Building a Coffee Empire...
business philosophies from Two Bears founder David Schneiderman!
The Come Up highlights successful business owners’ & operators ‘come-up’ stories in an easy-to-read, written interview format.
All content is transcribed from live interviews.
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For this issue: David Schneiderman, Founder & CEO of Two Bears Coffee!
Two Bears Quick Stats:
📅 Years in Business: 9
👥 Headcount: Four
📦 Distribution Network: Canada-wide (soon to be across North America!)
☕ Number of Cans Sold: Millions
💰 Top-Line Revenue: < $10M/year
Before Two Bears…
So I had a bunch of different businesses and I started really young — the first when I was around 13, I bought a CD burner…
I would go to HMV,
buy a bunch of CDs,
make a mix out of the best songs,
burn it,
then return all the CDs and sell the mixes in school.
Nobody was making mix CDs back then - it was actually super unique, and people loved my music and the mix. So I realized, okay, I could sell one or two at school a day, maybe 5…
But what if I went to all my buddies and other schools?
Because I played basketball, I knew kids from all over the city, so I started selling CDs to, other people at other schools who would resell them to their friend groups. And I started making pretty decent money just pirating music!
Jobs never really stuck…
I tried working a few jobs in my teen years - one I lasted only a day, and a week later, I tried out working at a cigar store…
A guy came in, looking to buy one cigar - maybe looking to spend about $50. And I got to chatting with him, gave him the whole backstory…This was Fidel Castro's favorite cigar - he gives it to all the diplomats…
On and on, until before you know it, the guy left having spent $1500 and was happy as could be. I was pumped, but when I asked my boss how much I would make on that sale, he said nothing but my hourly…
I got no commission and no upside for doing a better job.
So I was like, okay, you know what?
Keep the $12 - I'm out!
But in all transparency, years ago, I had a business go to utter shit…
I was in crazy debt, and I had to start my life again. And when that happened, I found a government grant - they pay you to do ten weeks of business school and start a business. This was at the beginning of the green movement when there was no commercial cleaning with green products, so I came up with a whole idea around that, they liked it, and they gave me the grant - so I got paid to go to school.
I ended up starting the cleaning company for a bit, but while I was in these classes, I was having a cold coffee, and I was just like,
Oh, my god. I love cold coffee.
Why am I not doing something with cold coffee?
I always said the next business I started wasn't going to be for the money…
It had to involve traveling,
meeting a lot of new people,
and selling something I love selling.
Because even if it didn't work out, after 5-10 years, at least I could be like, ‘well, I traveled the world. I met dope people.’
I'm not about getting rich, I’m about having a certain lifestyle, and everything aligned perfectly.
The journey of running Two Bears…
Nine years in, it is a completely different business from when we started. Joe, (my co-founder) was somebody I was buying coffee beans from initially, because he was a roaster.
I would write him an email once a month for an order, then about three years in, he was going to Columbia to the coffee farms, and I realized I had to learn a lot about coffee, so I asked if I could tag along and went with him.
And then while we were in the farms, we just realized:
he knows everything about coffee.
he's been roasting for ten years.
he's importing,
he owns a roastery,
he owns cafes.
He hates selling.
I love selling. I like branding, I like marketing.
Opposites attracted.
I liked what he hated, and he liked what I hated — and like most deals, ours was made on a napkin in Colombia.
Transitioning from DIY to major distributors…
I mean, the way I used to make it before, I'd probably be in jail if I was doing that now. *laughs*
I was just selling at the local farmers market and out of the back of my car, and didn’t know everything about food safety that I know now.
The first year, I worked my ass off — 80 hour weeks, and only sold $12,000 worth of product. Most people would give up, and most people TOLD me to give up.
But the next year we did over $100 - I felt progress and was getting great feedback.
Then, in year three, Starbucks launched cold brew in all their cafes, so instead of me having to explain what I was selling all the time, Starbucks educated consumers on a huge scale, so the trend just went up like crazy.
Our growth increased like three-fold, and then Whole Foods Canada reached out and said they wanted it.
We were the first Canadian iced coffee RTD being sold across Canada, but needed to scale up production to get us in all their locations. And that's when I approached some co-packers, and most laughed at me because the quantity was so small and it couldn't be made.
Then I met this one co-packer who was such a cool guy — Rumi. He was just the right guy who believed in it all. So I got to switch to a co-packer, and that was in glass bottles and it was black coffee.
And it's changed so much since then. But that was the real stepping stone where I started to understand food safety, the SQF, GFSI, you know, all the HACCp.
On navigating growth…
You know in professional boxing, where you see these young guys that are like 20-0?
It's because up until then, they've been boxing against chumps.
When you’re fighting chumps, you can mess up and still win the fight. But when you start playing in the big leagues, and you've got Mike Tyson in front of you, the margin for error is really small.
That’s what it’s like for us right now - if we screw up, we’re getting fines that are just disturbing.
So to manage the growth and make sure we don’t screw it up, we brought on a consultant who used to work at Unilever who's helping us with supply chain and logistics — essentially helping us just make better decisions.
We’re scrappy, but we’ve got him and a couple of consultants in the mix.
The one good thing about me is I realize how stupid I am. I am more than willing to ask a million questions because I have no idea what's happening — I'm just trying to just keep moving forward.
And in terms of managing finances while growing - we tried to allocate a certain percentage of every dollar earned into growth, but we were in crazy debt and couldn’t keep the lights on with that attitude.
Now I have a spreadsheet and I make sure before I say yes to an ad campaign that the math makes sense, but there’s no solid rule for allocating a marketing budget…
I mean, we probably should, but the problem is, sometimes opportunities come up you weren’t expecting and you can do an amazing deal and maybe have things blow things up there.
Also, we were at this exact point where our cost of goods were so high, and we knew what equipment we needed, so were like, okay, how much is all this equipment?
It was hundreds of thousands of dollars, but we needed it, so we decided to finance it. We got government grants and loans for equipment, then we could prove we needed the equipment and our cost of goods went down. There was a business case to buy the equipment on loan and pay the interest, and it all made sense.
And that's how we beat that situation - by going further into debt with equipment.
On end goals…
There's two.
One — these zero added sugar drinks that we're making - I want them to be everywhere so people can stop drinking utter shit. I want it to be convenient and inexpensive for someone to buy a great-tasting coffee that has clean ingredients. I want to give people that opportunity.
Two — every morning, when I have my coffee, I want to be able to sit and watch a sunrise on an ocean, or a river, or a lake.
I don't want a Ferrari.
I don't want a Lamborghini.
My dream is to build the perfect day: Wake up, have no stress, have my coffee, read the newspaper, go to the gym, do some work, spend time with family.
I know how much money that costs, and I know what I would need to exit to get that.
On dealing with setbacks…
I think a lot of people give up because they don't really know what they want. They’re down and out because they’re not ‘achieving’ but they also don’t have a clear vision of what they even want to happen.
I mean, it’s easy to get demoralized when you’re not achieving certain goals, and some setbacks punch you in the face just as you’re getting momentum.
There are so many times when I thought we might not make it, but you have to be stoic, like there's no tomorrow. When times are tough, get off your ass, go for a walk.
I'm an 80s baby from Montreal…
When I grew up, there was no crying - it was just get up, do it, and shut up. Times have changed maybe, and I don't know what people do today, but that's all I know. And so I think having the goal in sight, just keeps me motivated. I'm super fortunate that I've met some incredible entrepreneurs, and it all took them 20 years!
So when I'm 9 years in and don't have a lot of money, I don't care because I know it's going to happen…
I believe in our goal!
We're making some of the most tasty, delicious, and healthy coffee products in the market.
We're doing it, and we keep getting better every year.
our product tastes better,
our branding’s better,
we're coming up with new SKUs,
we're learning the game,
we're moving forward.
So do I cry that I haven’t exited yet?
No.
On bootstrapping vs. raising money…
To date everything has been bootstrapped…
It’s been me, Joe, my uncle, my dad, Joe's dad, my credit card, Joe’s credit card and a ton of government grants!
One day, we'll have investors, but there’s no rush. When COVID hit, I wanted to get out of the country, so I lived in Costa Rica in a little cabin, then in Colombia and Mexico for a bit.
You think investors are going to be cool with that? '
I knew that if we had investors, they’d be pushing me like ‘hey, no, you got to be here making sales, doing meetings.’
That's not why I'm doing this.
When we do get investors, they're going to be investors that help us grow our sales, but not change our lifestyles. Joe finishes early because he goes to pick up his kid every single day from school. Would an investor allow someone to finish that early?
Of course, we both have to work, but he finishes what he has to do, I finish what I have to do, and that’s it. And there is a point where it naturally makes sense to raise money - we may even be getting close to it, but it will never just be for the sake of raising money…
It's got to be the right people. And honestly, the dream is to find the right celebrity that wants to put money into this and who really believes in it - that is the real dream, to find the right celeb.
On managing a small team…
Lately we’ve shrunk the internal team and started outsourcing a lot.
When we used to manufacture everything ourselves, there were too many people, but we did a joint venture with a co-packer, so now it's our equipment in their room, it's all professional manufacturing, and we're down to four full-time employees.
We have a marketing agency that we outsource work to. And, yeah, we outsource and pay a retainer and commission on sales - but it’s just so much easier…
What are we going to start learning about Facebook?
Would we make more money if we did it?
Who knows!
But we’re profitable with it - at the very least, it’s not losing us money and it’s growing.
Three months ago, we got rid of the warehouse and office, and now we use a contract warehouse. They do all of our distribution and online fulfillment, which has saved a ton of money.
My worst quality is working with people…I have no problem saying that I'm a bad leader - I'm just no good at it. I mean, I'm a bad coach so building a big internal team is not the wisest move.
And because of that - I love working with agencies…
I met a great salesman who explained things really well to me once…
I was buying natural vanilla from him, and his price was really expensive.
So I asked him about it and he said, “my price is not absurd because of how much you’re going to use in the drink…I guarantee you can put half as much in as you regularly do, and get the same taste.”
And he was right.
So even though it was expensive, it still saved us money, because we had to use less of it.
And that’s the way I feel about keeping a small team and working with agencies - it may be a higher price, but it’s saving us time.
On risk tolerance and going up against the giants…
It's easier now that we have a consultant - it's not just two entrepreneurs saying crazy things and doing stuff that nobody should be doing.
I think having someone like that around, who's smarter than us in things we don't know about, is super key, instead of us just randomly chasing ROI on Facebook ads because we don’t know any better.
But I also think being broke forces you to be smarter…the way I see it, the more money you have, the quicker you lose it. If you have $10 million dollars, it becomes so much easier to start throwing huge sums at things that probably won’t work.
But hey, what do I know?
There's people that started drink brands that are making hundreds of millions of dollars that started way later than us, so I'm no expert.
All I know is what I know…
And yeah, we feel broke right now - it’s nuts! We want to get into this one Shoppers Drug Mart in Montreal, and there's a risk right there. The cost of doing so is pretty much the cost of a condo in Montreal.
And if it doesn't sell, who knows what could happen?
It's scary.
And I feel broke because we are fighting for shelf-space in that fridge against Coca Cola.
Like, we're trying to get into 7/11, and one of the buyers said to us, “I've got Coca Cola, I've got Starbucks… What do I need you for?”
And who knows what kind of funds those companies put towards ads. I don't know what each brand does behind, but the big guys definitely go to buyers and spend money to move competitors down to the shoelace level - that for sure happens.
But you know what?
They've been around so long, they’re kind of like Suge Knight - he used to be a scary dude, but he got older, and he’s not as big and scary as he once was. So I'm going to fight with every last breath I have to get our drink everywhere. And the reason is, I just love selling - so much so, that I don’t even feel like I’m selling.
When I'm going to a buyer, our product is so much better than our competitors, I feel like I’m doing them a favor, so it’s just easy for me.
I know I'm insane sometimes - to be a salesperson you have to be a borderline psychopath, but I saw this growing up as a kid. My grandfather sold moving supplies, and he didn't care if he was with his whole family — if he saw a moving truck pulled over, moving someone, he'd stop and give them a catalog and tell them what they're missing. And he always did it with such a smile, and he was so funny, and I just thought it was dope!
You can walk around, make people happy, make people laugh, and sell them something that makes their life better - that’s what I love doing!
On present day challenges and targeting new markets…
Things just take too long, and it drives me crazy.
When you're scrappy and doing things on your own, you don't need to rely on anybody. You can turn things around in a day, but as you grow, there are barriers where people start telling you things are going to take three months or even longer!
These kinds of things are painful, and it’s a big hit to the cash flow.
When you're not fully sold on one order, but you have pay for another production run, or you have a huge company that wants to put 100,000 cans somewhere, but their payment terms are 90-180 days - like ARE YOU SERIOUS?
You can't say no, but you can't really afford to say yes - but you say yes anyway.
And right now, we’re only in Canada…
We sold in Mexico one time and it actually went so well we ran out of stock. That's another example of a horror story where we didn't have enough product and it got delayed.
So Mexico is starting back up soon, and then we’re going to go crazy in the US. We just did a 5-day road trip through Buffalo, Rochester, Syracuse, Ithaca, NYC, New Jersey, Philly and back - just on a Monday to Friday and hit hundreds of cafes…
And even though it isn’t the smartest or most efficient thing to do, I think I might just do that in 5-10 states and go build the US scrappy! The local boutique places are where all trends start. When we went on our first road trip, it took like three months of follow ups, but now we're selling pallets.
Ain't nothing to do but to do it, you know — you just gotta get in the car, put some gas in and don't be a baby.
Do some push ups when you're feeling disgusting and get back on the road.
Closing thoughts…
I would tell anyone younger or older than me — if you’re just starting out something — just have a goal in mind. Know exactly why you are doing this, because you will be depressed, you will be lonely, you will be heartbroken. You have people that don't want to talk to you because all you want to talk about is this business - they won't want to hear it anymore.
You’ve got to be thick skinned…you got to be an eighties baby for a few years.
I’ve boxed three times a week for about 20 years, and when I am down and out,I just hit the pads and work out till I can't breathe, it’s great.
You're so tired that you don't even have the energy to be a sulky bitch, you know?
Work like that.
That’s it for issue this issue!
If you want to learn more, follow David on LinkedIn, and if you’re building a business of your own and need some support, we should chat!
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