This Entrepreneur Bet His Existing Business to Launch a Coffee-Shot Brand
Entrepreneur's New Year’s Guide
When Neel Premkumar stumbled upon a market opportunity he believed could become a billion-dollar business, he bet his entire business on it. It's since paid off five-times over.
That opportunity is providing caffeine in the form of two-ounce coffee shots with Premkumar's Forto (a take on the Italian word for strong) brand. Premkumar's company, Dyla, first came to the market with Stur, a natural water enhancer, in 2012. Forto launched three years later. Now Forto products are sold in 50,000 stores, and the brand has grown 400 percent year over year. Its top sellers are its Chocolate Latte, Vanilla Latte and Donut Shop Sweet & Creamy Latte.
Premkumar spoke to The Digest about his company's origins, building the business through the military and why he won't allow it to fail.
This interview has been edited for length and clarity.
How did you get into this business?
I started our company about seven years ago with our first brand, Stur. We compete with Kool-Aid and Crystal Light, but we use all-natural food extracts. I started it because my wife was pregnant with our twin girls at the time, and she wasn't drinking enough water. She kept asking me to find natural mixes that we could use to make water taste better, and I had a hard time finding anything on the shelf that was natural. I started working on the side with a friend who's a food scientist, who mixed fruit extract and stevia leaf extract to get a little sweetness. I gave it to her, and she didn't know that it wasn't a product on the market.
Forto launched about four years ago, and it was a big risk. I kind of bet the business on it. We were building out Stur, and by then we had probably $10 million dollars in sales and were growing pretty quickly. I'd invested in a production facility to be able to make these two-ounce concentrate bottles for Stur. I was drinking a ton of coffee and energy drinks and shots and kept thinking, there's gotta be a quick, easy way to get an espresso to go. How come nobody's ever done this? I was trying to figure out how to do it myself. I realized pretty quickly that when you brew coffee to make it taste the same that day as it does 12 months later, it's difficult. There was an opportunity to do it, but we'd had to invest all the money I had raised. I took that risk and put all our money into the Forto side, and it ended up working out. Four years later we quintupled the business.
Why did you believe so strongly in the idea?
I looked at the market size. I was drinking a lot of coffee and energy drinks, and you could look at how big the space was for an energy shot -- like 5-hour Energy is a billion-dollar brand. But while 5-hour has about a 7 percent penetration of U.S. households, coffee has an 81 percent penetration. So there is a much bigger market out there.
Forto and Stur sound like they appeal to two different markets.
It was very difficult the first year or two. It was completely different categories with different supply chains and ingredients suppliers, different selling strategies and routes and markets. It's not easy. It's almost like we're running completely different companies together. That adds to the complexity. On the flip side I wouldn't have done it any other way. We were able to leverage the growth of Stur and build it to put resources into Forto.
How do you balance both?
Across the business what I do are the key priorities -- for the week, month, quarter -- for both parts of the business. What has to get done on both sides of the business to maintain growth? On top of that all are nice-to-haves. Those investments on both sides we prioritize, and priorities would typically go Forto first.
How did you land your first big distribution deal, and who was it with?
The U.S. military. I had a meeting with them at a base in Richmond where they make buying decisions for all the commissaries, messes and the stores that they have on military bases around the world. There was an open call for entrepreneurs to share their food and beverage products. I was presenting this concept of a Forto coffee shot to the buyer, and the colonel in charge of the base happened to walk by at the time and was just like, this thing is really cool. Can I try it? He loved it. We went into every base around the country right next to all the Coca-Cola coolers, and then from there it snowballed.
What can other entrepreneurs learn from that experience?
There's a combination of luck and persistence that's probably fueled pretty much everything we've gotten over time. Most people may not have even taken the time to go to those open casting calls. But you'd be amazed at how much random luck is generated by putting yourself in those spots. I'll give you another example. With Stur, our first customer was Kroger. I cold called that buyer like every other day for maybe six to seven months and eventually I got him on the phone. He was like, "I literally have 10 seconds, I don't want to talk about this." I told him I already emailed you. If you don't mind, open your mail at 2 p.m. last Wednesday -- and he found it. I was able to convince him over 30 seconds to give us a test in 30 stores, and from there we have 12 to 14 flavors in all 2,000-plus Kroger stores. Persistence and a little bit of luck helps.
What is a big challenge in your industry and how were you able to overcome it?
In beverage, the major challenge is distribution. Basically, three major companies -- Coke, Pepsi and Keurig Dr Pepper -- control the overwhelming majority of sales in the industry, because they distribute in their own trucks into all the stores around the country. As a smaller company, without a partnership, it's difficult to get the full distribution nationwide. A couple years ago Keurig Dr Pepper took an investment stake in our business. We've since rolled out nationally in their trucks and so have rapidly scaled the business. We'll probably be in about 100,000 stores this year.
Before starting this company, you were at Nestlé. What did you take away from that job?
Seventeen to 18 years ago I was a brand manager at what was Pfizer's Advil business. I went back and got my MBA and started a marketing agency, and I sold off my stake in it. Then I joined Nestlé and ran internal entrepreneurship for one of their groups. I worked at the company, and now I'm back on my own. It's great working at a big company in some areas. They are terrific at managing data. They're terrific at thinking about all of the problems and challenges that might occur. There are many more resources you can tap into, and people will take your call and really do anything you ask of them. The urgency and speed at a lot of large companies aren't quite there as much anywhere close to what they could be as a startup. So one of the things that I realized was, as a startup, while we can't compete on money or distribution, we can compete on speed. We can be much faster than a Nestlé by conceiving an idea, developing packaging, the formula, the product, launching it in stores within two and a half months. Then finding out if it works, or if it doesn't work within another two and a half months, killing it. That ability for us to move fast in the market has really made a difference for the business.
Can you tell me something interesting about yourself that you think helped you launch and grow this business?
The name of our company is Dyla. My two girls' names are Dia and Nyla. When I started the company, before they were born, I named it after my kids. I did it for a very particular reason that I have remembered over the past seven years: I could not possibly let a company that I named after my own children fail. And so every time it was tough or I felt I wanted to stop -- I would remember the name of the company. It really motivates me.