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 37ยบ 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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