28 October 2013
Seems as though Nexba is making some noise in the commercial sector. Just recently a we were contacted by BRW magazine who were keen to write a piece on the Nexba story.
As regular readers, we were pretty stoked and jumped at the chance to be in the magazine.
There’s something about iced tea that conjures images of hammocks and island paradises.
Yet while the Nexba iced tea company has offices next to Sydney’s Manly Beach – about as close as you can get to paradise within a ferry ride of the CBD – the pace of the work inside it is anything but idyllic.
“We’ve built a strong foundation in the petrol and convenience market, but with more multinationals coming in to the iced tea category, we now need to take it from x to y quickly,” says Troy Douglas, 24, the co-founder of Nexba.
The fledgling company claims it already has the third-largest market share in Australia’s iced tea category – Lipton’s Ice Tea is the clear leader, followed by Coca-Cola Amatil’s Nestea – but 2013-14 looms as a make-or-break year as the start-up builds its distribution capability in the hope of revenue to match.
Three years ago, Douglas was a paralegal at Allen & Overy when he got a call from a mate he’d grown up with in Cherrybrook, in Sydney’s north-west. Drew Bilbe, 27, had been on an engineering tertiary student exchange in the US when he blew into the Mexican seaside town of Rio Nexpa.
“There were all these uni students there obsessed with these iced teas, that were fruit-infused, sweet-tasting and came in a can,” he remembers.
“That’s where I got the epiphany that this could be huge in Australia.”
Bilbe came home, got Douglas on board, and the pair began the boot-strapping process that, given they still live above their Manly HQ and are yet to pay themselves a salary, continues to this day.
Initial encouragement came from the discovery that while iced tea represented 14.5 per cent of the beverages sold in North American convenience stores and petrol stations, the equivalent figure in Australia was just 2.5 per cent.
http://www.brw.com.au/p/entrepreneurs/paging_nexba_smith_market_secretive_WGh3BLiHeIYHk4s4cu1KaP Page 1 of 4
Paging ‘Mr Smith’: how a secretive ‘flavour whisperer’ helped start-up Nexba disrupt the iced tea market 26/08/2014 3:34 pm
The pair was also heartened that executives from established beverage companies – from the big outfits such as Coca- Cola Amatil to the boutique-like Emma & Tom’s – took meetings with them.
“LinkedIn was a big piece of the puzzle for us, and we’d approach these people in a transparent way just asking for advice,” says Bilbe.
“It was great to see that people who have made it, more or less, were willing to support two young Aussie guys giving it a go.”
Yet the most important early contact came through Sharon Williams, Douglas’ former boss from a three-year stint at Taurus Marketing.
She introduced them to Peter Baron, a former shopfitter and graphic designer who, like them, had launched a product into the beverage market with no prior experience.
“And now he’s sold a billion of them worldwide,” says Bilbe, referring to Baron’s Sipahh milk-flavouring straws for children.
Enter ‘Mr Smith’
The support of Baron has been important to Nexba in two ways.
First, he knew ‘Mr Smith’.
That’s all that Bilbe and Douglas will call the semi-retired “flavour whisperer” who is apparently behind the taste of some of Australia’s best-known canned and bottled beverages, and who Baron called in to tweak Nexba in its early days.
“The gold nugget he gave us was in combining Stevia natural sweetener with sugar in a way that didn’t leave a bitter aftertaste,” Douglas says.
His work has helped Nexba keep all its flavours at 73 calories per can and 4.9 grams of sugar per 100 ml, below the
5 per cent threshold considered acceptable for diabetics and important in a global regulatory environment where the idea of sugar tax is gaining popularity in the face of epidemics in diabetes and obesity.
Baron’s next contribution was less mysterious – money.
In early 2011, Nexba’s founding pair spent $250,000 of savings and maxed-out credit cards importing a small beverage factory from China. It brewed and bottled 2000 cans an hour.
Friends and family – even Bilbe’s octogenarian grandfather – helped get the product out the door. “We set up the factory knowing we’d want to outgrow and get rid of it,” Douglas says.
“But no-one else at the time could do the 355 ml slimline can with a nitrogen injection that we needed for a still product,” he says.
The first distribution deals were done with the school canteen associations for Victoria and ultimately Australia, which were low on margin but high on brand exposure.
“That was a big endorsement for the healthiness of our product, and it’s got a next generation coming up knowing our brand and looking for it in shops.”
The big break, however, was when after 18 months of trying, Bilbe finally scored a meeting with buyers for the 7- Eleven convenience chain.
“Then things happened quickly. They knew the colours in our cans had fridge appeal compared to the dark colours that were out there.”
Now also stocked in BP and Caltex service stations and IGA supermarkets, Douglas points to evidence from one of these “hero accounts” that Nexba is helping grow the iced tea category.
“People are repeat buying and we’re adding incremental sales – our 12.5 per cent share of all iced tea sales was accounting for 62.5 per cent of category growth at one of our stockists,” he says.
It was clear the imported factory could no longer cut it, and Baron turned investor, supplying the funds required in negotiations with a contract packer. Bilbe says Baron’s investment was roughly on par with what the founders spent to establish their factory, and he and Douglas keep majority ownership.
Nexba can still trade on its nimbleness. It is due to appear on Virgin’s in-flight catering menu in November (/p/entrepreneurs/chancin_nexba_branson_trolley_virgin_jvDCaF4JUJxyD4ZAW0A72K), another low-margin, but high-exposure coup – clinched in part by the founders’ willingness to custom-make a trolley-friendly, 250ml can for the airline.
But it is now at the crossroads facing any fast-moving consumer goods start-up in Australia – the one marked “Coles and Woolworths”.
“Getting in there is really the only way to get the critical mass we need,” says Bilbe. “They’ve got 70 or 80 per cent of the grocery spend in Australia.”
Unlike their friends who share stands at trade shows, coconut water company H2Coco, Nexba has taken its time before approaching the big two.
“It was different [for H2Coco] because they had a previously non-existent category they could show them. We had to be careful to build a strong foundation first – which we think we’ve done in petrol and convenience – because obviously, a Coles or Woolies can decide they don’t want you any more and wipe a big chunk off your cash flow overnight.”
Ever mindful of relationships, Nexba plans to undertake its campaign to Coles and Woolworths with a distribution management partner.
The founders know the big supermarkets could be a game-changer.
“We targeted $1 million in revenue in 2012-13 and just missed it. We’re already cash flow positive,” Bilbe says.
“We’re aiming for profitability this year, but the revenue might be two or three times last year’s – or 10 times depending on what happens.”