Updated: Jan 31, 2019
“Fuck investors for a while, let’s work and do this.” -Quote of the founder, Alejandro Franco.
Three colombian business guys, studying in London, moving to Denmark and doing deep technology stuff: Kaffe Bueno extracts valuable oil from used coffee grounds and sells it to cosmetic, food and pharmaceutical companies for half the market price. The startup has patented two technologies, has deals to collect used coffee grounds from major companies around Copenhagen, and will be expanding to France and Germany in the next years.
Next year the startup will establish the first coffee ground refinery, and will be able to process 5 tonnes of coffee grounds per month for 18 months; after that, the team is planning to expand to France and build an industrial refinery in Germany, where they’ll be able to refine 100s of tonnes of used coffee grounds per month.
In this episode you’ll learn
How Kaffe Bueno uses waste to create amazing value and build a business
What mindset will help you deal with fuck ups
How to be more organized and get shit done
How to stay motivated on shitty days
Why impact without profits is not a sustainable business
Why he wouldn’t do anything differently, looking back
And so much more!
Kaffee Bueno started as a completely different business and was originally a university project during their studies in London. Most of their friends were swedish and they love coffee a lot. Alejandro then explains how they were assigned to make a business plan. And that is where they finally decided to make it happen. They wanted to build a business that doesn't just sells coffee, but addresses the severe issues the farmers have in that segment. He sums these up with "bad conditions in which the farmers are forced to work and live in due to the unfair scattering of the welfare along the supply chain". And that is why they wanted to build a bridge between these farmers and a more sustainable consumption. The idea was to directly trade coffee from colombia, roast and sell it in scandinavia through an online subscription platform. Far away from what they are doing now.
Their teacher in the entrepreneurship course was a venture capitalist - professionally investing money in startups. He invited them for a coffee and actually offered them money for their project. It was cool to see that someone like him was interested! They rejected though, because it was a quite shitty deal. So they thought: "If someone like him sees potential, we should try it ourselves".
Then they figured out that they want to do their coffee business in Denmark because it is one of the top coffee consuming countries. Further the danish government had a programm that helps foreign entrepreneurs to start their business, which was quite comfortable.
On top of that they realized that there are a few companies in Denmark doing stuff with coffee waste. They didn't know the science behind it though. And this turned out to be one of the biggest challenges for them. None of them had a scientific background. The investors weren't convinced of their bold statement: "science is available to everyone". It turned out to be the truth though. So what they did is sell their coffee during the day and learn about biochemistry during the night. They have all worked within the coffee industry for a long time, so they knew a lot about different value chain steps. So they knew that coffee comes with a lot of healthy compounds and they wondered why it wasn't being taken advantage of it in more areas. But as they were business guys they haven't focused on the deep technology behind it. To name a few benefits of:
Increases collagen and elastin
Increases blood circulation
and many more...
So they can basically use this for night and day creams, serums, face oils, sunscreen, shampoos, soaps and many other products. Alejandro explains that they get 100 Euros for a liter of coffee oil in the cosmetics industry. The price for this was at around 300 Euros before. And he claims that they are still making better margins than their competition. One question they had to find answers to was if all these good compounds were still there after the coffee had been made. Another question was what happened with the coffee waste? They found out that what makes the coffee grounds so healthy, is also what makes them so harmful to the environment (it usually generates methane in the landfills where it gets dumped). They found out that the oil is the thing that traps most of the bioactive compounds that are really good, and also found out (through google) that there was already a lot of research done by scientists that supported the health advantages. They found out that companies don't use it, because the coffee grounds are full of water when thrown away and it develops mould and bacteria after a couple of hours, which compromises the quality of the consequent products. They then developed a drying system that they put in the so-called collection points, meaning restaurants, hotels, etc. which prevents the generation of mould and bacteria. This system reduces the logistic costs of waste management of these companies by around 60%.
How three business students build the technology
They have financed their whole journey with their own savings up to a certain point. They started to make a little money with the first sales which kept them running. And then they have received many grants and funds that allows them to keep going. One cofounder took the lead on the technical aspects by asking Goolge the right questions. He found out that the only people that had the technology to extract the oils in denmark were the DTI (danish technological institute). They approached them to get some funds, they rejected us initially. They didn't trust these three colombians, in their mid 20s trying to use their machinery for some weird stuff. So they decided to send the coffee to China to extract the oil there to show them that it is possible. Then they were granted the grant, to work with them. Further they were able to optimize the extraction and the proof of concept. And from there things started to go well, they changed the whole business and got more funding but only for continuing R&D. Now they are looking for more funds to establish their own biorefinery, to scale up from the lab scale to an industrial scale. They will patent the drying technology. And they are getting their first machine next year to establish Scandinavia's 1st Coffee Bio-Refinery! This keeps them going for the next 18 months. Then they are planning to scale up the pilot in Denmark, and expand to France as well as Germany. Thereby they will be able to refine 100s of tonnes per month!
"It is and was definitely tough. But the ups and downs of this startup experience are better than sitting in front of a computer on a 9-5 job." - Alejandro Franco.
They are in constant need for used coffee grounds to produce their products. They were initially very concerned about it because they thought that coffee shops are restricted in space and standardisation in logistics. They have found out that especially big companies are more flexible in the ways of doing things for waste. It was a surprise first but then when you do the math you realize that there is also a higher potential in waste costs reduction in it for them. Alejandro mentions a hotel chain they partnered up which produces 22 tonnes of coffee waste per year. 10-15% of a bars or hotels waste management costs relates directly to coffee. And Kaffee Bueno offers a free recycling service by taking it from their hands. That is quite awesome! And all this by using technology to extract 10% of the coffee’s weight in oil.
Weekly book recommendation
Winning without losing, by Martin Bjergegaard, helped Alejandro organize his time, energy and efforts and get more done
The One Thing, by Gary Keller, gave him the tools to find more purpose in what he was doing, helped in prioritizing his time, and made him see the importance of the ‘non-work life’ for your ‘work life’.