Graham Stephan on the one brand ownership idea you should probably say ‘no’ to:
For those who haven’t been following, a few years ago in 2021, I launched a coffee company with a partner, and instantly, it was a massive success. I think in our first weekend, we did over $100,000 worth of sales. We sold out of everything. It was so successful, in fact, that our Shopify temporarily got flagged because a brand-new store got this huge influx of sales. I guess that triggered something on their back end that was like, “Hey, this could be bad.” So, they had to review it. Everything was totally fine, but it was an instant hit.
I was shocked. Now, even though we didn’t have any crazy profit margins or anything, the money that we did make was just reinvested back into the business to buy more inventory. It was a really strong proof of concept that maybe we were on to something. The sales were really, really, really good after that. For the next year and a half, we saw about $30,000 to $40,000 a month in revenue without barely even talking about it. We did very little promotion. Most of it was just organic, which was fantastic.
However, everything beyond that point proved to be extremely difficult. Why? Well, coffee and shipping prices increased faster and higher than we ever thought was possible. So, we had to raise prices just to avoid losing money on every order.
Ad rates also became very expensive. In the past, if you went to bankrollcoffee.com but didn’t place an order, we could retarget you on Facebook or Instagram to the point where maybe we spent a dollar but made $2 back. That was great—that was a really good investment—so we continued doing that. But when ad rates more than doubled, it was unsustainable. We started losing money on that, so we stopped.
All of this stalled growth to the point where we could continue earning enough just to keep it going every single month. We could raise prices again to try to make a little bit of profit, or I could actively promote it in every single one of my videos to try to drive more sales.
It’s really a tough one because the more I learned about the coffee business, the more I realized just how difficult this would ever be to scale off of my own name. Like, sure, you could have a successful influencer product where your core audience buys it and would gladly support it, but with something like coffee, it would be impossible to scale to a point where I could step back and not be actively involved.
When you have extremely thin profit margins and compete with brands like Peet’s, Folgers, and Starbucks, which sell millions and millions of bags at very thin profit margins because they have a much bigger brand behind them, it’s tough. Like, take a look at Chamberlain Coffee. Despite her huge following, coffee in stores, and consistent demand, it’s losing money. It’s actively unprofitable, and she said this herself. They’ve also invested millions and millions of dollars, which I think is going to be difficult for investors to get a return on capital without Emma actively promoting it to her own fan base.
At that point, it would be better for her to sell it from her own store, direct to consumer, cutting out all the middlemen. If investors are looking for a return on capital, I would say merch and clothing would probably yield way higher results.
Point being, despite Bankroll Coffee having consistent sales, incredible reviews, and otherwise being a success from a product standpoint, rising overhead costs just crushed us. We’d have to keep raising prices and keep pushing more sales just to make it sustainable. That is why, at the end of the day, we decided to shut it down.I guess, in hindsight, we probably should have made the decision a lot sooner, but I have no regrets in giving it a shot and trying something new. It’s also made me realize just how difficult it could be to create a standalone influencer brand that sells without you actively promoting it.
Maxx Chewning’s Sour Strips are a perfect example of this. Most people have no idea who he is anytime they go to Target to buy them. After chatting with Maxx, you can tell just how much he loves his product and has so much fun running it. But my creativity and passion was really just in creating YouTube videos—it wasn’t in building a standalone product.
That is why he sold to Hershey’s, and I’m here in my guest bedroom making YouTube videos.
— end of vid clip: @ minute 7:21
PSA to all creators: Stay outta coffee.
— Tang
Graham Stephan’s owned platform is: GrahamStephan.com.
