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Episode 28: When innovative design meets social enterprise

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All Xero In episodes

Hosted by Jeanne-Vida Douglas and Rob Stone

We live in a world of great creativity, innovation and social enterprise – an entrepreneur's dream. So how do you go about creating something that’s never existed before? And is uniqueness alone enough to get people talking?

This week the founder and owner of Frank Green, Ben Young, joins Xero In hosts Rob Stone and JV Douglas to talk about building and marketing a unique business empire.

“You’ve just got to believe in your purpose and just also celebrate your milestones of success,” Ben said. “I think it’s really important, getting your first product in the market or just getting it designed, then getting it manufactured and getting your brand right.”

Tune in to discover how to create a unique business, and what it is that has made Frank Green such a success story.

Small business resources:

Market research for small business – Xero Small Business Guide

Why social enterprise is a good idea, and how we can get more of it – TEDTalk

Pay for your coffee with your SmartCup™ and be rewarded! – video

Episode transcript

Hosts: Jeanne-Vida Douglas [JVD] and Rob Stone [RS]
Guest: Ben Young [BY]

RS: Welcome back to Xero In, you have your co-host Rob Stone and I’m joined here today by JV Douglas, JV how are you?

JVD: Hey, yeah really well, how are you going Rob?

RS: Really, really well. Excited about today, Ben Young the founder and owner of Frank Green is going to be joining us.

JVD: Yeah it’s a combination of such interesting ideas.

RS: I can’t wait to get in there and see how he actually designed this and the real focus on social enterprise – it’s one of those areas that you just can’t help but be inspired and respect people who are involved in it.

JVD: Absolutely, and we’ve touched on it a few times – the enjoyment that people get out of buying things that also have some kind of positive social impact. So being able to sort of tap that vein and give people an opportunity to consume in a good way is lovely.

RS: Exactly right, it really connects the consumer to a higher purpose. So let’s get started and go to Ben.

We’re joined today by Ben Young, founder and owner of Frank Green and CaféPay. Welcome to the show, Ben, we’re delighted to have you on board to talk about Frank Green and talk about the impact that you’re having on social enterprise within Australia.

There’s a lot of water bottles and there’s a lot of reusable coffee cups out there, how do you differentiate your products?

BY: First of all, we call our products smart cups or smart bottles and smart because of the way they look, just in terms of the curves and kind of the aesthetics in terms of very style-led. Secondly we’ve got a patented mechanism with inside our smart cup and smart bottles, so it’s like one handed drinking and customers have really loved that and how we’ve kind of worked to get that right. And then third, very different because we have a smart chip inside both of our products and that smart chip allows customers to pay for their coffee with their cups but it also allows coffee shops and so forth to build lasting relationships with their customers so they keep coming back to their shop more often because they’re gaining loyalty and getting special rewards.

RS: And who actually designed it – do you moonlight as an industrial designer?

BY: When I was a little kid I read this article about the psychology of design and about curves and things like that. And so when I briefed our industrial designer, he was a really hip young bloke and I said to him hey before you start designing the product I need you to go away and research curves.

Because there’s certain mathematical equations that produce curves that are pleasing to people’s eyes.

And the bottom of our smart cup has those same classic curves that they talk of and legend has it that Marie Antoinette’s breast was used to create the curves in those champagne coupe glasses that everyone loves, and everyone loves boobs, boys and girls, it’s a win/win.

RS: And you are actually personifying Frank Green. I saw the video on social media that you did and it is one of the best videos I’ve seen when it comes to marketing a product.

BY: Yeah, and he’s the kind of guy that if he was going out for dinner he would ring the host and say what are you cooking so I can bring a matching wine as opposed to just turning up with a box of Roses Chocolates. You know, he’s that kind of guy, he brings friends together, he’s not opinionated in any way and he loves people for the fact that they’re different.

In terms of the name of the business as in “frank” as meaning straightforward and honest in all the business dealings that we have. And then “green” as in sustainable and just really nice that they’re also the values and of our business.

Basically we’ve created a reusable coffee cup and also water bottle because of the devastating impact of single use products on the environment. So there’s three million single use cups that get put in landfill just in Australia every day and 30 percent to 40 percent of office bins is single use water bottles or coffee cups.

My last job was looking after strategy and M&A for Transpacific which is Australia’s largest waste company and I’ll tell you what – they call them MRFs, Material Recycling Facilities – they don’t recycle hardly any of the materials that you think they do. Mostly they just get put in a bin and taken to the landfill and get buried.

JVD: Why begin with the sort of reusable coffee cup cashless payment and coffee, how did you bring it all together and test it?

BY: So basically the idea came about ten years ago. I had this amazing manager at the time, and as a part of working in this company, he’d kind of challenged us to also come up with other business ideas that we might do in the future. Basically I see it as, you know, coffee is the most traded micro payment in the world. There’s three billion a day and about 1.4 billion of those are in takeaway coffee cups and we have a market for reusable coffee cups. They’re probably less than one percent at the moment.

And so by making a coffee cup that ticks all the boxes, it’s got the right style, design, functionality and technology, you’re bringing reusable products into the mainstream market.

RS: That’s really interesting. So the social enterprise is a secondary angle.

JVD: It’s an outcome, yeah?

BY: Yeah, it was in the DNA of Frank Green in its early days to just look after environmental sustainability because with a name like Frank Green people are going to kick your tires – and I can tell you, just in terms of how we’ve even designed the products and the sizes so they fit into, our shippers that get sent to our customers. We can actually get 102 percent utilisation off a pallet which is theoretically impossible.

RS: That’s incredible.

BY: And our manufacturer is also our finished goods warehouse. So, for example, our competitors, have it manufactured overseas or here in Australia then they come to a finished goods warehouse and then they get assembled and then sent out and I don’t want to have to apologise to anyone for that extra mile in my supply chain.

I see a lot in corporate businesses that environmental sustainability is a second or third-tier decision. It’s once someone complains or there’s some issue that people actually pretend that they care about it and with us it’s in the fabric of our company.

RS: You’ve got two distinct brands within Frank Green, you’ve got the smart cup with that amazing technology baked into it to allow transactions, sharing and networking with other smart cup owners – so what I thought was really cool, that you can go and just shout someone a coffee, another smart cup owner.

But then you’ve also got CaféPay which is for the merchants, could you tell us a little bit more about CaféPay?

BY: CaféPay is an industry solution. So it doesn’t matter if you have one of our competitor products or you have a smart cup or smart bottle, you can still engage in the CaféPay program or solution because basically you can take the band, you know, of one of our competitor cups and we’ve created our own band with the payment technology in it and you can basically take that off and make an otherwise “dumb cup” smart by doing that.

Because we realise that to get mass adoption you’ve got to be able to make sure that we can be in as many cafés as possible and you’ve got many different ways to activate the system or enjoy the system on a daily basis.

RS: You’ve obviously got the connection with the smart cup to be able to pay through that but we’re seeing that it’s very crowded out there at the moment with the likes of Square, Apple Pay, BPay, Tyro... I mean the list goes on and on. How do you envisage it to play out and how hard are you finding it to get more connections with these other providers?

BY: We’ve opened dialogue with all those companies that you’ve talked about. We will integrate into them at one stage because our loyalty and payments platform is unique which is something that someone else can’t do. Starbucks in the UK are giving people a 50 cent – or pence discount if people take their reusable cup into Starbucks which I think is fantastic and it’s – it’s great that such a big company has decided to do that. And the economics of it are in Australia anyway that it costs anywhere between 30 and say 40/50 cents for a single use cup with the outer and also the lid.

So that’s where we can use that benefit that a café wouldn’t otherwise have – to be part of their cost to supply a coffee to a customer. That money then can be used to offset the cost of the loyalty program that they would otherwise implement.

RS: That obviously informed how you priced the smart cup in the mid-thirties, what other factors did you take into consideration to come out with the mid-thirties price range for the smart cup?

BY: So when we first started the Frank Green we actually encouraged some of our cafés to sell it at 20 and others to sell it at, you know, 35 and 40. You can do a lot of research in marketing with like we did, you know, with focus groups and everything but until you get it out to the real world you don’t know. $20 was too cheap because they thought something must be wrong with it. So that was how we came upon the price.

RS: Price dictates quality.

BY: And then from every product sold online we give a dollar, not 10 cents or whatever, to Earth Watch and over –over time we’ve given them an increasing amount of money. And what I love about Earth Watch is that’s all about the science – the citizen science model.

RS: Because you’ve got quite a virtuous cycle between smart cup and the CaféPay. How profound have you found the network effect to be where you have smart cup holders going into cafés that don’t have the facilities there and getting them to come on board with this value proposition?

BY: We haven’t rolled out CaféPay into many places and the reason for that is because to give everyone a tablet and a reader and all that kind of thing is expensive so that’s the reason why we’ve integrated our system into others so therefore people don’t have to have two point of sales, two EFTPOS machines.

So that’s the thing that we’ve done just recently and then we can leverage off the network of a current POS provider to quickly gain kind of market share and penetration. You know, some of these guys have tens of thousands of outlets in Australia that we can now go to that make our proposition really compelling.

RS: You’re talking about supporting local industry which you are doing with the cafés but does that extend to the manufacturing as well?

BY: Yeah it sure does. So this is probably one of the things we’re most proud about. Our manufacturer is third generation manufacturer, so his grandfather, his father, now himself, this gentleman called Jamie Foster. He used to be a 90 percent automotive business when he directly contracted into the likes of Toyota, Ford and Holden here in Australia. But then we had the GFC and his business went from well over 100 people down to eight or nine. And then without his innovation and trying things that a lot of the older manufacturers wouldn’t have done, I wouldn’t have a business.

This guy is like the Doogie Howser of manufacturing and, you know, when I have my first child I’m going to have to call it Jamie and I’m just lucky that it’s a boy or a girl name.

JVD: A couple of years ago I was lucky enough to have a chat with Mark Harbottle who founded 99designs, which is like an online graphic design marketplace. It’s a great Aussie success story. What was really fascinating about our conversation – and we’re going back to sort of 2010 now, is that he was adamant that he was not going to be involved in the business for the long term and it wasn’t because of a lack of passion about what he was doing or a lack of commitment it was because he knew his sweet spot was getting start-ups from a back of envelope stage to sort of profitability point and then handing them over to someone else to run.

How important is it, do you think, for entrepreneurs to know where that sweet spot lies and – and what’s your sweet spot, is this going to be your big approach to business or are you ultimately going to hand this onto someone else and move onto some other social enterprise?

BY: Yeah, good question, I actually get asked this question a lot and I still have nowhere near finished with Frank Green yet. At the end of the day, in terms of our strategy, we’ve got other products that will come out in the future that we’ve recently got patents for.

It’s actually solving a customer problem and I don’t think we’re anywhere near finished that, so yeah I’m not looking to go anywhere.

JVD: Now that’s really interesting because it kind of leads me into my next question. I was going to ask if you were planning to build a global coffee cashless payment empire or if you were going to diversify into new areas.

BY: I don’t think there’s any other way to say it – that we’re going to pick on unsustainable production. So if you could just Google the top 10 products that go to landfill and you probably think about where Frank Green is going to go next. We’ve got offices in LA now, we’ve got offices in the UK, Hong Kong, Singapore.

RS: Do you have any I guess wisdom that’s come from bootstrapping or, you know, working parallel on your passion as well as holding down your day job for the listeners?

BY: Yeah, well I just think you’ve got to believe in it – and I think we did. We’re taking Melbourne and Australia to the world and doing things that have never been done before and I kind of think I’m really lucky to be involved in it.

You’ve just got to believe in your purpose and just also celebrate your milestones of success, I think that’s really important, you know, getting your first product in the market or just getting it designed, then getting it manufactured and then getting into market and getting your brand right, and things like that.

The last thing I would say is I’ve got some really good mentors – the highest level CEOs and so forth around the country that I take counsel from all the time because I definitely don’t have the mortgage on the thought of everything – and I can’t be expected to either.

JVD: So, Ben, you’ve got a really deeply integrated strategy that you’re going forward with, let’s go forward like five years, what does success ultimately look like for Frank Green?

BY: So we would be in every tier one and tier two café around the world and I call a tier one café a destination café like St Ali or Top Paddock here in Melbourne. Reusable products would be basically 30 percent – in five years 30 percent of all coffees that are sold at a café. At the moment it’s – it’s about one percent.

JVD: And what makes a great café experience?

BY: Coffee is kind of a social lubricant of society, particularly in Melbourne and that’s catching on around the world. So I love that community spirit that coffee brings and let’s face it in the morning you wake up and it’s one of the first things I look forward to doing, is actually getting on my bike and flying down to the local café and getting my coffee, like it really is a ritual and a part of my day that I really do look forward to.

JVD: All of this talk of coffee has made me want to go down and visit our local barista and have a chat with him and get my classic skinny latte which I think is the yummy mummy coffee of choice. But thank you so much for coming on the show and sharing not only your business ideas but your vision for using business to change the world.

RS: Yeah, thanks Ben.

BY: Yeah, thank you.

JVD: You know, Rob, what I love about the people we interview is they’re always so multi-faceted. Like who’d have thought that a guy who’s trying to reduce landfill and make coffee cups would have been so fascinated by design.

RS: I particularly respect Ben’s balance between really opening up the category for an industry solution but then at the same time finding the balance with rolling out the Frank Green smart cup to the consumers and it’s got that virtuous cycle effect between the two. I think he’s onto a real winner.

JVD: It’s that being able to answer what’s in it for me for every element along that kind of development cycle, so what’s in it for me for the end user that walks into the café, what’s in it for the baristas, what’s in it for the payment gateways, he’s thought it out so deeply it’s amazing.

RS: Yeah, and a really clever differentiation to the competitors to get that market share.

JVD: That’s it for this week, thank you so much for listening again to Xero In, we look forward to next week’s show.

RS: Thanks everyone.

 

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