Extreme Business Makeover: Overhauling a Decade-Old Brand

Transcript

Felix: Today I’m joined by Alex Yurek from Detour Coffee Roasters. Detour Coffee Roasters is one of the top coffee roasters in Canada and is on a mission to make sure no one has a drink a bad cup of coffee again. It was started in 2009 and based out of Hamilton, Ontario. Welcome, Alex.

Alex: Hey, Felix. Thanks for having me.

Felix: Yeah, so you told us offline that you spent nearly a decade working as an innovation consultant before branching out on your own to launch your business. Let’s start there. What is an innovation consultant?

Alex: Oh, that’s a great question. It’s a little bit of everything and nothing all at the same time. My previous firm, what we did was we worked with large Fortune 500 organizations. With those organizations, I specialized in food and beverage, and really helping them think about what was next. We worked with companies like Campbell’s, Tyson. We worked with companies that were focused on “How do we actually develop products and services that are much more relevant to the world of consumers of tomorrow?” I think throughout that experience working with these organizations, really what become apparent is innovation is really hard. Coming up with new products and new services and new brands is a challenge. After we grew that firm to a certain point, that’s certainly something that we wanted to get into thereafter.

Felix: Got it. You founded this firm or you were working for a firm as innovation consultant? I guess, what was the business that you guys started previous to essentially the brands, the eCommerce brands.

Alex: Yeah, so the business that we started was essentially a consulting company that was focused on innovating in food and beverage with all of these leveraged organizations. We worked with anthropologists to understand human interaction and what was relevant from a cultural perspective. We had a business strategy arm that was focused on developing innovative products and services associated with that. And finally, and I think most importantly, a heavy emphasis on design to be able to understand how we could not only come up with really amazing ideas but bring those ideas to life.

Felix: Got it. You were working with these brands that already existed, and then during this process, during the decade that you spent there, you guys realized that you wanted to essentially own brands of your own.

Alex: Exactly. I think it’s one of those things where once you do enough advisory on that sort of thing, you reach a certain point where you need to start practicing what you preach. That’s what really this part of my life is about.

Felix: Got it. What is the process for innovating? If you have a brand that exists today with people that are listening out there and they feel like there’s some stagnation going on with their brand, with their business, where do you recommend people look at first?

Alex: It’s interesting because I always like to start with understanding and going divergent with thinking. If we can understand not just who our product or service is relevant to today, but how do we understand, what are the trends and signals in the culture that exist that could start to point to where our products and services could go tomorrow, and really getting an understanding of what that would look like. That, for me, is the type of thing where there’s a huge amount of opportunity. A good example of that is one of the trends that’s happening right now in food, is a huge, huge, huge emphasis on fermentation. Being able to build fermentation into a core brand philosophy and being able to develop products and services that resonate with that, what right now is a subculture that could emerge to be mainstream down the line, is a huge, huge point of emphasis that we’re starting to pursue.

Felix: Now, how quickly do you need to move on these kinds of opportunities? It sounds like there is a subculture, so do you want to wait and see if it can establish itself, get some traction before you move on it? Or, do you want to try to get ahead and not be sure, and maybe it’s a 50/50 chance that it will become a bigger part of the mainstream culture?

Alex: That’s a really good question. I think actually what we’ve started to do is … The organization that I founded is called New Skew. The way that we’re thinking about the brands that we’re developing is we have our core and mainstream brands that are designed to capitalize on existing products and services right now, and so that’s what we’re doing with Detour Coffee, that’s what we’re doing with our bread company. And then, we have venture brands off to the side. Venture brands for me are pure bets that are a little bit ahead of culture, a little bit wild, and trying to capitalize on what that micro niche is, and be able to say, “Here’s a product or service where this can appeal to a narrow group right now with the hopes of expanding into something more mass later on.” An example of that would be our mead brand, Royal Canadian Mead, or Brainbow, which is actually a mental superfood organization.

Felix: Got it. Okay, so going back to the very beginning, so you guys had this firm. You were working with a lot of brands. You realized that you wanted to do something of your own. What was the first step? What was the first thing that you started to do to move in that direction of shifting your focus, shifting … It sounds like you had other people that were onboard already shifting their focus towards creating your own brands.

Alex: That’s a great question. I think one of the things for me that was really important was being able to have an understanding of how to get traction immediately. What we actually did is one of the very first things that we did as New Skew was actually acquiring an existing company called Detour Coffee Roasters. We bought Detour Coffee because I’ve been a massive, massive, massive fan of the product, but there was so much opportunity to renovate the brand, increase what we were doing digitally, and really get the organization into a growth mode, and use that as a bit of a foundational pillar for all the other things that we were looking to do.

Felix: Now, when you are looking to acquire a brand, this was, as we mentioned before though, was started in 2009, and you acquired, I think you told me off air, that you acquired it last year, so almost a decade of it running already before you acquired it. What do you look for in a company that’s been around for, I guess for a while, “a while” when you think about the online space? What do you look for in that kind of business to determine if it’s going to be a good fit or not for where you want to go?

Alex: For me though, the thing that was most important was, one, understanding that it was a good business, that it was a stable business, and that it would be a business that it has a bit of reliability, even if we’re going to start to think about making some changes with it. That was thing number one. Thing number two though was I had to be a massive fan of the product. If I didn’t like what was being shipped in each of those different coffee bags, it would be really hard to get passionate about what that was. Candidly, at that time, I didn’t have the subject matter expertise to be able to provide substantial improvements into what the quality was that was in that bag.

Those were the two things that were most important to me. One is that it was a really good business, and two was I was a massive fan of the product that was being shipped out, and that there was the opportunity for growth on so many different angles. We have a strong, strong wholesale business. eCommerce represents roughly about 20% of our overall sales now, which is double from what it was when we bought the company. There’s a huge amount of further opportunity for us to continue growing and renovating that brand.

Felix: Mm-hmm (affirmative). Does it ever make sense to buy a business if you’re not going to come in and try to essentially change a lot of things? Would you ever buy a business and just essentially, I guess, keep it the same?

Alex: I don’t think I have the right personality for that, to be honest. I think I always like to have a little bit of a personal touch and be able to provide a bit of finesse to be able to move the dial in that business. I think the only situation where it might make sense to acquire something and fold it in, for lack of a better word, is if it’s something that’s completely complementary. If I were looking at a tea company, for example, that could be something that we could easily integrate. But I think where real opportunity exists is when you can provide any degree of innovation to an existing organization, whether that be brand innovation, design innovation, product innovation, or even enhancing the business model in different ways. That, for me, is where there’s way more opportunity from both an intellectual side as well as a business side to be able to create change and growth.

Felix: When you said that you look for a business that has a lot of opportunity for growth, how do you uncover that?

Alex: It’s really interesting because I think with Detour it was a very good example of we had some hypothesis going into that transaction, that acquisition. The hypothesis was that … I’ll give you a great example. Detour has always been known as being a top specialty roaster across Canada. It’s used in the best restaurants in Canada, so Raymonds in St. John’s. It’s used in the best offices in Canada, so a good example is Shopify is one of our office coffee customers. It’s used in the top cafes across Canada, so HotBlack in Toronto, or Tunnel Espresso in Montreal, or Pavé in Vancouver. Really what that means to me is that there are aficionados and there are connoisseurs who absolutely love and are fans of the product.

Looking at the bag that things were packaged in, looking at the supply chain that existed before we even packaged it, I saw that there was an incredible amount of opportunity to innovate on design and be able to really allow the image of what this product was to be able to portray the quality that’s inside the bag. And then two is, the supply chain of green coffee in Canada is really hard and really challenging. Knowing that there was the opportunity to innovate on the business model to create a more compelling proposition for our retail customers and our wholesale customers, those were the two areas that going into the transaction we thought would be really fantastic areas of opportunities. I think it’s a little bit of luck and a little bit of smarts that both have proven to be somewhat true.

Felix: Can you talk about how long or what the process is like or was like to acquire a brand?

Alex: I always think about it in three different phases. I guess the important thing to know is from my previous life I’ve actually been through two previous acquisitions. Two of the companies that I’ve both worked with and worked on had been acquired previously, and so I had a lot of lessons learned going into this and knowing how to buy an organization effectively. I’ll divide into three territories. The first territory, the pre-acquisition, is really let’s get an understanding of the business itself, the key people who are involved, the financial performance. And really, if there’s going to be an owner that is going to be stepping out, how we orchestrate that in a way to make sure that there are no major gaps that emerge or that the thing that we’re buying isn’t in one person’s hand, in one person’s head, and being able to make sure that there is some redundancy and risk that we can mitigate as a result of that. That took about three to six months before we actually made the decision to close the deal.

There’s an interim period when you close the deal and it’s been announced and all of those sorts of things, and this was from January really up until March of last year. To be honest, in that entire period, I would say that I made no changes, I made no real material decisions, and that the emphasis of that phase was really learning, learning how things worked, learning about the strengths of the people within that organization, learning the ecosystem that exists around that organization, whether that be suppliers or whether that be customers, or whether that be massive organizations that we might need to rely on. Really it’s that learning period where we can start to understand are the hypothesis that we thought going into this transaction, are they true? How true are they? How do we need to rethink these so that we can do it better? And what are the things that have started to emerge that we haven’t even been thinking about prior to the transactions?

We went through that, and then finally what we started to do in April is really make some small, incremental changes. I always think that small, incremental changes lead to very big changes in the long term, but it’s about making those small tweaks that round out the edges and happen over a longer period of time where you can start to find success. In April, we completely redesigned the website. In May, we completely redesigned the packaging. In June, we really revamped what our offering looked like to customers and those sorts of things. And then from then on, it really became about having all of these investments and foundational pieces in place, and now how do we start to supercharge this by putting some dollars and sense into marketing, into really understanding how to drive traffic and traction, both on the retail and the wholesale side.

Felix: Are there things that you think that you can never really, truly learn about a business from the outside until post-acquisition, until you’re actually in it?

Alex: Oh yeah, absolutely. I think the biggest wildcard that you go into any transaction with is understanding how you’re going to work with the people in that organization. It’s one thing to be having conversations that are largely hypothetical, but it’s another thing to have conversations that are really getting into it and trying to make decisions and trying to be collaborative. I always start a new idea with “Tell me why this is a bad idea,” because I have a fear of pushing people to make a decision that might not be the right decision and being able to make that decision by consensus, and I think that’s a huge piece of how we can start to make those changes. But I think that’s the biggest wildcard going in is just how you’re going to work with people in that organization.

Felix: Got it. Can you talk a little bit about, not necessarily the finances, but how do you structure a purchase like this? I think it appears to a lot of people that might be listening that it’s out of reach, this acquiring a brand, especially one that’s been around for so long. What needs to be put in place for someone to be in a position or a company to be in a position to acquire another brand?

Alex: Yeah, so it’s one of those things where it obviously takes dollars and sense to be able to execute on a transaction like that. There are two very different types of transactions. The one is that you’re buying the business, so you’re buying that corporation or that person’s selling the entire corporation to you. The other is when you’re buying the assets of the business. In an example of if you’re buying a factory, you can buy the property, you can buy the plant, you can buy the equipment. That’s the first big decision to be made, but in any scenario, the way that you go down is it can be funded with either equity or debt. What that basically means is equity is essentially dollars that are in your pocket that you’re going to deploy against that transaction. If it costs $50,000 to buy that business, you’re going to have to pony up $50,000 and pay that person for that business.

Debt is a little bit the opposite of that. It’s going to a bank and putting together a bit of a case to say, “I’m interested in buying this business. It has a strong, stable, reliable cash flows. I would like to take out a loan in order to do so.” Generally, this is one of those types of things where if the business does have strong, stable cash flows over multiple different years, the banks will actually contribute a significant portion of the dollars to be able to do that. What that basically means is that you can put in a smaller amount of equity and get a greater amount of debt and pay that debt down over multiple years. A great example of what that could look like is that same business that costs $50,000, you can pony up $50,000 and pay for it all in equity, or if you wanted to do 80% of that deal with debt, there are different banks, so all the big banks as well as BDC. They might be willing to contribute 80% towards that $50,000 so that you only have to cough up 10,000 of your own dollars in order to do that deal.

Felix: Got it. So the business has to look strong from the bank’s perspective with the track record? What about the track record of the buyer? How do you need to appear to get the buy-in from the banks?

Alex: There’s a few different things. I think the one is being able to prove that if you’re gonna do this deal, you’ve got the track record and business acumen in order to not screw the business up after you’ve bought it. That’s really the biggest risk in any sort of transaction, is that you’ve taken a good business and turned it into an okay business or … In the worst-case scenario a bad or non-existent business. So that’s really the biggest piece of the puzzle there of what it takes to kind of have them green light it.

It helps if you’ve got a few assets so that the bank can look at it and know that there’s some dollars and cents that can back this transaction up. But really what it comes down to is how much money you’d be willing to put in of that 100% that needs to be ponied up. Or really the track record of success in doing things like this before.

Felix: You mentioned that you guys made changes to the brand over time, starting with the website and then moved on to the packaging and then moved on to the product offering. Why did you choose to approach in making the changes in that order?

Alex: Really what that allowed us to do was it allowed us to test our hypotheses in ways that were progressively more expensive. So by us doing some light web redesign and relaunching and seeing the traction and what people thought is kind of being some initial design hypotheses. It allowed us to really test where we were wrong, to be honest, and we had a lot of lessons learned from that. And I’d rather have that lessons learned with a little bit of design time and a little bit of design effort before we actually go and …

To give you a sense of what the purchase order would look like for buying new packaging is when we buy bags for our coffee, we need to buy them 100,000 bags at a time. So I’d much rather make mistakes with web design that we can easily edit, change, and shift and lift around than make those changes and have to live with 100,000 bags for a certain period of time.

Felix: That makes a lot of sense. What were some of the learning steps that you guys discovered during the process as you were going through these different iterations?

Alex: To give you a sense of what the previous website was, is it was … dated. It was on the Shopify platform, but the design and the navigability of it was quite challenging. It was a sidebar menu and by the time that you finally got to a subscription that you might be interested in, you’re nearly five to six clicks in before you’ve even started to get to check out. So one of the changes that we started to make was, “How do we eliminate that as much as possible and in line with kind of E-commerce best practices?”

One of the learnings that we had was I think that we took it a little bit too far, where we started to get a lot of inbound inquiries on, “I need more information. I want to learn more about the product. I want to be more engaged in this buying experience, and I need help to be able to come to the right decision of what coffee I might want.” What we actually had to do is we added in a little bit of more content and more information and more things that need to get digested along that shopping journey that we weren’t considering previously.

Felix: Got it. So that’s a great point. I’ve never heard someone say it like this before, but you can make the mistake of simplifying the check out process … that check out journey … too much, where the customer doesn’t have enough information to be confident to make that purchase. So basically what you see now … What is the ideal kind of flow … What is the ideal engagement from the time that a customer lands on a site … How do you see them kind of traveling all the way to a purchase? Like what’s the ideal, essentially I guess, funnel that you see them going down?

Alex: Yeah, so really when they come to our website, we have … The majority of our visitors now are actually returning people who are coming to buy something new, buy something exciting and get into it. So that’s kind of the first thing that I would divide it into, is, “Are you new or are you returning?” If you’re a returning customer, then what I want you to see first and foremost is what our new hot releases are that you should get into. And that’s something that I think if you’re someone who’s experienced our product you’ll be a fan of it because the product itself is really amazing.

But are you into coffee with a taste more chocolatey? Are you into things that taste more fruity and vibrant? Are you someone who’s gonna buy at the premium end of our offering, or are you gonna buy on the entry-level end of our offering? With those returning customers, what I want them to know is I want them to know kind of what those things are that are really exciting that we’ve just come out with and have them be able to click through to that product page almost immediately.

Felix: How do segment them? How do you know if a returning customer or a new customer?

Alex: We segment them in our analytics, actually, in the background. So Google Analytics is one of the tools that we use, and I guess I say that we design the website and this is the experience that they have, but I think what we do is we actually test to … We go into Analytics and we create two different groups that we’re looking at and be able to understand what are the patterns that are going through in retrospect to be able to understand, “Is this successful, or is this not successful?”

Felix: Got it. So they come to the site and either if they’re returning or new they have the same first experience, but you give them the kind of two doorways to go down if they’re returning or new?

Alex: Yeah, and it’s really interesting because for the new customers that are actually visiting the website for the first time, often the way that they discover us is through an organic Google search, whether looking up espresso roast versus filter roast coffee. Or they wanna understand the flavors of coffee. Or they wanna understand specialty coffee just in general. So we get a very, very large amount of initial inbound traffic through those sorts of links. So content marketing for us is a huge piece of the puzzle. And what those people generally click on, too, if they find the article interesting, is they wanna know, “What’s this whole thing all about?”

We actually spent a very significant amount of time redesigning the, “Our Story” part of page and creating a number of calls to action so that people go from, “This is really interesting information that kind of filled what I was looking for,” to, “This is a company that I’m really interested in and that I would actually consider buying from because I love coffee.” And that’s really what our content is centered around, is it’s centered around things that would be interesting to people who love coffee.

Felix: Got it. So most of the people that land on the home page at the very start, they probably come in just to detourcoffee.com like directly because they’re a returning customer. They already know the brand. They already know the website. But the new customers, they’re coming from a Google search, that because of your content marketing, your [inaudible] … They’re landing on some kind of content page and they want to learn more about what is Detour Coffee, so they go over to the “Our Story,” “About Us” page, essentially, and learn more about the company, the backstory … And then from there, that’s when they typically will go down to browse the catalog?

Alex: Exactly. That’s exactly the flow. And I would say the people who come to detourcoffee.com … Our conversion rate on those folks is quite huge. People come to our website to buy our coffee again because it’s amazing. The people who find us through organic search traffic and they’re looking for specialty coffee roasters in Ontario or espresso roast coffee or different things like that. They tend to browse around and poke around to a few different pages. Our conversion rate is obviously lower, but we’re bringing in such a huge amount of traffic through those different areas and being able to capture leads through email and through different marketing efforts so that we can build an audience that’s really relevant of coffee professionals and coffee hobbyists. Those are really the most important ingredients for us.

Felix: Got it. So what is the content marketing strategy? How do you know what kind of content you should be writing to attract these new prospective customers?

Alex: One of the advantages that Detour has is that we actually have some retail locations where we have cafes and we interact with customers on a daily basis. And what that means is …. And I put this into the bucket of consumer research … But what this means is that we get asked the same questions over and over and over. We get asked, “What should my grind size be?” We get asked, “How important is a coffee grinder?” We get asked, “What’s the difference between filter roast and espresso roast?” And so just by listening to people and understanding what their questions are … I know it sounds really simple, but it’s somewhat challenging to do and being able to convert that into something that’s interesting. That is our entire kind of content strategy, is listen to what people want to know and help them along the way.

Felix: Got it. So you know what kind of questions they have. The second step is even more challenging, which is to convert it into something interesting. What does that mean?

Alex: What that means is … Having a coffee company means that I work … And I mean this in the best way … with a lot of coffee nerds. What that means is if someone says, “I really like strong coffee,” that means something very different to a coffee nerd than it does to a consumer. And so how you actually express what strong coffee is versus what weak coffee is versus what light roast is versus what dark roast is … There’s a way to do that that would resonate with a coffee hobbyist. There’s a way to do that that would resonate with a professional barista. And there’s ways to do that that would resonate with coffee roasting companies. And it’s really being able to bridge the gap between all three levels of that information, where you’re designing content that’s approachable as well as for the hobbyist and for the professional is really credentialized and you can back it up and you can dive into deeper layers of information. That’s really the challenge there, is how do you actually create content that’s digestible by the target audience?

Felix: And is the content all done in-house or … How do you scale up the content that you guys are creating?

Alex: Right now all the content that we create is done in-house. And what we do is if there’s an idea or article that we wanna publish … So a great example would be one of the articles that I want to do next year is actually an entire series on how to open up a café. And what we’re gonna do, we’re gonna do it in a five-part series that talks about the financials, that talks about the investments that need to take place, how people can think about staffing and how people can think about design. And what we wanna do is, we’re actually gonna take different folks across the Detour groups and be able to really have them express individually what each of these different topics means to them.

Emma, who runs our Green Vine program … We buy a lot of green coffee. She’s gonna be able to talk about the quality of coffee in a way that no one else can versus Ryan … who runs all of our sales and marketing … is gonna be able to talk about the experience of coffee in ways that no one else can. By leveraging the expertise of different people within the organization, that’s how we’re gonna develop the copy for it. And then we’ve got a small marketing team that we can leverage to really make sure that we’ve got great photography, that we’ve got kind of great imagery to be able to back up and put some infographics around what we’re doing. And that’s the sort of thing we're looking at a webpage full of words is a hard webpage to look at. So being able to design content that engages at very different levels and types of information is really important to us.

Felix: Mm-hmm (affirmative). So as part of the content and SUS strategy, people come and discover the brand for the first time and read about it. But you don’t want them to just drop off. You are also collecting their emails to get them into your email marketing system. What is that like? How do you entice them, or how do you encourage them to give you their email address?

Alex: Yeah, so for email we actually use Mail Chimp as our email distribution and campaign app. And what we actually have on our site, is if you go and you go to kind of one of those blog pages or different things like that, what comes up is a really quick popup that says, “Hey, would you like to know more? Fill in here and receive a 10% discount.” And I think that’s actually proven to be one of the most popular ways to collect emails and what it actually does in a bit of a not so subtle way is actually introduce the concept that not only do we talk about coffee, but we sell coffee. It’s one of those tricks where I think a lot of the people who are coming and they’re looking at the espresso roast versus filter roast …

I keep using that example ’cause that’s the one that drives the most traffic. But those are people who may or may not even be looking to buy coffee in the moment. But they’ll want to be able to buy coffee later on, and this provides a mechanism for them to be able to do that. And so we’re just subtly introducing the fact that we actually do happen to sell coffee as well as talk intelligently about it.

Felix: Got it. So once you do get their emails, what are you sending them? Like what’s the frequency that you’re sending emails? Like, give us an idea of how you do the email marketing.

Alex: I would love to do more email marketing. For us, it’s just one of those things that is one of the largest drivers of new purchases and new revenue on the website, which is really important because once people try our product, they’re absolutely hooked. What we do, is we try to send out emails on a bi-weekly basis on something that’s incredibly topical or kind of funny and quirky or different things like that. And the tone that we try to take in that is being somewhat casual towards things in general, but being professionals when it comes to coffee.

The latest campaign that we actually sent out last week was actually around Daylight’s Savings Time and a reminder to do that and, “By the way, your body might take a few days to adjust, so how ’bout some coffee to help mitigate that?” So just finding somewhat topical and relevant ways to talk about coffee is really what our outbound email marketing is about.

Felix: And do you usually try to get some kind of link back to the store or back to a particular product with each email?

Alex: Exactly. So each email will contain at least two product references of new and exciting things that we’re really happy and proud of, and then all emails will actually create a link to a subscription mailing page. And that’s just one of those things that we always like to have is subscriptions obviously drive more recurring revenue than one-time purchases. So we want to make sure that at any point in time people always know that subscriptions are our core offering, whether it is some additional value that we can offer.

Felix: Got it. So let’s jump back to the kind of steps that you went through. So the website redesign was one thing. We talked about that. And I think you also mentioned that you wanted to redesign so it served both B to C and B to B customers. Can you talk about that? Like how do you create a website that serves both of these customer types?

Alex: Yeah, absolutely. This is one of the challenging ones is … What we wanted our website to be able to do was … I mean, our wholesale offering is fundamentally different from our retail offering. For cafes that we work with, there’s a lot more complexity in service and what that means is that we’ve got sales account managers all across the country that are really focused on being able to make sure that cafes are supported throughout that. So what we wanted our wholesale pages to do was to be able to connect people to the right person within our organization as quickly as possible. It’s not one of those things where you can go online and buy … for reference … an espresso machine, as an example … is a commercial espresso machine could be north of a $30,000 investment. And that’s the type of thing where we wanna be sure that we connect them to the right person. What the wholesale section of our website is really about is it’s about-

Alex: Wholesale section of our website is really about is it’s about really, in a snapshot, making people certain that we have a really incredible product and a really compelling wholesale offering for them, and then be able to connect them to the right person, who’s going to be able to help them. And so, that was really what wasn’t there before is wholesale was somewhat varied. If people found the address or information for us it was by luck more than intention, and so we really streamlined the contact forms and the e-mail outreach that those people are able to do to be able to reach us more effectively versus the retail side of our website is much more experiential and more content heavy.

Felix: Got it.

So, B to B has become almost more practical in how do we get the answers, how do we get them talking to right person immediately, and the B to C offering is more about experiencing the brand, learning about the brand, and kind of answering that universe.

So, once you guys tackled the website redesign, you said you moved on to packaging. Tell us about that. What kind of changes did you make here?

Alex: Yeah. So, the previous iteration of Detour’s packaging was actually craft paper packaging with tie down, the tin tie downs, and with a label on the front, and a label on the back. And so, there were a few different things that we wanted to look at when it came to the packaging redesign. One is, craft paper and tin ties don’t necessarily communicate to the customer that this is a premium product, and especially when we put them into a shipping box. They might come with wrinkles, or they might come with the kind of different marks that make it obvious that they have been shipped, and that they have gone through either Canada Post or USPS in a way that might not be as gentle as we would have liked.

And so, the other thing about that type of packaging is if you think about the process of actually applying two different labels, trying something down it’s actually a lot of labor that goes into packaging, and when we’re putting out hundreds of thousands of bags on an annual basis it becomes a huge, huge, huge driver of inefficiency. And so, that was really what defined that brief was let’s move away from the things that don’t create an elevated product experience, and create inefficiencies within it, but let’s really double down on the things that people love.

And the things that people really loved about the previous version of the packaging was the beautiful artwork, and the flags that existed on the front, the product information and the level of detail that we provide on back. So, how can we come up with a new packaging solution that kind of brings out all those things that people love, and really improves on the things that we can be doing better on.

Felix: Did you have to go through multiple iterations of this? Or how do you … ’Cause like you mentioned you buy a hundred thousand at a time like if you are to purchase packaging I’m assuming you’ll want to, obviously, get that right. But then how do you iterate on it when it comes to basically producing a physical product, in this case, the packaging?

Alex: Yeah. So, I couldn’t even tell you how many iterations we went through. It must have been hundreds when all was said and done, and really there were two things that we were designing in parallel. The one was: What is the bag that our coffee is going to be packaged in? And then two is: What’s the label that’s going to go on the bag? And for the bag, and what that was, what we’re trying to understand was: All right, how do we design something where the brand comes out, but it’s not an obvious kind of Nike swoosh on the front of a T-shirt and hits you right in the face? It’s how do we make sure that people know that it’s Detour, and use the flags as kind of that iconic piece of what the brand is, and how do we start to really emphasize the product information that exists on the front?

And that was kind of the biggest change, and the challenge for the brief ’cause it’s so much information to put on one kind of side of the packaging, and how do we think about color, and how do we think about how we differentiate between our blends and our single origins in a way that makes sense. And so, we actually brought on a freelance designer who specializes in packaging to be able to kind of help us through that process and be able to make sure that what we were trying to achieve with the brand, and the materials, and the design was really coming out effectively.

And so, we went through so many different iterations to kind of come out with the version that we have today.

Felix: When you’re going through these iterations is it just like something that you guys look at internally to make a call on what needs to be changed, or are there ways to test this with your customers?

Alex: That’s a great question, and I think it’s one of those things that a lot of people don’t do enough of is bring their prototypes out into the world to be able to understand what works and what doesn’t. And so, that was one of those things where, if you think about my learning as working in an innovation consulting for a decade, I worked with a number of different research disciplines that were really focused on talking to people and understanding the problem that we’re trying to solve. And so, what we did was once we had a version that we felt really good about we actually introduced it first to a few different key wholesale customers to be able to understand what was good, what was bad, and what was ugly about it, and, again, I always start with a question of like: What’s bad? So, that was the first piece of the puzzle. We iterated on it from there.

And then what we started to do was there were a number of kind of, I would say, passionate grand advocates for Detour that exist more on the retail side of the equation, and what we did with them was we actually we showed them the product, and we showed them some digital mocks, and some proofs of what it would look like to be able to get the feedback from them on what that was.

And so, I’d say there were a huge amount of learnings along how we’re thinking about color, how we’re thinking about information and each of those different pieces of the puzzle that we were able to incorporate that we wouldn’t have been able to come up on our own.

And, to be honest, we’re not done yet. Now that these exist in the real world we now have learnings that will make even our next iteration of packaging more effective.

Felix: Got it.

So, now moving on to the last piece that you guys changed, or you guys improved was around the offering. What was the previous offering, and how would you describe it today?

Alex: Yeah. So, the previous offering was … And I’d love to send you some screenshots of what the previous website was, but I think the previous offering was really focused on how do we simplify coffee offerings, so here’s our blends, here’s our single origins, and a very limited number of subscription offerings. So, would you like to subscribe to our blend, or would you like to subscribe to our single origins? And that was kind of it. So, the menu was a little bit constrained, and if you were an adventurous coffee drinker, or you were a novice and looking to just understand what’s good and what’s right there wasn’t really an opportunity to start to discover that and feel comfortable with the decision.

And so, what we actually started to do was design our website. So, it’s actually kind of interesting, ’cause the products that we’re shipping it’s a menu of coffee that rotates seasonally around the year, but the way that we’re packaging that and merchandising that is very different. Where we’re differentiating between things that we’re offering for espresso, we’re very clearly differentiating between what our single origin coffees are, our subscription offerings have more than doubled. So, if you want to subscribe to specific products and specific services that’s something you can now do that wasn’t previously available.

And so, we’ve taken a lot of the constraints of what we’re offering away, and the thing that we’ve added is a level of wayfinding and details to be able to help people make the right decision.

Felix: And the subscription service was that always there before you guys purchased the brand?

Alex: So, it was there, but it was one of those things that was very hard to discover and hard to find. So, previously subscriptions drove a very small amount of revenue and traffic, and now I would say they account for, in any given month, 60 to 70 percent of digital sales.

Felix: Wow. That’s amazing.

Now, how do you manage a subscription service like that, especially, of which making up over half of the sales of the online business? How do you make sure that you guys have essentially a tight hold on making sure everything goes out on time, you guys got the right designs on the subscription … Or not designs. But how you make sure that you have it delivered?

Alex: Yeah. So, this is one of those things where one of the advantages of having a larger … So, if you think about kind of anything that we sell digitally represents 20% of our overall business, we actually have a huge amount of inventory management and production management systems that exist in the background to be able to support that amount of volume.

And so, what we actually do is our Shopify, which is kind of call it the front end of the experience for our customers. Shopify actually talks to our inventory management system, which is about picking and packing the right orders, and the inventory management system that we use is called DEAR. And then DEAR actually talks to our shipping software, and we ship everything out through FedEx, and they’ve been great partners. And what we’re able to do with them is they’ve got software that if there is an exception, or if there is delay, or if somethings not getting there it’s flagged immediately so that our customer service team can start to follow up, and make sure that we have the opportunity to proactively turn a negative experience into a positive one.

I would say that the bigger challenge for us, or opportunity for us, next year is what I would really like to do is start to enhance the experience that our subscribers are having because they’re some of the most important customers.

So, how do we make sure that we’re continuously providing really amazing education when they’re unboxing it? And so, right now we’re redesigning the unboxing experience so that people can get even more excited about what’s coming.

I would love to provide easier and more flexible options to be able to change and update subscriptions. And one of the biggest challenges that we have from a retention perspective is that people often overestimate the amount of coffee that they’re drinking, and so they tend to … If we have drop off, it tends to exist at the third shipment that we send out, so being able to proactively mitigate that, and send an e-mail, or get a phone call out there that starts to say, “Hey. Do you have too much coffee? Do we want to adjust it for you just to make sure that your cupboard’s not full?” Those are the types of things that we’d like to implement over the next three to six months to be able to not only increase kind of the value of our subscription but increase the retention across the board.

Felix: Got it.

Now, what about the promotion side. How do you promote a subscription service specifically differently than if you were selling just the products one by one?

Alex: So, it’s subtly promoted in different areas of our website. So, we have a top bar that kind of makes it very clear that every subscription product ships for free, which people absolutely love. So, that’s one side of the angle, but I think the way that we talk about it throughout the website where it’s less about browsing a catalog, and more about enrolling in a service. And really it’s hard to kind of create a fundamentally different experience when people are shopping online, so what we try to do is we try to create a very enhanced experience when people open up that box, and when it gets to them. And so, that’s kind of our moment of truth is being able to have people open that box, open it up and be able to see something that kind of gives it a bit of a wow, and that they’re having something that’s truly special.

Felix: Got it.

What about applications? Are there any apps that you rely on to run particularly the online storefront?

Alex: Yeah. So, I’d say the apps that we rely on the most … The one that I’d say we mostly rely on is actually Recharge, which is our subscription engine, and they’ve been great at helping and supporting us through the migration from the old version of the website to the new version of the website, ’cause there are some pretty significant changes that we had to make. So, that was probably the first big one that we had to integrate.

The other thing that we’ve been using for a period of time on the design and experience side is actually Shogun, which allows us to create much more beautiful pages that aren’t as constrained by the limitations of the templates, and don’t require us to know and understand CSS in order to implement them.

And then the other piece of the puzzle is really how we think about the marketing ecosystem that exists around our website, and how we’re doing retargeting. And recently we’ve gotten into doing a little bit of SCO as well as targeted marketing on Facebook.

Felix: Got it.

So, we spent most of the time talking about Detour Coffee, but you and your team are launching other food eCommerce brands. Can you tell us a little bit more about them?

Alex: Yeah. Totally. And I’d say a lot of these brands are going to be developed on the backs of some of the learnings that we’ve had with Detour Coffee. And so, we’re actually in the process of launching two businesses that are going to have an online presence. The first is it’s called Brainbow, and I don’t know if you’ve ever heard of adaptogenic mushrooms, but essentially imagine mushrooms that provide a lot of the same or similar benefits to caffeine in terms of focus, wakefulness, and mental acuity. But essentially it’s a single serve powder that people can mix into any hot beverage that provides those same benefits without the crash of caffeine or any sort of energy drink. And so, we’re going to be launching that actually next month. And so, this is Brainbow.com.

And then the other one is that we have a bread business called Dear Grain, DearGrain.com, and we’re going to be launching. I think it’s going to be Canada’s first bread subscription service where we do really beautiful sourdough bread, and what we’re going to start to do is start to develop an eCommerce subscription program that’s targeted specifically at people where we can do overnight fulfillment. So, imagine having a fresh loaf arrive on a weekly, bi-weekly, or monthly basis.

Felix: That’s awesome.

So, and the story we’ve been talking about the whole time is DetourCoffee.com. Thank you so much for your time Alex.

Alex: Thanks so much Felix. This has been fun.

Felix: Thanks for tuning into another episode of Shopify Masters the eCommerce podcast for ambitious entrepreneurs powered by Shopify.

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