Tuesday, March 15, 2011/
Like most aspiring entrepreneurs, Emma Welsh and Tom Griffith had lofty ambitions when they ditched their corporate careers to launch their start-up. However, as is often the case, they were soon rudely awoken to the harsh realities of building a business from scratch.
As Griffith admits, several early assumptions about the duo’s smoothie brand Emma and Tom’s rapidly flew out of the window. A first year sales projection of $3 million was one of the first targets to be crossed out in red ink.
“We were wrong by about triple, I’d say,” Griffith concedes. “You make every assumption and future forecast and invariably it’s wrong. It takes three times as long and twice as much money as you think it will.”
“We came from reasonably aware backgrounds. We were and are realists. And yet it was a much bigger deal than we thought it would be. I never thought it would be as difficult as it has been. We’ve had to duck and weave through the years, but you think about why you’ve done it and it keeps you going.”
Completing the business journey
Griffith says he’s a big believer in the maxim of the last kilometre being the hardest in the entire journey of getting a product from idea stage into customers’ hands.
“We wanted square bottles for Emma and Tom’s, much like the premium juices in the US,” he explains. “We met someone who believed in us and the business to do the bottling, which probably saved us around $30,000.”
“(But) one month from launch, the bottler said that they couldn’t put the label on the bottle, because of its shape. I drove up there and said ‘You are going to do this. This isn’t even funny.’”
“We had to have a contract with the bottler and then take them to another labeller for a whole year until the bottler got the right equipment to be able to put labels onto square bottles. That cost us $110,000 in just one year, even with a seven cent a bottle discount.”
Griffith says: “It really is all about distribution and delivery. Getting the product from the warehouse to the shelf is very hard. It’s a very competitive sector. We thought, once you’re into a retailer, you’re in, but you can get delisted because they consider you too dear and you go broke.”
Griffith says that price pressures were particularly tough during Emma and Tom’s first year. Margins were slim.
A price point of $3.50 a bottle, around a dollar more than the average competitor, was necessary due to the premium nature of the product and the cost of ingredients: “We use the whole of a mango, for example, in the product, which is very expensive – it’s not like an energy drink,” says Griffith.
The business may have had to endure initial pain but Welsh and Griffith’s vision to introduce a new kind of juice drink to Australians is now taking shape. Founded in 2004, Emma and Tom’s is now an international brand with sales anticipated to hit $5 million this year, employing 20 staff.
The business’ rise is at odds with the backgrounds of Welsh and Griffiths. Although undeniably successful in their careers – Welsh held senior commercial and marketing roles at Uncle Ben’s and NAB, and Griffith was an investment banker and chartered accountant who was a UN Security Council consultant for Iraq’s reparations from the first Gulf War – neither had started up their own business before.
“We definitely weren’t natural entrepreneurs,” says Griffith. “I was 42 years old and naïve, rather than 22 years old and naïve.”
The idea for Emma and Tom’s came to Griffith during a skiing holiday in Canada, where he was confronted by a range of premium juices that weren’t evident in Australia at the time.
Having just received a pay-out from the UK-based firm he was working at, Griffith decided that he wanted to take a crack at the idea in Australia. He turned to Welsh, a long-term wannabe entrepreneur who Griffith had met aged 12 at a swimming lesson.
“I knew I had a solid friendship with Emma, so I told her about the idea, she thought about it for five days and then said yes,” he recalls. “We hired a truck and did it. As for the name, we decided to use our weakness, the fact there were just two of us, as a strength.”
So, what’s the secret to a successful business partnership? “We’ve always got on amicably,” says Griffith. “We have a good understanding of what we do. Very broadly speaking, Emma makes it and I sell it.”
“We’ve barely had a gruff word in seven years. It’s about respect and communication. Emma’s husband works at the business too – we’ve tried to create a company that is fun to work at.”