Natalie Brittan, along with her partner Chris, are the proud owners of a growing chain of independent coffee shops in London called Carbon Kopi. Originally from Malaysia, Natalie’s family emigrated with her family to New Zealand whilst she was in her teens. Starting out as a journalist, she developed a passion for all things coffee and began to dream about owning her own chain of coffee shops.
She met her now husband Chris, originally from the UK, whilst living in New Zealand. Being avid coffee connoisseurs, they used to spend their weekends exploring New Zealand’s coffee establishments, and crafting their trade as budding coffee entrepreneurs. A seed, or coffee bean, had been planted, and they began to nurture the idea of starting their own coffee shop in London.
Chris and Natalie decided to make the move to London around early 2016. Undeterred by the Brexit vote that happened later that year, they moved to London a year later and began their venture.
They came up with the name Carbon Kopi, firstly taking inspiration from Natalie’s Malaysian origins, since Kopi is the Malaysian word for coffee, predominantly used in Malaysia, Indonesia and Singapore. And secondly, the idea is that each cup of coffee they make is supposed to be a consistent “copy” of previous ones in terms of quality.
Seven years later, Natalie and her husband have established two Carbon Kopi outlets, and in the process raised their two children.
I sat down with Natalie, over a cup of coffee at their original Barons Court site, to discuss the journey she and Chris have travelled thus far, synthesize the multiple challenges faced as an entrepreneur navigating the vast (+GBP10bn annual retail coffee market), but ultra-competitive London coffee sector, and of course draw out some valuable lessons learnt.
What’s your Compelling Value Proposition?
My first question is what every aspiring business owner needs to ask themselves when thinking about starting a business. What is the product or service they provide, which provides value to the customer, and in the process make a profit?
In Natalie’s words, Carbon Kopi provides excellent and consistent quality, single origin and guest coffee, with a friendly and personalised service, to discerning customers in West London. This is echoed in the mission statement of Carbon Kopi, which is:
“We believe in combining the best coffee with the best customer service and it is our aim to be at the heart of every community we open in”
Natalie Brittan co-founder Carbon Kopi
The friendly and personalised service is evident in the coffee shops. As I sit there, sipping on a coffee, Natalie greets familiar customers by name, offering whether they’d like one of the freshly baked pies, or whether they’d like to try a guest coffee. This personalised service is something unique to smaller, owned managed coffee shops, unlike the large scale coffee shops found along the high street, which make it relatively immune from the dangers of an increasingly AI driven world.
What factors do you consider when opening a new outlet?
1. Understand your audience
First and foremost is to understand your audience – who are they, their behaviours, and routines.
Natalie says you can’t be too reliant on one specific audience, as trends change and things evolve. At the Barons Court site, for example, business boomed during the pandemic. Being in a predominantly residential area, the café was flooded with customers, as professionals working from home bought coffee on their once a day walk around the neighbourhood, and as lockdowns lifted, many professionals continued to work from home several days a week, and frequented the shop to work from, or to have a coffee break at. However she has recently noticed shifting trends, as workers increasingly return to the office. The underground is more full, evident of this return to work trend. As a result, her steady stream of customers has dropped to lower levels, and she is now reliant on other customer segments, such as teachers from nearby schools, church workers, and hospital workers.
The Barons Court outlet also feels the effect of school holidays when families go away and as a result business slows down.
This is not so much the case at the Wandsworth site, which tends to have more professionals as customers, who aren’t affected so much by school holidays.
Ultimately, she says, a shop needs a minimum volume of customers per day, so that even during quiet periods, the outlet is earning a sufficient contribution margin to cover fixed costs.
2. Conduct due diligence on potential sites
Natalie says it took 5 attempts to get their first coffee site, and they learned some painful lessons in the process. Soon after they first arrived on the scene in London, they found a site they thought would be perfect for a coffee shop, however it was not to be.
Located on a busy street, with strong footfall, the shop had been used as a hairdresser for many years. Excited to get going, they paid an interior designer to design the shop layout, paid legal fees to get contracts written up, and began to acquire fixtures and fittings. However, they soon faced a stumbling block with licensing issues, which meant the shop couldn’t be changed from a hairdresser to a coffee shop. Disappointed and frustrated, and having incurred significant design and legal fees, they continued to look for other shops until finally they identified a funeral parlour, and converted this into the coffee shop it is today.
3. Undertand the competition
Competition from other outlets can adversely affect sales. For example, a “Gails” outlet has recently opened outside the Barons Court underground station, a mere 10 minutes walk away, which provides competition to customers now, who can now choose either outlet to get their morning caffeine fix from. She says this had a negative effect on sales.
However conversely, the Wandsworth site is not too badly affected by competition, even though there are several competing coffee shops on the same street. The reason, is that this particular area has sufficient footfall to ensure the pie is divided fairly between all players.
What are some of the lessons learned from your entrepreneuril experience?
1. Avoid downtime at all costs
Most independent coffee shops buy their coffee machines on vendor financing arrangements from coffee bean roasters. Under this arrangement, shops must commit to buying a certain quantity of coffee beans from the roaster every week, and the vendor also agrees to provide a certain standard of maintenance to the machines. This is critical, since any downtime in the machine leads directly to lost sales for the company, and loss of customer goodwill, which may be difficult to reverse.
2. Implement the Pareto principle on big decisions
Natalie and Chris took the decision to expand the business in 2021 to offer brunches, because some of their customers had asked for this and it coincided with the semi-lifting of the lockdown which enabled outdoor dining. The company invested a considerable amount of resources to build a kitchen, employ a chef, and build outside seating. They soon realised however, that the customer segment they desired, such as young professionals, preferred to go to other destination restaurants further away, where they could have brunch followed by a walk along the river or through a park. And, conversely, they tended to attract younger families, which would result in more cleaning up after children, and also a feeling of alienation from remote workers, who felt they needed to give up table space to families.
They get recommendations from time to time from a small number of customers wanting them to offer a range of vegan and gluten-free items. Natalie says they tried some vegan options, but have found that the ingredients, e.g. vegan cheese, is not yet up to their quality standards.
The lesson above, is that you can’t implement all the recommendations from customers, and the better approach is to focus on doing the 20% of things well, that serve the needs of 80% of your customers, whilst avoiding trying to be all things to all people.
3. Investigate before investing
As described above, it is critical to do your due diligence on a proposed property before investing funds. Check the property can be used for the desired commercial trade; conduct structural surveys and other checks, to ascertain the condition of the building, any to gauge what repairs and maintenance expenditures might be required going forward.
4. Access to funding is a constraint
This is a constraint faced by most small businesses. Apart from investing your own savings into a business, or finding a partner to invest, accessing loans from banks is difficult, because of scale and limited track record. Without access to banks, the next option is higher interest rate loans, which may end up loading the business with debt it cannot repay.
How do you monitor your business performance?
A business needs to identify its main business drivers, which lead to value creation. For example, revenue is a business driver, which is a function of the volume of units of coffee sold, multiplied by the price per cup. KPIs enable a business to monitor the factors which lead directly to the business drivers, and are an indication of whether the business is likely to create value. The main KPIs monitored by Carbon Kopi include:
Average spend per customer – driven by quantity of units of coffee and food items purchased by customers, and the price charged. Natalie says anything over 200 cups of coffee sold per day is a good achievement. Customers buying food items pushes this number up. About half of customers tend to buy food with their coffee. The ratio of customer buying food as well as coffee is important.
Proportion of eat-in versus take-out customers – generally the higher the ratio of take-out customers the better, since this ultimately results in less costs for the company. Many coffee shops now offer a take-out price which is about 20% less than the eat in price, to incentivise customers to take out food and drink. This is because eat-in results in more costs for the store including labour and overhead costs.
Customer satisfaction – being a single origin coffee roaster, focusing on discerning customers, it’s critical to ensure they consistently provide a quality experience. Natalie consistently checks social media reviews, to establish what customers are saying about the shop. She focuses on recruiting baristas who fit the Carbon Kopi mould of being friendly to customers, good at their job, and offering personalised service.
What are some of the challenges facing coffee retailers?
1. Inflation
Inflation has led to substantial increases in the costs of trading across most sectors of the economy in the UK. As operating costs have increased, businesses in turn need to increase the mark up of the products that they charge to customers to ensure margins are maintained. In aggregate, this leads so dampened demand for customers. VAT rates have reverted to 20%, having initially been reduced to 5% during the pandemic, and thereafter 12.5%. So when you see a cup of coffee selling for GBP 3.60, 60c is VAT, and the shop ends up only getting GBP 3 net.
2. Shrinking disposable income
Higher levels of inflation across the board, and also increased interest rates, which has increased mortgage payments for home owners, and in turn higher rentals for renters, has seen declining levels of disposable incomes amongst consumers, thereby leading to a reduction in demand for consumer discretionary products such as coffee.
3. Shifting weather and traffic patterns
Demand can be reduced by unexpected events which seem to occur increasingly frequently. For example, erratic weather patterns leading to floods on the streets or heavy rainfall can lead to customers not stopping at the coffee shop. In addition, when roads are closed due to repairs, this can lead to a reduction in traffic past the shop and reduced footfall. For example, the close of Hammersmith bridge to vehicles, has seen that section of the road closed which has shifted traffic patterns.
What does the future hold for independent coffee shops?
Although automation will negatively affect some industries, Natalie believes coffee shops will be relatively immune from this, because customers in residential areas value the personal service and human connection. Having said this, some components of coffee shops will be affected by increased automation such as the filter batch brews. Outlets serving the higher end of coffee customers will offer rare coffee beans from around the world, which are stored frozen and freshly ground to serve discerning customers high quality coffee.
In terms of expansion plans, Carbon Kopi intend to open a third outlet within the next 12 months, and ultimately wants to reach a target of five coffee outlets servicing customers in West London.
Conclusion
Natalie and Chris have worked hard to grow Carbon Kopi to the business it is today. Through numerous ups and downs, they have learned many lessons along the way, and are well placed to achieve their goal of having a chain of five shops in West London.