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Raw and real lessons of a subscription business

Raw and real lessons of a subscription business

Cam Northway, Cocktail Porter and Sweet & Chilli

The founder of a new subscription service for cocktails has revealed the intricacies of launching a second business and some of the lessons learned about selling via subscription rather than traditional retailing.

Cam Northway (pictured) is known in hospitality circles as something of a drinks guru. His established business, Sweet & Chilli, offers a range of services for events, from bartenders and bars to training and education as well as coordinating branded events.

The business was founded in 2002 and operates in Australia out of its Sydney headquarters, with operations in London in the UK and Los Angeles in the US.

Yet Mr Northway identified a new gap in the market – tapping into the “foodie” culture that arisen on the back of celebrity chefs and TV shows such as MasterChef and My Kitchen Rules and extending that to the beverages market. And so he launched Cocktail Porter in October 2018, supplying cocktail kits to customers by way of a monthly subscription.

My Business sat down with Mr Northway to ask him more about the business, including why he decided to take subscriptions into a purely discretionary product mix, how he juggles launching a new business without sacrificing performance at the establishing operation, and some of the mistakes and hard-learned lessons he has faced along the way.

Where did the idea come from to take subscriptions to the cocktails market?

“It was probably born out of a few experiences that I’ve had:

1. Using subscriptions like Marley Spoon.
2. We do a lot of events [at Sweet & Chilli] and people just don’t understand how to make these cocktails at home.
3. When you go to a bottle shop, shopping for cocktails can be quite difficult… to find five or six different products.

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“So a few things culminated to make me think this could be a great idea.

“Most people in Australia have been taken by the food storm with MasterChef and My Kitchen Rules and Jamie Oliver etc. and they’re so into doing their own cooking at home… That just hasn’t translated into the drinks world yet.

“People still think cocktails are hard to make – but if you can cook a simple dish with a recipe, then you can certainly make cocktails, because there’s generally only three or four ingredients.”

You mentioned food delivery service Marley Spoon; but food is obviously a necessity while cocktails more discretionary. What made you think a subscription model would work for a more discretionary type of product?

“Subscriptions are a relatively new model for food and beverage.

“People can still buy a one-off kit, that’s available, but if you actually consistently buy over 6 to 12 months, people can develop their own bar – and that’s something we wanted to help people achieve.

“A week into subscription, most people are going into subscription rather than a one-off purchase. We’ll have to wait and see how that pans out!”

According to Mr Northway, once the concept had been well thought out, he pitched it to several spirits suppliers he already had relationships with through Sweet & Chilli to gauge their reactions and interest in getting involved, with great success.

That led to formal market research, focus groups as well as lots of toing and froing with friends and other contacts.

“Fortunately enough, a lot of the feedback came overwhelmingly positive.

“I think at some point, you’ve just got to pull the pin, get it into action. There’s no turning back now – we’ll make some mistakes, we know that, but from mistakes you make learnings, and from there we can prioritise what’s working and make sure this is a sustainable business.

Were you nervous about your IP and pitching to prospective partners?

“I think that’s always a risk you take when talking about the idea, to anyone. It’s certainly a risk that I have thought about.

“However, we do work quite closely with a lot of the partners we first pitched it into, and I knew that there was no real thirst for them to go and do it themselves. So we were careful in who we went and spoke to. It had to be done.

“I would [also] be complimented if someone copied what we’re doing, as it means they like the idea and there is a market for it, and we’re first and will continually [strive to] be the best.”

You put in the bulk of capital yourself – where is the rest of the funding from?

“Some partners, some friends and family put in, and also some private investors.”

Why did you make it a separate business and not integrate the offering within your existing business [Sweet & Chilli]?

“Good question. Sweet & Chilli is very much a business-to-business focused agency; we offer training, consultancy [and] we host events. This sits a little bit differently, because it very much goes towards the consumer.

“At some point in time, there might be the opportunity to sell it or potentially roll it into a bigger distribution component of the business. But for the moment, it makes sense to separate it and separate the staff.

“Going forward, we really see them growing in two different directions.”

Does Cocktail Porter have any staff yet?

“Two full-timers, on top of myself. And then we pull in different experts as and when required.

“The two full-timers work across digital strategy, including marketing and social media; they work across all fulfilment, logistics and warehouse; they work across the building of the website and overseeing customer service.

“And then along with myself, we bring in contractors to help us develop the kit… We want to make sure the kits look and feel and taste fantastic.

How do you balance your time and energy and attention across the new business while ensuring the established business keeps ticking over nicely?

“There’s certainly some nervous moments! Am I shooting myself in the foot? Am I neglecting the bread and butter maker?

“I’ve got a great team at Sweet & Chilli who I’ve been able to give more responsibility to; it has been great for them to step up, and for me to step away a little bit.

“I wasn’t so concerned about Sweet & Chilli suffering – I was more concerned that Cocktail Porter might not work.”

Are you concerned about the idea of hype around the new business versus repeat business?

“Ask me in a couple of months!

“There are sales coming from different places, so it’s not just friends and family supporting us.

“We hadn’t been promoting this in the six months prior to launching, so the fact they are buying now is because of our social media plan and our marketing strategy now.”

How do the restrictions around selling/delivering alcohol affect the new business?

“There are a lot of couriers out there who simply won’t send alcohol.

“We have a check box for customers to say they are 18 or over, and the delivery must be signed for.

“That does increase the delivery costs a little, but they are just the compliance issues we have to work with. Otherwise, you lose your liquor license and your business.”

It can be very expensive to warehouse stock, but on the flip side, it can be risky to order things on the fly if something doesn’t arrive in time for shipments to go out. How do you manage this?

“Well I can give you a pretty interesting example. We were getting ready to launch this time last year, we’d bought the stock, bought the ingredients – everything to go. Unfortunately, a few things happened that meant we needed to put it on a hold. And a year later, a lot of those ingredients had gone by their used by date.

“So we found out very quickly and very early that we couldn’t order in bulk and we needed to ensure we know our levels so we don’t over order or don’t under-order.

“It was a pretty quick and rude awakening call, so we’ve got some systems in place to know how much we need to order. And having just launched, we’re still learning that.

“I guess that’s the beauty of having Sweet & Chilli running in Australia for 10 years – we have a range of different suppliers we can call upon. We’re working with a lot of people we think fit our brand. But we do have a lot of fallback options.

“Our e-commerce site links with our warehouse system, which also links with our accounting system, so they are all cloud-based systems. But the ability to pull a report and know exactly what we have, do we need to order something, then place the orders, etc. has become systemised, very automatic and very easy to work.”

Did you engage a third party to pack and send the shipments?

“No, we’re doing everything ourselves – we’ve got a 500sqm warehouse in Alexandria [in inner Sydney], so everything comes to us where we can pack it, quality control it and we ship it out.

“By all means, it would probably be easier to use a third party, but then your costs go up as well. And being very much a start-up, we’re trying to take on as much of that responsibility, get it right, and make sure that there is the quality control on everything that we’re sending out.

“Over time, certainly if it builds to where we hope it to, then certainly it could go to a third party.”

Raw and real lessons of a subscription business
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