We can learn some great lessons about building brand loyalty by copying the biggest brands in the consumer sector..
Did the inspiration for KeepCup come from your cafe business?
Yes, absolutely. When we started Bluebag in 1998, we were one of the first people to bring in the paper cups, when most people were like “I am not going to drink out of a paper cup I prefer glass”. But 12 years later, people mostly prefer the paper and Hudsons Coffee and Starbucks and all those chains only offer a disposable cup.
But we have got a problem there. I have always been interested in sustainability issues, always interested in how our industry in particular contributes to waste – I think 80% of packaging is for food. And then we have the whole pre-packaged concept which in some ways compounds the problem.
We looked around to buy in a reusable mug to sell in the stores and they were all just ugly, they didn’t fit under the group heads of the coffee machine, you didn’t know how much coffee to put in, how much milk to portion – they were basically designed for the American style percolated coffee where you have it hot all day. We toyed with the idea of producing our own but were really put off by the manufacturing costs.
Then we ran a trial at Bluebag of the Decor red soup mugs, and 15% of people bought them and returned them for reuse, so 15-20% of our soup sold in Bluebag stores are using those red mugs and we knew there was a market there. And then we also realised that the market was also going to be global if there was one, and so from there we took a punt and engaged industrial designers.
You would think coffee cups sound pretty easy to design, but I guess there are a lot of different users, including the coffee drinker and the barista.
Our main experience was through the cafe side, Bluebag, and we know that someone would stroll in with their ceramic mug and the barrister would roll their eyes and carry on, so we knew it had to fit. In order for it to be accepted by the barista community, and we have got a bit of an artisan coffee community here in Australia, it had to be loved by the baristas, so it had to sit under the group heads, they had to be able to make it in the cup, because the whole art of latte is bringing that cream up with the milk and if you have to tip it from one vessel to another, you’ve destroyed it.
So those were some elements of the design. We didn’t want to have a screw top or any mechanism that would have meant you couldn’t drink the coffee with the lid off, so there were some real technical engineering problems to overcome there. So what we’ve ended up with is a single use mechanism that will now last thousands and thousands of years.
How long did that design process take?
A long time. We engaged the designers in October 2007 and we got the prototype in February 2009 and it leaked. In June we got the prototype right. So it took five months of really finetuning, testing – someone was popping on and off that lid a thousand times to try and work out how long it would last and where the leak was coming from. That was a tense time for everyone.
Manufacturing is not an easy thing to get into if you don’t have experience. How did you approach that?
We relied heavily on our industrial designers and they put forward a couple of proposed manufacturers and the only ones we went and saw were the ones that were local, they were in Lilydale [an outer Melbourne suburb]. We met them, we liked them and they were really integral to the success of the design in the end because it was partly the industrial designers and their engineers, but then also partly the finetuning by the engineers at the plastics factory in getting that right. They were thinking about it night and day too to get it to work. So I think if we’d opted for something offshore, it would have taken even longer and I don’t know we would have got the result we were happy with.
There is certainly an advantage of being able to drive out to Lilydale and see them rather than travelling to Southern China or talking on the phone.
We chose them because it’s a sustainable product and we wanted it locally manufactured. I had no idea it would take six months from prototype, just that tooling process took so long.
Obviously you have other business interests going on, so probably plenty to keep you busy, but were you ever reaching a point where you were not sure if it was the right thing to do?
We were reaching the point where we were saying, if this doesn’t work, how many costs do we sink, is this ever going to work? If one in a hundred is faulty or if it only lasts 100 uses, is that really an answer to the problem we’re trying to solve?
So June 2009 you launch and the last update I saw was 250,000 cups. Is there any advance on that at the moment?
Yes there is, it’s probably in excess of 300,000.
So we’d be talking somewhere around $2 million here?
There were a lot of costs we’ve got to get over in setting up this business. But obviously when you buy to resell you don’t pay the retail price and a lot of the support has come from corporate Australia.
So when we went to one of the manufacturers, he said if you can’t sell this product off a prototype, pack your bags and don’t bother. I mean, I don’t think he got the concept really. But we did that and we approached Energy Australia, we approached National Australia Bank, we approached ANZ and it was NAB who gave us our first order off the prototype.