A simple concept – a drinking straw that flavours the liquid as it passes through it – propelled Martin Chimes back into the hectic passion that a start-up business brings. He tells AMANDA GOME how he ended up with a global concern just one year later.
Martin Chimes was finished with business. He was in his early 50s and, having started and built businesses, including running big concerns like Corporate Express Australia, he wanted a rest.
Then two years and a half years ago he came across an invention shown to him by an ex-business colleague that activated the start-up passion all over again. It was a simple drinking straw packed with beads of flavour that dissolve to make instant flavoured milk.
From day one he could see the global potential of UniStraw and was determined to build a large business on the back of the humble straw. He says in its first full year of trading the company had revenue of $33 million, is now profitable and makes 50 million straws a month: chocolate is the favourite.
He tells Amanda Gome how he did it. Any questions? Email [email protected],au and Martin has promised to answer. One reader has already asked a question (see end).
Amanda Gome: How did you go about creating a large global business from inception?
Martin Chimes: There are seven key areas.
1. Build a global brand and vision.
2. Raise the money.
You first have to have the money, and we raised $25 million from our network. (High-profile investors, friends and Chimes own more than 50% of the company.) After you develop the plan the most crucial part is getting the right people.
I look for people that have been involved in successful global starts ups before. They are often in safe jobs. So I present to them the vision and the dream. I say: “You are smart. A person like you can get a job any day of the week, but you will never get an opportunity to be part of a global business in such a short period of time with an invention so simple.
They come on board and salary sacrifice and in return they get share options. I also tell them what do you have to lose? You are in a safe job, you will go back to a safe job. And it is compelling: they are attracted to the challenge, the kudos of being successful, and the money from the share options.
3. Do it better than anyone else.
Differentiate yourself and be the best in class.
4. Have great systems.
We built structures for a big business from the beginning. We must be the smallest company I know to have a SAP accounting system. We have an in-house lawyer and accountant. Our focus is making sure people have the best tools: the latest laptops and BlackBerrys. Communication is essential to our brand and you have to have the tools to do your job properly. We spend top dollar on tools, but everyone travels economy class and stays at budget hotels. We share rooms if we have to because the money you spend on business class buys a hell of a lot of tools.
5. Brand protection.
You have to be prepared to protect your brand and stand up for what you believe in. We have spent millions on registering patents and trademarks – and defending it. There have been two huge cases: in one our product was copied by Nestle and we sued them in the High Court and ended up settling amicably.
6. Build barriers to entry.
We have built in secret processes. We have split manufacturing across countries. We make the powdered formulas in Australia and then we ship them to two factories, one in China because it is very low cost to do the packaging there, and the other in the US which is very automated.
7. Develop an innovative distribution model.
Our model is a first. People pay upfront for the license and we get a loyalty from all the sales. They spend their marketing dollars promoting our brand. We were told no-one would subscribe to it, but they did. We have 40 partners in 100 countries that signed up to that licensing model.
We started recruiting in Germany. First we would go to the supermarkets and check out the products we liked and note down the distributors. We then approached them, but they get approached all the time. However when they went to trade shows they would see the flurry of activity around our stand and make the connection that they had seen us before.
We also had a great international licensing director who signed up 100 countries in 70 weeks.
What was your biggest mistake?
Brand positioning. We designed the milk favoured straw packaging to be appealing to children, but it looks too much like a lolly candy. But it is low in sugar, all natural flavours and no preservatives, and it encourages children to drink milk. But mothers think anything the kids love so much must be a treat, so we are looking at resdesigning the packaging so in the mother’s mind this is a healthy product, and that will increase the occasions. So there will be a breakfast occasion, and an after school occasion. That reposition will be costly.
We are aiming at $50 million revenue for 2007-08. We spend maybe 3%-4% of revenue on research and development and are developing new products including a straw to flavour water.
I have also made my money and been successful, so I want to develop a straw that helps kids with AIDs and other health problems. The straw could contain the micro nutrients so children get the necessary nutrition when their mouth is full of lesions and they cannot swallow. I am trying to tie up with the major aid agencies and get them interested. It would be a not-for-profit venture.
Read more about Martin Chimes
Lance Davidson asks: How did you go about raising the money and how did you determine how much you would need?