display or pouring samples and educating customers. So that’s where most of the proceeds of this next round are going to go. And then international white space. Like you said, we’re not available in Australia yet, we’re only available in the continental US.

So we might have a couple of stores in Australia, which is pretty cool. I’m sorry, not Australia, Alaska. You have me thinking down there, Alaska, but nothing in Australia yet. And so I think international expansion is exciting because right now it’s all white space. China drinks five times more bottled coffee than the US, Japan is a big ready-to-drink coffee country. So there are a lot of opportunities there. And that’s really where we’ll go after we establish this beachhead further in the US.

Jimmy DeCicco:

I don’t know. It’s certainly an option. I think we’ve built a really strong sales and marketing brand. We haven’t built a foundational business in the sense that we don’t own our own factories, we don’t have our own distribution networks. And those two things are really expensive. Those two pieces right there really take a chunk out of our gross margin. So a lot of brands like us, like you said about vitamin water, are built to sell to a strategic who has those synergies. vitaminwater is now produced by Coca-Cola in factories for a couple of pennies, and it’s distributed on Coca-Cola trucks. So the margin on that thing is damn near 70%. Whereas for us, we’re like in the 30s.

So to go public, we don’t get a factory and we don’t get trucks, but there are some interesting case studies of some public companies right now, similar in size to us that are doing really well, like Celsius energy drink is a good one that I reference quite a bit. Yeah. And how much

Jimmy DeCicco:

It’s funny as the old way has made it harder for us because honestly, when Coke spent $4 billion for vitaminwater, that was a bad investment, they never made that money back. So now CEOs of strategics like Anheuser-Busch and Nestle and Coca-Cola, they’re under a lot more scrutiny and none of them want to be wrong. None of them want to overpay for a brand like us. So it’s harder for us to get an outside valuation like that in the private markets, versus what’s happening in the public markets right now with SPACs and retail trading, things like Robinhood.

Robinhood is an interesting thing because for the first time in our lifetimes, we can influence public company valuations just because the people on Robinhood love Super Coffee. They know the brand and it’s like, “Dang, I could put $100 into this company.” If we get enough of those folks to do it, it’s a different game than it was five years ago or even two years ago.

Jimmy DeCicco:

The Reddit warriors.

Jimmy DeCicco:

First is just work hard and be nice to people. I think we all need to do more of that. And honestly, if you’re doing both of those things, you’re usually going to be right. It’s usually going to work out in your favour. And you can’t have just one. If you work hard and you’re an asshole, we don’t want to work with you. And if you’re nice to people, that’s great, but if you don’t work hard, you’re of little use to us as well. So work hard and be nice to people. And then check us out, we’re @drinksupercoffee on Instagram. We’re always posting new partnerships, new promotions, discounts, giveaways, that type of thing. Follow along the journey. On LinkedIn, I’m just @jimmydecicco. So we’d love to stay connected with you guys as well.

Jimmy DeCicco:

Alex, thanks man. When I come to Australia, we’re going to pour samples together.

Jimmy DeCicco:

Yes, sir. Coming right up.

Jimmy DeCicco:

Take care, my friend. Thank you. See you.

Jimmy DeCicco:

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