Chilli Coffee has been called the ‘brew-with-a-bite’. James Sullivan and Douglas Bates launched their chilli-infused coffee business at the start of 2020. As both co-founders are focused on the global growth potential of Chilli Coffee, they use the build-measure-learn lean startup principles to iteratively develop their business.
James and Douglas are both highly experienced entrepreneurs. James has been in the hospitality industry for 15 years and is an experienced coffee roaster and barista. James said the idea for Chilli Coffee was sparked when one of his customers “thought it would be cool if someone invented coffee enhanced with a chilli flavour.” James thought so too. Through a trial-and-error process James invented a recipe of complementary flavours that work. Douglas joined with him to create the Chilli Coffee startup, as he saw the growth potential and thought it would be ‘fun’ to work with James. The pair met at a Mentoring for Growth session, continued their conversation at an Innovate Moreton Bay Social catch-up, and formed a cohesive business partnership. Douglas recognised a winning opportunity and “just had to be involved,” collaborating with James to take Chilli Coffee to market.
James and Douglas bring complementary skills to the business: James focuses on getting the coffee flavours right, heading up manufacturing and packaging, while Douglas focuses on operations, marketing and business development. Chilli Coffee formally launched their initial product range with three flavour intensities on 10 March, 2020, at Basil and Vine, an Italian-themed café. The launch was attended by several dignitaries, industry representatives, customers, and friends. James and Douglas gathered valuable feedback from the launch, with attendees enthusiastically sharing their views on the tastes and flavours. However, one week later, COVID restrictions were announced disrupting the startup in its tracks.
COVID impacts
James and Douglas planned to introduce their product to the market through personal coffee shop demonstrations, so coffee shop owners and customers could taste their Chilli Coffee and owners could see customer reactions first-hand. However, COVID restrictions halted their plans. James and Douglas had to find another way to progress, as slowing down was not an option.
James and Douglas refined their target market definition, adapted their products to increase sales and refined their marketing strategy.
Response
Far from being discouraged, the Chilli Coffee co-founders decided to use the time lockdown provided to continue developing their startup. They reflected on the feedback received from people who had sampled the Chilli Coffee intensities. Together with data from their online shop and feedback from customer tastings they pivoted numerous times to test and measure alternatives. By reflecting on all this feedback and market research, James and Douglas refined their target market definition, adapted their products to increase sales and refined their marketing strategy.
One of the reasons startups fail is because of the challenge of finding the right target market for their offering. With the easing of COVID restrictions James and Douglas selectively approached cafes and commercial coffee retail outlets. Many operators were unable to purchase Chilli Coffee due to contractual coffee supply arrangements with their existing suppliers. Most retail outlets have their espresso machine supplied rent free, subject to purchasing minimum weekly coffee bean volumes. However, some independent operators saw the opportunity to offer clients something different to attract new customers, by providing exclusive coffee products. These early adopters, who promoted Chilli Coffee have quickly built a loyal customer following.
The Chilli Coffee co-founders next focused their attention on adapting their products to increase sales. Douglas and James realised from their interactions with customers that consumers “tended to start on the milder side of the scale and then advance towards the hotter versions” of the coffee. They expanded their original range of three heat intensities to offer a broader selection of flavours. They introduced a new milder flavour and renamed their coffee varieties to align with their brand’s quirky personality, namely D’Lish (super mild), D’Vine (mild), D’Midl (medium), and D’Sting (hot). Both co-founders knew from their beverage industry experience that having a variety of packaging sizes available from small to large stimulates sales. So, Chilli Coffee adapted to make available their products in different packaging sizes.
Douglas was keen to continue to refine their initial go-to-market strategy, so invested his time to expand and finesse their website, online store and marketing collateral. The pair rapidly deployed an online VIP member program. Over 60% of all online shoppers became VIP members for life-long access to discounts, exclusive offers and events, and to be invited to experience limited edition short-run blends.
Chilli Coffee experienced an unexpected success in late May 2020 with their first-place win in the Mr Chilli Beverage Awards. James and Douglas were then interviewed on Channel 10 News and, as the story aired, their online sales soared.
Future
The pandemic didn’t cool any of Chilli Coffee’s growth ambitions. James plans to continue developing their hot range of chilli spice infused coffees. Douglas is already exploring export opportunities for the startup. Branding has been and will remain a primary consideration for Chilli Coffee, given the focus on independent coffee retailers and the need to compete against larger coffee wholesalers.
As experienced entrepreneurs, there is little doubt that the partners have developed their resilience through the trials and tribulations common to starting a business. According to Douglas, “We never stopped during COVID”. This is a testament to their determination to make their startup work, despite the pandemic, by focusing on learning, refining and pursuing emerging business opportunities.
