Make sure the numbers make sense. Before going “all in” on your idea, you have to have a plan in place. You might have a great product but it won’t make a good business if the cost to make the product is higher than your customers’ willingness to pay for that product. In addition, there are so many “hidden costs” when starting a business, such as permit fees, storage fees, website fees, etc. It really adds up as part of your fixed costs. Entrepreneurs often say, “Move fast and break things.” But I recommend, “Think first. If it makes sense, move fast and break things.”
As a part of our series called “5 Things You Need To Create a Successful Food Line or Specialty Food”, I had the pleasure of interviewing Peter Lee.
Peter is a UC Berkeley Alumnus, who applied his knowledge of coffee and chemistry to create the original coffee bar company — COBA. A scrappy self-starter, Peter started his coffee journey as a high school drop-out backpacking through South America to source coffee and learned about all the inefficiencies in the coffee trade along the way. That trip is what kick started his mission to change how coffee was consumed. After gaining traction at UC Berkeley, Peter and his team launched COBA on Kickstarter and was able to surpass their goal by 200%, they later secured their first fundraising round at a $1 million valuation.
Thank you so much for doing this with us! Before we dive in, our readers would love to learn a bit more about you. Can you tell us a bit about your “childhood backstory”?
I was a stellar academic student with a 4.4 GPA in high school and was very involved in debate related activities (Debate, Model UN, etc)- even placing 2nd in California in a debate competition. I thought I was going to end up at a top school, but something happened in my senior year that caused me to drop out two months before graduation. The year before I applied to schools, my parents lost their business in a fire, and they had no insurance. As a result, their income was negative. As an international student at the time (under a business visa), I wasn’t able to qualify for loans or aid. So, when the colleges asked me for proof of ability to pay the full tuition and board, I had none. The second semester of senior year was tough, and I ditched class a lot to just lounge around at Starbucks. (This was important later). After I left high school, I figured I’d keep my Asian Immigrant Parents happy by attending community college. During my community college days, I tried to restore some dignity for dropping out and started a handful of small businesses: I owned and operated 3 vending machines, started an SAT/college prep academy (half the students got into UC Berkeley), and a coffee roasting/catering business. The coffee roasting business is what inspired me to learn more about coffee and piqued my interest to figure out ways to utilize coffee outside of just dunking it in water and drinking it. That curiosity is what led me to create COBA, The Coffee Bar. After community college, I transferred to UC Santa Barbara, and did a last ditch effort to apply to Cal and somehow got in. So, I transferred to UC Berkeley. I applied to UC Berkeley four times total and got in the fourth try.
Can you share with us the story of the “ah ha” moment that led to the creation of the food brand you are leading?
My “Ah Ha” moment didn’t last very long. After I realized we can grind coffee and form a bar using chocolate making techniques, I thought it was genius. But when you grind coffee, it oxidizes and turns very bitter and stale. So, that “Ah Ha” was short lived as the first iteration tasted terrible. No one’s first idea is ever perfect. It’s the constant iteration and testing that creates the perfect product. It took 3 years of ups and downs before I was confident to give COBA to the world.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?
In our original Kickstarter campaign, we had a “golden ticket” reward where we would randomly select one backer and give them something like the “lifetime supply of COBA.” We didn’t know that random drawings were against Kickstarter policy, and the email they had sent asking us to amend our reward got lost as I was in Ecuador at that time sourcing coffee and visiting plantations with no cell signal. So, our campaign got shut down. Funny part is, NowThis picked up our story and we went viral with over 300K views right after our campaign had gotten suspended. We had to scramble and relaunch the campaign that same day. Somehow, we were able to convince all our original backers to back us again, and we met our goal in 24 hours. I laugh every time I think about these few days. I flew in from South America, found out we had gone viral, and saw the campaign had gotten suspended. The credit really goes to the team for pulling through and working 72 hours straight.
What are the most common mistakes you have seen people make when they start a food line? What can be done to avoid those errors?
Cutting corners. I get that this is kind of broad, but I have seen startups make false claims without the proper certifications or reduce the quality to lower costs. Every bar of COBA is an extension of my 8 years of sacrifice and our team’s 3 years of hard work and passion. The product has to be up to a certain standard and quality as it’s an extension of my story. I wouldn’t be able to offer this to anyone if it didn’t meet my standard.
Let’s imagine that someone reading this interview has an idea for a product that they would like to produce. What are the first few steps that you would recommend that they take?
Step one is always sharing your product with people and getting their feedback. This is a simple step and the feedback is going to be instrumental because that communal input helped form COBA for me. My first 100 customers came from my network of friends and family. All of them watched me hustle in the coffee business for years before I formally launched COBA. They’ve all seen COBA and tried it in the earlier iterations too. As a coffee lover, I have my own biases about how coffee should taste, but hearing feedback helped me get to the right product.
Many people have good ideas all the time. But some people seem to struggle in taking a good idea and translating it into an actual business. How would you encourage someone to overcome this hurdle?
I feel this is more of an internal struggle than an external one. Most people put blinders on themselves before actually getting started. For me, I collected all the resources that were available around me and took a small first step. For example, I sold coffee to our school district’s superintendent as a high school dropout but to get there I had to literally email all the principals in my district that I got off the district website and offer them free coffee on me. The superintendent responded, and I grabbed a beat up thermos and disposable cups, dressed my best, and pitched my idea. The meeting resulted in a one year coffee supply contract with my school district. I didn’t have a kitchen, a coffee machine, or anything commercial at all. I had a pot and my mom’s minivan to move the coffee. Now, COBA has contractors, facilities, a marketing team, investors, and overseas expansion.
There are many invention development consultants. Would you recommend that a person with a new idea hire such a consultant, or should they try to strike out on their own?
Unless the consultants are bringing on clients, they were not helpful to my business. Our product formed based on customer feedback, not that of hired consultants. For the initial product testing, we tested COBA with our Berkeley community until we had a product people would actually pay for. Food is a physical product that has to be transferred by hand, so naturally our customer base was our closest community, the Bay Area. We’ve hired consultants in the social media space that had 100K followers they could sell to only because it made logical sense since there is more of a guarantee in sales.
What are your thoughts about bootstrapping vs looking for venture capital? What is the best way to decide if you should do either one?
In food, going for venture capital makes sense if you have a bullet-proof formula for increasing revenue and profits. However, that bullet-proof formula generally comes from testing with bootstrapped funds. The two go hand in hand. For COBA, we started our pre-seed investment round once we had sensible profit margins that are in line with industry standards and a loyal customer base of repeat buyers. Bootstrapping early in the business for me meant living with an extra roommate to save on rent and asking cinematography students to help film and edit our Kickstarter video. We labored in the kitchen for hours at a time to make COBA’s and sold them on campus as another quick stream of income because we would always sell out in 3 hours. We would use a “just enough” method, buying the minimal number of equipment and supplies and circulating all the proceeds back into the business. The momentum from our early days culminated into our Kickstarter campaign that raised the funds we needed to scale production.
Can you share thoughts from your experience about how to file a patent, how to source good raw ingredients, how to source a good manufacturer, and how to find a retailer or distributor?
Patents didn’t make as much sense in our business as a trade secret. A trade secret is a layer of protection for our recipe and formula for COBA. We mark our ingredients by different code names to keep our formula a secret. Competitors often add flavorings like hazelnut or lavender to mask the stale coffee taste in their bars; our trade secret protects how we’re able to keep a fresh coffee flavor in our bars. Generally, food is difficult to patent unless we’re talking about specific equipment that for example creates or sorts food. I’m not an attorney, so it’s best to ask one for specific advice.
Here is the main question of our discussion. What are your “5 Things You Need To Create a Successful Food Line or Specialty Food” and why? (Please share a story or example for each.)
• Create an authentic original product. — Coffee is an indisputable part of my story. After I dropped out of high school and got rejected from a job at Starbucks, I just started by selling coffee from a thermos. It grew to building a small roaster from scratch to sell the roasted coffee beans to my community. I travelled the world looking for green coffee beans and sourced coffee from selective plantations. Looking back, this was part of the preparation to build a new category in coffee — the coffee bar. When we started, there was no such thing as the coffee bar. Part of the problem was that the coffee beans became stale after grinding it for so long. It took 5 years of learning to roast, grow, and brew good coffee to create the coffee bar without compromising the quality of each bar. Going back to this authentic original product piece, I am not too scared of competition. One thing no one can compete with is our brand and our story. Our story is so unique and backed with years of research and testing that I am proud of our ability to weather through challenges while staying true to our origins.
• Study your competition. For me, competitors fuel my drive and energize me to pursue excellence and think outside the box. A quick audit of our competitors at WholeFoods and boutique shops gave me snapshots of what they’re doing and we’re not. I’m a naturally anxious person, but when I don’t take action, the anxiety stirs up even more. One product that really inspired me was RxBar. They are the pinnacle of a successful consumer-packaged goods this decade. I watched every interview and read every article about the founder and the company in its early years. One thing that stood out to me was their packaging. The company founders even said their packaging change was the most important move the company made even more than the Kellog acquisition. That made total sense. The first thing a customer will see is the packaging. We revamped our entire packaging to make a very clear statement: COBA is the most convenient coffee ever. The taste of our bar, which I originally thought was the most important part is instead the surprise and delight or trying COBA. We aggressively study our competition and use our competitors as fuel to keep pushing.
• Stay physically healthy. COBA uses very heavy machinery and supplies. We also work odd hours and work on our feet for 8+ hour blocks at a time. Since we used to use a shared commercial kitchen, storage space was limited and we had to move our product and equipment in and out each time. Staying healthy and active made a huge impact on whether this is sustainable or not. I’ve taken up yoga to help with my flexibility for when I’m on the floor cleaning and scrubbing bits of COBA stuck to the floor. I go to the gym and work out my legs, arms, and back to make sure I can carry our 75 pound tempering machine up the stairs. I run marathons to make sure my cardio can keep up with all the running about in the kitchen. Also, I’ve noticed I get easily hangry when I don’t work out. My friends and family know about this too, so I gotta save them from myself by staying active.
• Put your team first. COBA is blessed to have a group of competent, talented, and smart UC Berkeley students as its core team. They are the ones who were able to get COBA up and running and make everything possible. Right now, our team is lean and entirely operational and creative. Every member has their distinct role, but they also all broke their backs in the kitchen. We’ve all hand-molded COBAs, washed dishes, mopped floors, and carried product and equipment. They are the backbone, fuel, and body of this business. It is also important to protect your team. Inevitably, I think every company makes mistakes partnering or hiring the wrong people. It’s important to push those individuals out early because they mess up a good culture. Then, it’s important as the founder to understand each individual on the team and check in regularly to make sure the company goals align to theirs.
• Make sure the numbers make sense. Before going “all in” on your idea, you have to have a plan in place. You might have a great product but it won’t make a good business if the cost to make the product is higher than your customers’ willingness to pay for that product. In addition, there are so many “hidden costs” when starting a business, such as permit fees, storage fees, website fees, etc. It really adds up as part of your fixed costs. Entrepreneurs often say, “Move fast and break things.” But I recommend, “Think first. If it makes sense, move fast and break things.”
Can you share your ideas about how to create a product that people really love and are ‘crazy about’?
COBA is better than other alternatives because we really did our homework. We learned about the three waves of coffee, took a history class about coffee, visited coffee plantations, roasted coffee we sourced, and did the whole grinding/brewing for 5 years before we created this new category of coffee bars. Even when we were creating this category, we didn’t compromise with adding lavender or hazelnut to mask the stale aftertaste. We applied what we know about coffee, vacuum chambers (physics), heat, water solubility (chemistry), and found a scalable way to make the best tasting bar.
I thought I was rebelling against the third wave (think Blue Bottle). But while on this journey, I learned the third wave of coffee wasn’t a rebellion against the second wave (think Starbucks). It was questioning and building on top of what already existed. In my heart, I would love to open a cafe and do that, but all the cafes are doing the same thing with the same roasters, grinders, espresso machines, and settings/temperatures. Only very sensitive and trained palates can tell the difference between two espressos. The most novel thing that’s happened to coffee in the last 10 years was the introduction of cold brew. So, I see COBA as a leap into a new category of coffee. We’re in the early stages, and things will improve and change with more precision and tempering. Fun fact, the mass market for starbucks roast is the italian/french roast, which was reserved for the coffee beans at the bottom of the ships because sea water would get in them and they had to burn the nasty water out. What I’m saying is that our first batch wasn’t perfect and still is not perfect, but it might get there.
Ok. We are nearly done. Here are our final questions. How have you used your success to make the world a better place?
We have a lot of nurses and doctors as customers. Through them, we found out medical professionals have difficulty taking off their masks and drinking coffee during their shifts because of obvious safety protocols. So, drinking coffee during their shift just hasn’t been feasible. Not only that, the coffee turns lukewarm by the time they’re able to catch a break. COBA is able to quickly solve this problem for our front-line medical professionals. So we ran a campaign where we shipped COBAs to any medical professional that reached out to us completely free of charge.
You are an inspiration to a great many people. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger.
After our Kickstarter campaign, I visited our coffee farmers in Ecuador to learn more about how they grow coffee. Did you know a coffee tree can take up to 10 years to mature? I also learned that because the coffee cherry ripens unevenly on trees, the harvest happens year round. This means that since the highest quality beans are arabica, coffee farmers are climbing high altitude mountains all year and handpicking each cherry that they then have to process for 3 months. This is difficult and strenuous work that gets wasted as a typical cup of coffee wastes about 70% of the coffee bean when it gets dunked in water and then thrown out. Inspired by this journey, I wanted to find ways to cut out the inefficiencies in the coffee trade. But to do so, I first had to get people to think about coffee differently. Third Wave Coffee goes into so many precise rules and laws of extraction without much consideration of the waste and people that grew the coffee. I hope to bridge this gap by creating a more efficient way of consuming coffee and applying better techniques to extracting coffee so there isn’t as much waste during consumption.
We are very blessed that some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US, with whom you would love to have a private breakfast or lunch, and why? He or she might just see this if we tag them.
I would love to meet Michele Buck, the CEO of Hershey’s. She has helped lead Hershey’s the last 15 years, and I just want to know what kind of problems she deals with and how she goes about solving those problems. Hershey’s is such an icon and has stayed an icon for decades. I want to know how they’ve been able to do so and keep such a loyal customer base.
Thank you for these fantastic insights. We greatly appreciate the time you spent on this.