'Necessity is the mother of invention': Coconuts Organic on why D2C may be the lifeline small brands need
At the beginning of June, the Cornwall-based company launched its home delivery service across the UK. Although the product is listed in major retailers including Tesco, Ocado, Morrisons and M&S Food, Cecily Mills, founder of Coconuts Organic, believes that the D2C route is a vitally important one for a growing brand such as hers, especially in the current environment.
The COVID-19 pandemic initially caused her ‘a lot of sleepless nights’, she tells FoodNavigator.
"It was a real shock for us,” she said. "There was talk everywhere that supermarkets were pulling small brands to focus on the big ones that shift volume to get stock on the shelves. That was a real worry.”
There were further fears that supermarkets would not launch new products. “Coming into the summer, new products [are] exactly what we want to be doing and [are] a key part of our growth and sales strategy.”
‘The crisis prompted focused action’
Although the brand wasn’t in the end pulled from shelves, supermarkets withdrew promotions. “A brand like ours [needs] these promotions to keep our turnover going and get ourselves noticed,” added Mills.
Meanwhile, a funding round pencilled in during March, plus ambitious plans for a launch in China were both put on hold. The China expansion “was a very significant part of our turnover planned in for this year" and is now planned in early 2021.
In addition, as a start-up, the company, although it qualified for the furlough scheme (which, with only two other members of staff, Mills ultimately disregarded) was not initially eligible for the various support packages launched by the Government to help businesses through the COVID-19 pandemic.
These events gave Mills fresh impetus to explore the D2C options available to her to make it work.
“Despite all the anxiety and worry, I'm very pleased to say that we are now [at the end of June] in a really good position because it prompted us to take really focussed action," she said.
Mills revealed she had for five years attempted to solve the challenge of delivering her ice cream by post. But each time she tried, it had neither been practical (with the product melting) nor cost effective. “But necessity is the mother of invention and we started talking about it again in early April. We were like: 'God, we've just got to make this happen’. And low and behold we've done it."
Packaging breakthrough
The breakthrough was made possible by discovering a “great manufacturer of dry ice and some really great packaging” meaning her ice cream is kept frozen solid during transit in an insulated bag with some dry ice.
"Customers place an order on our Shopify site, we pack it up with dry ice and we get it over to you on a 24-hour courier,” Mills elaborated. “If you order on a Monday to Thursday you will always get it the next day. If you order on Friday or the weekend you get it the following Tuesday."
Mills’ biggest challenge was solving the problem of the ice cream melting during transit. Her options had previously been limited to packing the ice cream in dry ice in either polystyrene options that for her were “ugly, clunky and terrible for the environment” or wool. However, as the owner of a staunchly vegan company committed to using no products made from animals, wool was not an option.
Mills eventually discovered “a completely new to market insulated packaging that's completely vegan” and which can also be recycled. She admits this route is, however, "more expensive because these options are less widely used."
Customers pay slightly more for home delivery: £5.95 a tub (with free delivery on five or more tubs) compared to £5.29 on Ocado or £4.50 on Tesco home deliveries. So why not just order from a Tesco or Ocado home delivery? Supermarket slots are like “gold dust” counters Mills, who is also hoping to attract D2C consumers with more options. A direct link with its customers means it can offer them flavours and ranges not available in supermarkets.
"You can get flavours we are winding down or old stock,” she explained. “We have started to develop some online only special edition flavours which we are really excited about because before now our route to market in supermarkets involved tens of thousands of units for a commitment on a flavour. But this is all changed now. If we want to bring out a limited edition flavour to celebrate August, we can.”
What's the demand been like?
Mills is encouraged by the demand so far 'from launching without telling anyone'. “We’re processing up to a few orders a day which we are pleased with. We want to get to a hundred orders a week, which is a benchmark we want to get to by the end of July. After that, we aim to grow by new ranges of products. You will still be able to go to Tesco and get a tub for £4.50 but the offer that will be online will be much more exclusive, limited edition, low run numbers that you will pay a premium for, but you will get delivered to your home."
Currently, demand is mostly from existing customers. “Obviously customer acquisition is going to be really important,” observed Mills. But she believes she will be helped in this regard by the huge shift in consumer behaviour amid the pandemic which she believes will stick.
"Really significantly, shopping is not an enjoyable experience in any way shape or form anymore,” she noted. When – perhaps even if -- the shopping experience returns to something resembling what it was pre-COVID "the convenience of online shopping is going to be here to stay. If we can realise this opportunity and get ourselves out there and establish ourselves in this space, it's going to really pay dividends.”
Meanwhile, she believes the COVID experience has accelerated consumer desire to indulge in treat items such as ice cream. Despite the stress and uncertainty of lockdown, Coconuts Organic actually had its second biggest sales month ever in March.
The challenge now, according to Mills, is for food brands to tailor NPD to make eating occasions at home more exciting for people. “People's mindsets have changed so fundamentally these past few months. It’s such a big shift so that even when we are allowed out again I think [in home] is going to be a really significant part of how we eat.
“And frozen food has been one of the biggest - if not the biggest winner - from lockdown… the freezer aisle has never had more traffic. It’s a huge opportunity for us.”
The D2C route will allow small brands like Coconuts Organic to tap these trends.
"It's fantastic news for us and transformational for our business because we have always had this model [of] mass market through supermarket because there did not seem like there was any other way to sell ice cream. So us cracking D2C has suddenly not only helped us to get through COVID, but the potential we’ve unlocked is really exciting because it opens up a whole new side of the company that we never thought was available to us."
That direct link to customers "gives us scope to start interacting with them in a really different way".
