Friday, August 31, 2012

Getting the Scoop: Brooklyn's artisan ice cream success

Do Your Research

Interview with Brian and Jackie Smith
Owners of Ample Hills Creamery, Brooklyn
By Jeff Yoskowitz and Kathryn Gordon

Jeff:  Hi Brian, Hi Jackie.  What is your concept and where did you get your concept from?

Brian:  My background is in creative writing.  I was a TV movie screen writer and directed audio plays.  I was always in the creative and entertainment world, and always had a love of ice cream.  I wanted to find something that was a little more community based than writing, and to do something that was more than the ice cream – I wanted to create a “gathering spot.”

From Ample Hills' website

Kathryn:  I first visited Ample Hills back on a cold night in winter, and there were a lot of people in here enjoying the ice cream, and also hanging out!

Brian:   I went to every ice cream shop in Manhattan and Brooklyn with my then 2-year old and researched ice cream shops in all 5 boroughs, looking at ways we could be different and have a competitive advantage.  We have created a space that appeals to people year round.  

I heard once:  “Any idiot can sell ice cream in the summer time, but what else are you going to do the rest of the year?”  If you can build a space that people want to be in, you can make a living during the other 8 months of the year.  

So many shops are small and you just get ice cream and leave. We wanted to build a children’s play area, so when it was dark in the middle of January they could go some place and get out of their house.  The concept was to do artisanal, made from scratch ice cream that didn’t have any pretentions from the foodie world.  We offer fun, funky, playful, rotating, changing flavors.  People get excited about that!

Ample Hills' Play Area 

 Jeff:  You are pasteurizing your own ice cream bases?

Brian:  In my competitive analysis, I learned that the vast majority of companies don’t pasteurize their bases, and use an ice cream mix.  For me, there was never a question of not pasteurizing, because for me and my creative background I knew it would become too boring if I just started from a mix.  I needed the challenge and complication of the fun of pasteurizing, and our ice cream tastes better because it’s fresher.

Kathryn:  You’re using local purveyors and farmers? 

Brian:  We source our milk, cream and eggs from different farms.  It has changed over time because our production volume exceeds the level some farms can provide us in terms of ingredients.  It’s a combination of what we can get, and who has enough milk for us. 

Jeff:  So you’re getting very fresh dairy products, producing small batches, and pasteurizing yourself. Cost wise, how’s it working out?

Brian:  Clearly, we probably make some of the most expensive ice cream in the city in terms of its food cost.   But we’re making up the lower profit margin in terms of volume.  We ran out of ice cream when we opened and had to close down for 9 days to restock. 

The authenticity of the experience drives our volume.  Customers waiting in line for their cone and seeing the ice cream being made (with the explanation boards of the process).  

View into the ice cream production kitchen

Jeff:  What are your food costs like?

Brian:  When I was doing my market research, I learned that food costs (of a sustainable business) should be between 25-28% and overall ours are okay. I have to trade off the cost of some of the more expensive ingredient flavors versus the less expensive.  Over time our purchasing power has gotten better, and we’ve been able to keep the ratio because we’ve been able to lower our base food costs.

Kathryn:  You have a general manager in charge of the front of the house and your wife Jackie does the books and payroll.  Are you doing the production?

Brian:  I was doing everything at first.  We’ve now been open a year and 2 months, and I’m trying to move in the direction that 2-3 people run the pasteurizer, and do the baking.   I’m still the only one churning and doing the mix-ins.

All the staff and customers help to create flavors.  I’m the final arbiter, but we have fan contests on Facebook and involve our community. 

Kathryn:  You’ve gotten a lot of initial favorable press, right?

Brian:  It’s all just come to us, because what we were doing was unique and different.  I now use social media, but a lot of our publicity came to us in our first four days of opening.  I didn’t plan it, but we ran out of ice cream.  Florence Fabricant at the New York Times covered us and we had a line around the block and we didn’t have any product.  We had to shut down.

I believe that we have “earned our press,” and “earned the lines” of people waiting for the ice cream.  I am passionate and did my research, planning our concept.  We make product from scratch, on location and that allows us creative freedom. 

Jeff:  What’s next for you at Ample Hills?

Brian:  We are looking at opening an additional retail space in Brooklyn with a production factory twice this size.  We’d still like to be a destination spot, but be able to offer ice cream classes, ice cream camp…

Kathryn:  You already offer a lot to your community through this location; I noticed your fun “Swap O Matic” machine here on my first visit.  And you have birthday parties here for kids? 

Jackie Smith in the retail shop

Jackie:  We have parties here every weekend!  We custom created a unique “ice cream churning bicycle” that kids enjoy using in their parties.  Our general manager also runs kid drawing contests and ice cream flavor/name contests on Twitter and Facebook.

Kathryn:  All the “community space” takes away from your production kitchen and I guess you’ve outgrown it?

Brian:  It’s hard to decide how large the production room was going to be, within a 900 square foot facility. I had to make the kitchen as small as possible – but it’s impossible to research ahead of time what you will ultimately need regarding space allocation.   But producing a higher volume of ice cream than I initially anticipated meant that in the first 9 days, I had to double the kitchen space we had allocated, buy larger blast freezers and a larger pasteurizer than I had initially purchased.

Jeff:  What warnings would you give other entrepreneurs?

Brian:  Be more prepared for success!  Like what am I going to do if I have 3 times the number of people buying ice cream than I had planned for?  I had prepared psychologically for the opposite, but we did run out of ice cream.  Interestingly, that generated more press than it might have if we hadn’t had to close down right after we opened.
Jackie:  Also, everything always costs more than you’d think.  With such constant use, this is our second set of guest tables.  We wind up painting every month the front of the ice cream case (because we couldn’t afford tiles when we first installed the case).  Luckily, our landlord lives above and he is also our general contractor, so we can get things fixed pretty quickly.

Brian:  Get as long a lease as you can.  I can’t believe entrepreneurs who are willing to settle on 3-5 year leases.  You create all this “energy,” around your brand – it may not be transferable to another location if you lose your lease.  So I wouldn’t put time, money and ambition into anything less than a 10-year lease, or you might wind up paying twice.

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Monday, August 27, 2012

Getting Customized Solutions to Make Your Food Startup Prosper

Tell Us What You Need

Interview with Sho Islam
Rutgers Food Innovation Center
Interview by Jeff Yoskowitz, Jessie Riley and Kathryn Gordon

Jeff:  Hi Sho, can you tell us about the Rutgers Food Innovation Center here?  It seems like it is located in the middle of nowhere.

Sho:  We have been Bridgton since 2000, and are a Center of Rutgers University. This area in Southern Jersey is historically “the garden” of the “Garden State,” but agriculture and the economy in general has declined over the decades and we are here to increase the economic activity in the region, specifically as it related to food businesses.

We’ve had the incubator facility open for about 4 years.  We help with all aspects of starting and expanding a food business, from concept to commercialization.  We offer a unique incubator center where food establishments can come to get all the support they need to become successful, profit sustaining businesses.

We have 4 production bays, and can schedule up to 4 simultaneous production runs if necessary.  Our facility is USDA and FDA approved.

Jessie:  What kind of staff do you have here? 

Sho: We have marketing, business development, and regulatory specialists, a food technologist and production and plant operators on staff.  We also work with other organizations and companies on as-needed basis to meet the need of our clients. For example, clients may work with SBDC (Small Business Development Center) if they need help writing the business plan, or a private company/consultant for logo design; but we’d be there to guide the client through the process.   

Kathryn:  How do you charge for the consulting you do? 

Sho: We work on a cost recovery model and prices are customized for the need of the client.  Our business and technical mentoring rates are priced at $100 per hour (for smaller start ups) and $150 (for larger companies).  Our production facility rates vary by the room that is being utilized and the frequency of occupancy but rates vary from $750-$1250 per day.

Jessie:  How many people a year do you assist?

Sho: Typically we deal with about 250 unique companies/individuals inquiring per year to determine how they can be best assisted by us. To date we’ve assisted over 1400 companies/individuals.

One of the 4 production bays at the Center, with walk in blast freezers, walk in freezers and refrigerators behind

Kathryn:  Is there a typical length of time companies are here working with you?

Sho:  No. The length of time varies based on many variables; some of our clients work with us on very specific short-term projects (food sensory for example),  some have been working with us for years and others have moved on to co-packers or built their own facility (Schar USA for example). 

Jeff:  What’s the main advantage you provide a business to work here with you versus at another incubator?

Sho:  We are a one-stop shop. We work to make sure you have the best odds of success when the product is launched.  We work with companies on whatever it is they need in terms of marketing, business mentoring, product development and/or production assistance. 

Jessie:  If I owned a burgeoning company who wanted to work with you, how would I go about it?

Sho:  You would contact the Center, fill out our questionnaire and then we would have an initial consultation. Afterwards, we would develop a customized proposal that meets your needs. 

Jeff:  What’s your success rate of mentoring companies, and how do you define success?

Sho:  Of the companies we’ve assisted to commercialize products, greater than 85% of our clients are still in business. 

Jessie:  This is an amazing facility, thank you so much for the tour!

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Sunday, August 19, 2012

Don’t Work So Much "In the Business" That You Can’t Work "On the Business"

Don’t Work So Much "In the Business" That You Can’t Work "On the Business"

Interview with Joan Coukos
Owner/CEO Chocolat Moderne

Interview with Kathryn Gordon and Jeff Yoskowitz

Kathryn:  Congratulations Joan!  You’ve come such a long way from when I helped you a bit with your launch years ago of Chocolat Moderne!  

Joan:  Yes, we just won the NASFT (National Association for the Specialty Food Trade) gold award for their overall chocolate category, Outstanding Chocolate, and silver award for our hot beverage, Kama Sutra.

Jeff:  Why did you choose chocolate?

Joan:   Chocolate may have chosen me!  I always was into food, being of a Greek background.  I was a banker and my vacations were always food-focused.  As a lay person, I tried to educate myself on the latest culinary trends. 

I visited Belgium in late 2000 and was fantasizing about something other than banking.  In November I had seen the movie Chocolat, which gave me a general good feeling, and the idea to possibly be a proprietress of my own business.

On the plane to Brussels, I read an article about Pierre Marcolini and new trends in chocolate.  I had always revered chefs and the article let me connect that.  Pierre Marcolini was a chef, and a creative human being who could take chocolate and make artisan flavors with natural ingredients and custom designed packaging.    

I decided to check out the chocolate scene in Brussels and I came across an outside antique market with metal chocolate molds.  I couldn’t put them down and I bought 2 of them, with the idea to be able to teach myself chocolate.  I knew I had the guts being that I had lived as a single woman banker in Moscow for years.  I came home and Googled truffles, bought some Valhrona (chocolate) at NY Cake & Baking, and read for the first time about tempering chocolate on a website.  I started experimenting at home to teach myself how to mold chocolates, and brought in samples to the bank where I worked. 

Kathryn: Somewhere in this timeframe, I met you, right?  I know I helped you with the production for the NY Chocolate Show that year…

Joan:  One weekend a month, all I would do was to make chocolates at my apartment.   I picked the brains of everyone at J.B. Prince, met the owners of Chocolatier magazine at the NY Chocolate Show and then I took a chocolate bon bon course where I met Kathryn (with Pascal Brunstein, MOF).   I just bought some chef clothes and showed up.

After 9/11, I was laid off and I started to form the ideas for my own business.  I started out of my kitchen but I signed a 5 year, renewable lease for this location in August, 2003.  I figured I would start without a lot of staff, and I didn’t mind working alone because I live in the neighborhood.   I started with around 1,000 square feet, and 2 years later expanded the office space by adding another 500 square feet. 

Jeff:  Is this still enough space for you?

Joan:  It is except in the height of the winter production season, when we could use more table space to spread out on.

Our business is growing and it seems to have doubled since this time last year.  We are getting ready to re-sign the lease here, because we’re maximizing the opportunity for retail.  We’re in between 2 major shopping streets, and continuously invite in bloggers for free press.  I use the web for internet marketing and we’ve added a retail counter here.  By using our production space as our retail location, I can get a higher profit margin on sales without having to carry more overhead.  We use the Square credit card system for retail sales.

Jeff:  What’s your life like?  Is it 7 days a week since you live nearby?

Joan:  Yes, it is.  We’re getting to the point this summer that we want to take off more time.  My husband works here with me, so I’m able to see him while we’re working. 

Kathryn:  What are you working on now?

Joan:  There are lots of “business things” we still have to fix.  One goal is for margin improvement.  I’m a purist, using only Valrhona and other expensive ingredients.  I also have very high end, beautiful packaging.  But I believe that packaging is my PR and it has gotten me into Barneys, Bendels and Dean and Deluca.

Jeff:  Have you experienced any shelf life issues?

Joan:  For chocolates without preservatives, shelf life is generally not very long.  My recipes are reviewed by an experienced food chemist.  Most of my bon bon fillings are ganache, praline and caramel so I always go by the shortest shelf life, which is the ganache.  If you store our chocolates at 68F or below, the shelf life is 3 months.  Moderne Bars have an 8 month shelf life, so that has been more appealing to small stores. 

Kathryn:  What have you learned, 9 years into the business?

  • I was naïve about how hard it was to sell a good product.  A lot of things were going on and Chocolate was suddenly a hot thing.  Major specialty retailers, gourmet markets and department stores wanted to carry it.  Sales have been the bane of my existence though.  We haven’t had a consistent sales effort.  Doing trade shows, we get good sales leads and have picked up new accounts that way.  Off and on, commission based sales people have helped with our sales.  When you’re wholesaling, you can’t become dependent on one primary store – you have to supplement with orders from multiple, smaller stores.
  • Buyers’ tastes are often more sophisticated than their clientele.  We’re growing now because the public’s taste has caught up to our product. I’ve often been the first with my brand to differentiate myself and the market has had to come up to us.
  •  We’re really small in terms of production and administrative people resources.  I have 2 full time production employees, one of whom has been here 6 years, and I also take on seasonal help.  Doing the in-store sampling and demoing is an enormous time drain, and I lost some stores because I just couldn't keep up with that.  
  • I've never had a PR budget, but the Top of the “O” list, Sofi Gold/Silver awards and random citations around the country have given us press and fueled our current growth. Perhaps now an active social media strategy makes this a little less important, but when I was starting out a big PR endorsement would have been a nice initial boost.
  • This has been a really good year, but our success up on the 9th floor leads me to believe that I would have done even better from day one with a retail store.  I know retail is tough and there are a lot of ‘dark doors’ out there, but if I compare myself to my successful peers, they all have retail shops!  It makes it easy for journalists to find you and write about you.  My strategy was to take this space and start off wholesale, because Manhattan retail is so expensive.  I thought it wasn't worth the tradeoff to me for the smaller production space I would have been able to afford if I had opened with a retail outlet.   I could build brand awareness through the web, but I had low margins because I was always selling wholesale. 
  • A year and a half ago we started opening the factory on weekends more often by allocating more space from the production area so we could sell our products at a higher margin 
Jeff:  Have you experienced any problems producing and selling out of an office loft building?

Joan:  No, surprisingly not.  We’re licensed by the NY Department of Agriculture, and I've been lucky with inspections.  We were the first food business for the  building management company who owns this building, and they've been pretty lenient.

It would make sense now to have our own delivery van for local deliveries, but we ship Fed Ex and UPS throughout the year. Even when it’s hot, we ship Fed Ex ground in the tri-state area and overnight second day to the rest of the country with freezer gel packs and padded insulation. 

Jeff:  At what point into it were you able to say that you were happy with your progress? 

Joan:  Things were going gangbusters after the second full year in 2006 but businesses are cyclical and progress comes and goes.   For example, I think now that I took on the additional office space a little too early, but it was better to do that than to outgrow the production space.  I wanted to create a brand rather than just be a little store, and I felt that I had established “the brand” in the first year or two. 

Additionally, chocolate has evolved as a product in the last 6 years.   Bonbon shelf life is short for artisan chocolates and only sell well around the holidays so most chocolatiers moved into solid bars. But I wanted to have a filled one, with a longer shelf life than the bon bons.  

Jeff:  Is there anything you would have done differently over these 9 years?

Joan:  It would have been good if I had paid someone to do sales, but paying a salary made me nervous.  Now I feel that decision might have been a mistake.  I've spent all my time and energy on creating the best product I can, but it’s taking longer to pay off because I can’t do everything. 

So what do you do?  I should have gone out and gotten more money sooner for a retail space and more PR and sales help.  Someone told me once:   Don’t work so much “in the business” that you can’t work “on the business” – and yet, I totally did that.  It doesn't work to make chocolate all day and then work on the business aspects at night.

Jeff: Thanks Joan!

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Friday, August 10, 2012

How to Successfully Run an Incubator Kitchen

Interview with the owners of Hesperides Kitchens & Bakeries in Hawthorne, NJ
Lisa and Albert VanDenBerg with Kathryn Gordon and Jeff Yoskowitz

Kathryn:  Hi Lisa, Hi Albert. I met you here a few months ago when I came to help with the production of one of your clients.  I’ve spoken to several of your clients who say that the two of you are completely supportive of them and what they’re trying to do.

How long have you been in the commercial incubator kitchen business?

Albert:  It’s been about 2 ½ years.  This is my grandfather’s old feed & grain mill from the 1920’s, that has been split into 4 buildings.  Originally, there was a guy who rented some space here and built himself a kitchen for dipping oils.  After he left a cookie company moved in, but they wound up selling their business.  When I was trying to rent the kitchen space, a company called, Red Ribbon Pretzel was starting out and needed a small kitchen.  I just said, “come see what I’ve got!”  They decided that this space would work for them to start their business, and that’s how it all started, and Lisa and I got into the incubator business. 

Lisa:  I run an organic farm in NY State.  We also use some of the space here ourselves for a CSA (Community Supported Agriculture) and food co-op.  It allows us to sell our product, and to feature our incubator client products as well.  For example, CSA share participants can pre-order any one of our incubator client products for pick-up when they come here on Tuesdays for their fruit/vegetables.  We also have a CSA for cheese, other dairy products and coffee.   Some of our incubator kitchen clients use the vegetables and fruits from the farm.  We are trying to help these people make money – as the owners we want them to make money and succeed. 

Lisa VanDenBerg with product showcase in the CSA pickup space at Hesperides with incubator client products

Kathryn:  I love it!  You’re facilitating farm-to-table and supporting local artisanal food producers at the same time.  That’s brilliant.

Lisa:  We attended a NEOFA (Northeast Organic Farming Association) conference on incubator kitchens. That was very helpful to help us understand more about this business and get some tips from other farmers who have supported product incubation.

Albert:  For example, I build the walk-ins myself. NEOFA participants gave us tricks like how to rig up an air conditioner for the walk in and bypass needing an overhead compressor, We’re able to cool the walk in for a fraction of the typical set-up cost.

Jeff:  I’m not sure I understand that, but it sounds really useful to know! 
Can you tell us more about your facility and the mechanics of how you set everything up here?

Albert:  We have 11 kitchen spaces here, in an 8,500 square foot facility.  2 kitchens (one bakery, one culinary) are rented by the shift, and the others by monthly clients.  In total, we currently have about 40 customers. 

Lisa:  We find people through referrals on the internet, and the Rutgers incubator facility.   We have also had a client who “outgrew” our space, wasn’t ready for their own kitchen, and transitioned to Rutgers (which can support a higher level of manufacturing).  For example, to wholesale meat-based products you have to be in a USDA facility like Rutgers.

(Editor’s note: look for our upcoming interview at the Rutger’s incubator kitchen)

Kathryn:  How do you schedule clients for the shared commercial kitchens?

Albert:  We recently started to use Google calendar, and it’s working very well for us administratively and for the clients.   Freelancers can see the available time slots on the web, but only Lisa and I can actually schedule people to use the space.  Everybody who works here knows they have to be flexible to be able to keep their production costs down, and share the space.

Jeff:  How to you approve people to use your space?  What kind of requirements do you have, and what do people get for a base price? 

Lisa:  We require $250 a month minimum.  For that, they also get a storage rack (clients have to provide a cover and a lock), and storage in the shared fridge and/or freezer walk-ins.  Each kitchen has a standard set of equipment: burner, convection oven, reach in refrigerator, 20 Qt. Hobart and speed rack.  Clients provide their own small wares and sheet pans.  Everyone shares the 3-part sink dishwashing area, break-room and bathrooms.

Albert:  Clients are required to carry one million in product liability insurance, and have a Serv Safe food handler’s license to use the bakery kitchen.  To use the culinary kitchen, they have to have the Serv Safe manager’s certification. 

Jeff:  You don’t require a security deposit or pre-payment?  What happens if someone breaks a 20 Qt. mixer or something on their shift? 

Albert:  That’s actually only happened once, and the shift worker’s boss helped to pay for the repair.   We’re trusting in that sense.

Kathryn:  Can you talk about the food handler’s licensing and how you work with the local health inspector?  If there’s an inspection, and you have 40 clients, how does that process work?

Albert:  I also have a food handler’s license.  Everyone has to follow my procedure manual.  I have to be the leader because if the health inspector comes in, whatever they find could shut me (and the entire Hesperides incubator facility) completely down.

Lisa:  We walk through the kitchens daily.  One of us, or our son, is here every day.  We throw away any ingredients that have expired.  We throw out any food that’s not covered.  If someone left dirty dishes in the shared 3-part sink, we just throw them away.  We have to – it’s our liability.

View within Hesperides from Shelly Goldenberg’s Chelique chocolate production area 

Jeff:  When you build out a new kitchen, how do you get your equipment?  And is it both gas and electric here?

Albert:  I buy used equipment on Craig’s list, and it works out well because I can work on the maintenance.  I try to buy new convection ovens.   The ovens are gas, and the 6-burner stove in the commercial kitchen is gas – everything else runs on electric.   Our total utility bill is 5% gas.  In the summer, the air conditioning to keep the kitchens cool is the highest cost. 

Kathryn:  And how does it work if a particular monthly client needs a special piece of equipment?  For example, you have people here making ice cream.

Lisa:  We used our electrician who knows the building to run the lines, and the client who needs that equipment pays the electrical installation cost. 

Kathryn:  And you’ll charge them a higher electric fee too?

Albert:  Yes but it isn’t on a separate meter, so I work with each individual client on their pricing.  For monthly clients, each pricing arrangement differs anyway, based on their kitchen size.

Jeff:  What’s the turnover like of clients?  How are you marketing to find clients for the kitchen spaces? 

Lisa:  At this point, we get 10-15 inquiries per week.  Everyone thinks they can do this! So the spaces pretty much fill themselves.  We have a majority on a monthly plan, which requires us to train people less (we train new people on how to use the equipment, and we have to “watch” new people more in terms of the cleanliness standards, etc.)

Albert:  We have less turnover than you’d think.  Some clients have been with us from the beginning.

It’s a co-operative here so everyone has to get along.  I will turn people away if the product doesn’t really fit in.   We have gotten rid of people if they don’t clean up, or play the radio too loud.

Jeff:  You’ve seen a tremendous volume of new start-up food businesses walk through these doors.  What are the most common mistakes people make?

Albert:  Everyone thinks they want to rent their “own space,” not realizing that at least 50% of what’s required is outside, selling and working on websites/marketing etc.    Baking is not 100% of your time, so a shared space can be a perfectly viable option.  Sales and marketing needs as much attention as baking. 

Lisa:  People who were formerly home cooks do not realize the amount of production that they can make in 2 hours in a convection oven with a large mixer.
Albert:  I’ve seen people really not know what they’re doing in terms of pretty standard kitchen equipment, even ones who have graduated from culinary schools.  I read the manuals (for the Hobart and the convection ovens).  I know how time and temperature is affected by convection cooking – and I never worked in a kitchen!

On the positive side, the most amazing thing is that the clients help each other:  how to work a piece of equipment, where to source ingredients, or how to package a product.

Lisa:  We want our clients to be able to just focus on their cooking.  There are no hidden costs from working here – each client knows ahead of time exactly what each month’s production will cost in terms of rent/overhead/utilities.   We even take care of scheduling for the pest control, dumpster pickups and cleaning grease traps.  Clients clean their own kitchen spaces daily, but we also have a weekly cleaning service for the floors. 

Jeff:  Is there anything you’ve learned over the years that you wish you hadn’t had to deal with?

Albert:   It was a learning curve about certification and the “black market” demand.  One of our clients would need a copy of their certificate to be able to sell at a farmer’s market, but then it would somehow get copied and be given to their friends (who were not legal clients and not producing their products in an authorized, commercial kitchen).  Those people would unfortunately represent themselves as working here, and that created a liability issue for us. 

Now we have changed the certification copying policy so that we will only fax directly to whoever officially needs it at the farmers market, etc. and the certificate for our approved clients is only for a specific business name, and for a specific length of time.

Kathryn:  Thanks Albert and Lisa!  It’s been very informative talking with you.   And the next time I come over here, I’m going to bring a cooler and buy some of the local artisan cheeses you offer!

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Friday, August 3, 2012

Creating an alternative to soft drinks

Healthier Options

Interview with Philip Crouse and Laura Smith
Cup & Compass

With Jeff Yoskowitz and Kathryn Gordon

Jeff:  Hi Philip and Laura.  Tell us how you started with Cup & Compass?

Philip:  I founded the business about a year ago.  It started with a passion to create a natural and lightly sweetened horchata.  I didn’t grow up with horchata and only discovered it a few years back while visiting my girlfriend in Philadelphia.   I was fortunate to have worked for a few food companies before starting my own.  I quickly brought on Carlos who was a classmate of mine in business school.   He had restaurant experience so brought a different perspective than my own.

As we continued to learn more about the beverage industry, we identified a larger opportunity in the dispensed beverage category in fast casual restaurants. It was really then that our mission was born to provide a wholesome alternative to the soda fountain.  I approached Laura at the beginning of 2012 to help out on the Finance and Operation side of the business.  She left her Wall Street career to join us full time in May and we couldn’t be happier that she did!   

Carlos, Laura and Philip of Cup & Compass

Laura:  I worked with a few start-ups before and I have a passion for the natural food industry, health and wellness.  Cup and Compass married my passion for healthy food with my business background. We have a lot of complimentary experiences from our diverse backgrounds which come in handy given we are currently doing all the sales, marketing, manufacturing, delivering, finance and operations for the business!

Kathryn:  Can you tell us about your current product line?  

Philip:  We partner with fast casual restaurants and a talented group of tastemakers to develop customized products for each restaurant’s customer base and menu. Only basic, pure ingredients are used and we lightly sweeten our products with organic cane sugar. We are currently in 2 Mexican taquerias where we offer a Hibiscus Lemonade and a Horchata. We will be introducing Limeade shortly as well. 
All products are handmade, in-house. 

Philip checking the temperature of the Hibiscus Lemonade

We manufacture at the Organic Food Incubator in Long Island City.  We do all of the manufacturing ourselves!  We work there once every week or two, but as our demand grows we can increase our time commitment via the incubator’s shift schedule.   We can make about 150-200 gallons in a shift.

Note:  read about Organic Food Incubator and Bad Ass Organics in our earlier blog entry on “Creating An Organic Incubator Kitchen” at

Jeff:  How long is the shelf life you’ve been able to create?    

Philip:  It depends on the product.  Our horchata can last three months before the taste starts to change noticeably.  The Hibiscus Lemonade lasts longer.  It does have to be refrigerated after it has been opened though.

Kathryn:  You install a dispenser near the soda fountain at a restaurant?  How does that work?

Laura:  We manufacturer the beverages and package them “ready-strength” in 2 ½ gallon bags with a dairy hose cap.  Our dispensers are made specifically for our packaging.  We have a fantastic design team that retrofits each of the dispensers so that it really stands out at our partner stores.  It’s refrigerated at about 37º F.   We are continuously improving our dispensers and packaging and are currently working on a new version of the dispenser which will agitate the product and make it easier for retailers to operate.

Jeff:  It’s a very interesting product, so what are the comments you’re getting back from clients?

Philip:  People have loved them so far!  A lot of people appreciate that the drinks are only lightly sweetened.  We’re currently in the West Village and the Upper East Side, and the demographics of each area are completely different, so it’s very interesting trying to optimize the sales in each location.  We are also in the process of developing new products and flavors based on customer feedback and our own ideas.  

Jeff:  What have been the biggest challenges to date?

Philip:  Finding a bag that would work for our production process and also be compatible with the dispenser was quite a challenge.  We found that the bags that we needed for our machines were not compatible with our hot fill production process.  After speaking to a ton of folks who said that it couldn’t be solved, we were fortunate to end up finding an amazing vendor who partnered with us and solved the issue with a customized bag. 

Laura: Another challenge is minimums. We consistently run up against minimum order sizes. We have created great partnerships with vendors who are excited to grow with us. Without their help we would have 10,000 bags, 100s of pounds of hibiscus and 50 dispensers that we wouldn’t know what to do with!

Kathryn:  How are you identifying additional clients for your products?

Laura:  We like to try and meet people at target restaurants through friends and industry contacts.  It also has been helpful to connect with other food and beverage entrepreneurs in NYC.   We hope to be build successful relationships with our current restaurants and retailers so that other potential targets hear about us through word of mouth. 

Philip:  One of the reasons why we enjoy the Organic Food Incubator so much is because it’s a like minded community of entrepreneurs, and Mike Schwartz (one of the partners of the incubator) is a teacher (and fellow Chef/Instructor at ICE with Kathryn and Jeff) and has been instrumental in helping us perfect our production process.  It was challenging to scale up ¼ gallon batches to 55 gallons, and Mike’s insights have been tremendous. 

Our long term goal is to create a platform in fast casual restaurants across the US for customers who want natural, lightly sweetened beverages that pair well with the food they are eating.

A happy Cup & Compass horchata customer at Dos Toros Taqueria 

Kathryn:  Did you think about bottling the beverages and selling to grocery stores?

Philip:  No.  The bottled beverage is brutally competitive and very expensive.  We think that there is a large opportunity to create healthier dispensed beverages with no preservatives that customers can get at their favorite restaurants.

Jeff:  Working in a start-up; how are controlling your costs?

Laura:  We have augmented our small team with talented interns from ICE and NYU to help with the production.  We were also lucky to get taken on by Orrick, as a pro-bono legal client. They have been nothing short of amazing.  Lastly, Columbia has been very supportive.  The university has sponsored an office space at Spring and Varick Street, Columbia Business Labs, which we will be working out of for the next year.  We share the office with 20 businesses and around 30 entrepreneurs.

Kathryn:  Tell us about the name:  Cup and Compass.  What’s the significance?

Philip:  It wasn’t our first name, actually.  The first name was Tiny Kitchen, since we started in my home kitchen.  As we approached our launch date, we found out from our lawyers that that our name wasn’t going to fly because of trademark issues.

Laura with Bags of Hibiscus Lemonade

We were very invested in the name Tiny Kitchen so it was painful letting go.  However, it gave us the opportunity to step back and take a look at the business again as it had changed significantly since we first named it.  We decided we wanted to contextualize “beverage” in the new name, and we wanted something sentimental, invoking tools that have basic, functional uses.  Finally, we wanted to bring in the idea of discovery since we are trying to get people to discover something new.  That is how we landed on Cup & Compass.

Jeff:  Thank you so much, we’ll check in with you later on.  Next time we look forward to trying the limeade!   

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