Wednesday 27th Jan 2021
In our #asktheindustry series, we’ll be speaking candidly to UK businesses about the unique challenges of operating in their industry sector. From household names operating on the international stage to start-ups planning to get there, we'll be going behind the scenes with some truly unique UK businesses.
In this first edition we'll be shining a light on the UK food and drink industry. We cover topics such as how to get your product out there, manufacturing at scale, distribution, financing growth, recovering from a recession, building a brand and staying motivated.
How have these businesses built their brands and successfully scaled? What challenges have they faced along the way? What lessons have they learned? What advice do they have for anyone on a similar journey? For all this and more, join the conversation at #asktheindustry.
In this instalment we speak to John Steel, CEO of Cafédirect, one of the world’s most well-known coffee brands.
Tell us a little more about yourself and the company
Hi I’m John Steel and I'm the CEO of Cafédirect. I joined in 2012. Cafédirect is a founder of the Fairtrade movement and very proud of its organic coffees and very proud to be the first coffee company in the UK to become a B Corp and also to be a social enterprise.
Being a B Corp means a great deal for us. It's being part of an organization of businesses that are trying to move forward and change the role of business. So it is about dynamically improving the role of business in society. And what it also does is it helps you see what's good and bad about your organisation. And then you're more likely to do something about it.
What was the motivation to start the business?
Cafédirect was started in 1991, and it was started by four charities and three farming organizations who came together because of a collapse in the price of coffee, and these charities and these farmers started direct trade to try and get a fair price for farmers to make sure they had a sustainable living.
Where can we find your products?
Cafédirect products are available all over the world. In the UK, you can buy them in Co-op, Waitrose, Sainsbury's, Tesco's, Ocado... most retailers really.
We also sell online via our website where you can get a coffee subscription alongside some of our more premium ranges such as London Fields.
What’s unique about your brand?
What really makes Cafédirect unique is its business model, the principles upon which it was founded, and the mission of the business. So our mission is to improve the livelihoods of smallholder farmers. And our business model is set out to re-invest profitability with those farmers and help change their lives and the environments they live in.
So really it's a business that's not just trying to make money, it's trying to change lives and change the way business functions. And that's what really makes the business different. And that's what makes us so proud of the amazing coffees, teas and cocoas that we provide.
What has been your proudest moment to date?
Working for a business like Cafédirect that has got a clear mission means that you've got loads of moments that you're really proud of and things that are done by the business and the people who work for it.
I think probably my proudest moment was seeing the way everybody in the business reacted to a period of crisis in 2016 and all coming together to help the business to flourish and be successful after that.
Another would be Cafédirect winning the social enterprise of the year award in 2018. We've been around for 28 years and to have your peer group of businesses recognise you for all you are achieving was just a really touching moment.
How has the business been funded?
When I think about Cafédirect over the years and how it has been financed, hopefully it will provide some insight for entrepreneurs starting out. I mean, Cafédirect was one of the first businesses to do crowdfunding. So in 2004, we did an open offer, it was pre Crowdcube and all that, all of those kinds of companies didn't really exist. So the company literally wrote the phone number on the pack. I had it printed on the pack, and then every time somebody was buying a jar of coffee or a bag of coffee, they could ring a phone number and buy shares. That's the first way we financed the business, effectively by getting all of the believers in the business model to back it. And that was hugely successful.
I think subsequently we've been very careful to make sure that we finance growth in a way that is respectful of the different shareholders. So we've used a range of finance, that's included invoice finance, discounting, and bank loans, but I think it's always worth getting the balance and clearly not overstretching yourself from a debt perspective, but also I think making sure you've got the resources in place because raising finance takes a lot of time and distracts you from operating a business and delighting your customers. It’s important to make sure that you've got the right financial tools in place, but also being clear that you've got enough.
What has been the biggest challenge to date?
The biggest challenge has been taking a business that's phenomenally mission-driven and incredibly ethical, maintaining that heart and that DNA, but making it more appealing and commercially competitive, because getting that balance right is a real challenge because you mustn't lose the DNA, you mustn't lose the meaning, but you do need to be able to compete.
The biggest challenge in the business was really getting it to recover after many years of decline. And in 2016 the business was in a crisis. We buy our coffees directly from the growers, so we carry a lot of stock. And if your sales start to decline, you can end up with a lot of stock on your balance sheet, but not much cash. And we ended up in a really difficult cash flow crisis in 2016. And I think navigating that and bringing everybody through that and recapitalising and restructuring the business was an incredibly difficult challenge, but one that we got through and has meant the business has flourished ever since.
And looking back, looking back on when I started in 2012, I wish I'd known how fast and hard I could push change while still maintaining the ethical heart of the business. I think I was very sensitive to protecting all of the business stands for, and that probably slowed me down. I think I could have been more radical and rapid in the changes, I was very respectful about all the amazing things the business does and got myself pulled into that ethical heart and that amazing business model. And I think I found a way now where I feel comfortable that that's enshrined in the business and I can be much more progressive. I think looking back it would have been great to see that earlier.
What one piece of advice would you give to anyone starting out in this space today?
I think it's difficult because I guess there's probably two or three things they'll need to think about. I think the first thing is making sure that you do what you believe in and translate that into a really powerful proposition that really delivers and delights consumers. I think you need to get that right first, but I think conversely, you don't want to agonize over that for years. You need to get out there and make it happen and live and breathe it.
So I think the first piece of advice is to get that proposition right. I think the second is to not hesitate and go out there with all your self-belief and be confident and get a response from the marketplace and learn from that.
Where have you found advice to guide you?
I think one of the most important things when you're starting out or developing a business and trying to grow rapidly is to not think you know it all. I think you need to find the right advice and support and that can come from many different sources.
I'm very lucky to have a strong board of non-executive directors and a very experienced chairman. So I can get a lot of advice and support and challenge from the non-exec team around me.
I think being open with your team can help you too. I don't think you should lock yourself away in some ivory tower. I think the way you choose to build your culture and engage with your team can really help. And I guess even at my age I would still ask my dad!
Want to feature?
To learn more about featuring in our #asktheindustry series, please get in touch with Hitachi Capital Business Finance via the link below.