Seizing the Opportunity to Learn from Your Mistakes [Podcast #100]

Ozan Dagdeviren

Hello, and welcome to the startups of London podcast. I’m your host Ozan and the founder of Startups of London. Today, I’m joined by Jordan, co-founder of Lixir. Welcome, Jordan. I’m very excited to have you and talk about the business.

Jordan Palmer

Hi. Thanks for having me on.

So let’s talk about Lixir Drinks, right? The website is next drinks.co.uk. I’ve been snooping around and seeing some interesting stuff. So, tell us all about it.

Yes. Great. So, Lixir Drinks is a tonic water and mixer company. We started in 2018. Myself and my good friend Mate, an old school friend. But we were also housemates, at the time when we started Lixir. We both set up the company then. And we predominately supply tonic waters and mixers to the UK market in particularly the hospitality sector. And we sell to some markets overseas as well.

Just for a bit of context, I would love to understand your background and what made you really want to go into this type of business. Do you have some experience in the hospitality? Is it something of a gap or a niche that you’ve experienced as a customer?

Yes, our backgrounds actually are quite limited. We both started the company when we were about 23 years old. Matt and I both were studying up in Newcastle at Newcastle University. We graduated in 2015. And we both sort of went our separate ways and did a little bit of travelling. And then just coincidentally, I decided to, I wanted to move back up to Newcastle to find work. And Matt was actually already living up there. So, we became housemates. And again, just by chance we both happen to pick up sales jobs in the spirits industry. So, I was working in Field Sales for a company called Diageo, which sell brands, such as Smirnoff, Guinness, and Johnnie Walker…

Do the big ones.

Yes, exactly. And Matt, my business partner, he was working for a company called William Grant and sons, which sells massive brands like Hendricks gin and monkey shoulder. And we’re both doing sales roles.

Now, it makes perfect sense.

Yes, that’s the sort of background of the both of us. And it was around sort of 2016-2017 when we really saw the flavoured gin category, really started to take off in the UK.

Indeed.

So brands like Whitley nail, they were coming out with a new flavour gin, almost monthly. And for us, we thought it was great. Like, particularly, when we were going into bars, we were finding that a lot of our customers were, stocking a wide variety of gins. But then when we looked at the mixer space, you obviously had two or three huge brands, such as Schweppes, Fevertree, and Britvic. But that was about all the categories offered. And there was definitely at that point, it’s changed quite a bit now. But certainly back then there was a limited variety of flavoured tonics on the market, which for us, that didn’t really make a lot of sense given that, if you look at a gin and tonic, in particular, three-quarters of that drink is a mixer, the flavouring is always coming from the gin. And for us, that just didn’t make a lot of sense. But that’s kind of our background. And I guess how we got into the world of tonic waters.

This story is very important, the theme that comes up again and again. And this is something I want to share with our listeners. So, the dilemma is some people think about building a company straight out of the university. And in most cases, it is actually better to start gaining some job experience, and then understanding a certain industry, and then seeing the gaps in that industry. I think that’s an amazing perspective. Imagine you and your co-founder did not have the context that you did, and you start at the same company. Do you think it would be different?

Yes, definitely. I think we’ve Lixir when the idea came about, it was very natural and organic. And it wasn’t in any way forced. I think there has definitely always been something in Matt and I were… We were probably at some point going to start a business. I think, my father has always been sort of self-employed. So, I grew up with him. He worked for himself, and he was always kind of around growing up. He had the flexibility to pick you up from school.

Amazing!

And, he wasn’t sort of tied in to just being sat at an office all day. And I think, subconsciously that probably had a big impact on me growing up. And when I started working for a big company, actually I think always inside thought, I’d love to do something myself. And similarly, Matt, he had some kind of different sort of business ventures, sort of small business ventures that you started up at university, so we’ve definitely always had that inside of ourselves, but it was certain we’ve licks here, as I say, it wasn’t, it wasn’t a forced idea was the idea came about from just chatting one evening having a few drinks, probably about work. And just realised that we thought there was a gap in the market there, and obviously, having a huge interest in the drinks industry anyway. And, we were building experience, we thought, wow, this is a really good opportunity.

Indeed. So, tell us about the business model, you have identified a gap in the market. Also, thanks to your other full daytime jobs. At that time, you have the entrepreneurial itch. And I think, like it’s a theme again, that comes up all the time, people who had parents who were, for example, doctors, or like dentists, if they decide to go into healthcare, they become amazing doctors. Or I think this is the same for sales, same for other types of industries. Or there’s almost a certain very subliminal, subconscious conditioning that I think we go through as children when we try to start to understand what life is about. And then we observe our parents, from a certain perspective, experiencing life. And I think that sticks. So, we have that proclivity towards whatever that is. Of course, not everybody does that. But when they do it, I think they have like a competitive edge towards other people. So, you have the founder mentality, I think, the commercial mindset, you are a founder. You identify the gap in the market, which is amazing. And then the hard bit starts? Yes. So where do you go from there?

Yes. For us, this was the first business, proper business, we were looking to launch. So, there are a lot of things. If I was doing a second round, I’d probably do differently. But I actually think, for us being quite young at that point. And a little bit naive, I’d say actually helped us because it gives you that sort of fearlessness. Really…

Do you remember?

Do I remember…

Any of the things that you would not have done if you were more experienced?

Oh, I think just it comes back to planning. Like, I think we’d have started a lot sooner from when we had the initial idea for Lixir, to when we actually launched the business, that whole process took around 18 months. I think when we first had the idea, we thought we’d have a product in hand in probably about three or four months, which it does take a long time to set up. But I think the thing that held us back by maybe six months towards the end was just kind of striving for perfection, with the branding and just the business in general. And I think, so much has changed since we have actually started anyway, that in hindsight, I’d have, I’d probably just started a bit sooner. I think for us sort of going back to… We did it at quite a good point in our lives where there was, I’ve always been quiet although I’ve started my own business, I’d actually say, overall, with a lot of my decisions. I’m quite risk-averse. And I actually like to have a plan B. So, when we started out, we did quit our sales jobs. But we took up bartending full time, evenings and weekends. So, we had an income stream they’re coming in.

Is it a good match? Because it is customer research, and market research at the same time, this is amazing. I think that’s a very smart thing to do.

Yes, definitely, you gain that kind of operational understanding. And as you say, you hear what consumers are asking for you get market research there. And then coincidentally, the bar, the cocktail bar we worked at ended up becoming our first-ever customer. So…

I loved it.

There’s always that added benefit as well.

I think that’s one of the smartest things that I’ve heard the founder do. Of course, maybe you’ve stumbled onto it by luck, or maybe it was just like a moment of brilliance. But I think it’s just such a good example of the type of action that is needed to start a business up and running in the very first days. What could be better than like, you need to perhaps find some financial stability while you’re building the business? So, you actually buy yourself some runway, which is amazing. And at the same time, you’re immersing yourself in the exact environments and the context where people will make that decision to either buy your product or not. Because I think it’s even important to be able to imagine that interaction, right? Who makes the choice of tonic water? Where do they see it, right? At what moment does that happen? Is it like does the customer have a say in it? And where would that be placed in the bar? So, these are very little things to the insight, they should be amazing I’m thinking.

Yes, even ideas you have that you don’t expect will be big things actually can make quite a lot of difference. So, if you look at our website, you’ll see our full range. Each flavour has quite a distinctive colour. And it is quite colourful and vibrant. And one of the reasons we did that was the, I won’t say which brand, but they’re the tonic brand, we were stocking in the bar, which I worked at before we launched, the labels are all quite similar. And actually, if you’re working, in a late-night cocktail bar, and it’s quite dark, and it’s busy, you need to pick out that bottle quite quickly. And if you can’t actually tell, which flavours which in the fridge without having to closely examine the label, then it does become a bit frustrating as a bartender. So, that was one of our points of difference when we’d go in and chat to customers. And we’d get on to speaking about the packaging. And they’d agree with that. They say actually, yes, that is operationally that is a bit of a problem. Whereas the packaging you’ve got here solves that.

So, you’ve built a certain value for the bartender there. And in essence, the purchasing decision maker, which I think is quite smart. But is it the customer who sees and says, Okay, I want the pink grapefruit one, or like the classic Indian? Or is it in the menu, and then they pick it and then it’s the bartender, who does like picking up and mixing it there.

Yes, so it does sometimes depends. So, speaking specifically about a bar or restaurant, which in our business, we refer to that as the on-trade, and the off-trade being kind of retail. So obviously, the retails are a little bit different. Because consumers will have the choice. They’ll look at the brands on shelf, and they’ll make a decision based on what they see. Whereas in the on-trade, a consumer often has limited choice, because a bar might stock, just one brand of mixer. It’s unlike beer where you’ll walk in, and there could be five or six different loggers on tap, which a consumer can choose from.

And it’s very visible.

Yes, and it’s very visible. Exactly. So where the mixers are kind of a one-in, one-out sort of listing, not all the time, but most of the time. So, yes, consumers often don’t have as much of a choice as to what their service is, they have more influence. Of course, I’m sort of choosing the spirit, which they can see on the back bar. But there are things we can do as a business to solve that. So obviously, when we gain a listing in a bar, or a restaurant will often try and do staff training. So, we’ll chat to the bartenders about the brand about the flavours. We’ll do a tasting, so then they’ve got the information, they need to then help the consumer make a decision. And then when that’s not the case, because over COVID table service has become a lot more popular and people order through menus, on an app or just at the table, we then rely more on making sure that we’re listed on all menus, and we’ve got as many flavours on that menu as possible to help increase our chance of sales.

But because you’ve also worked in that part. So, you have some experience to start with pitches. I think it is a big asset for the business. What was one of the things that surprised you while you were building the first product? So, let’s try to think about it in two segments. One of them is bringing the product to market saw in your first one or two sales points. And let’s exclude the place where you were actually working with… That’s an amazing connection. I think it’s a good place to start. But what was the next sales after that, right? Because that’s kind of like a more neutral experiment. let’s say in terms of the feedback that you would get from the market. Because they don’t know you and most of them want to know you anyways. So, until there, what were the challenges in turn? But that has kind of surprised you and your partner in terms of labelling branding, bottling mixing of the drinks, and then getting them into the bottles. I have no idea how that value cycle works. But what are the things that you were not expecting?

Yes, so there are a few learnings there. Specifically on the production side of things. The barriers to entry for a tonic water business are actually quite high. It’s not like trying to launch gin, which you can buy a small gin still off Amazon and you can make gin and bottle it in your garage for making tonic water. You need a proper manufacturing plant that can pasteurize that can carbonate, that can blend the liquids that can bottle that can put on the caps, and put on the labels, the packaging is not something you can do that well on small scale. So that was something going into it that we didn’t have experience it and then I think that’s why there are actually few competitors in our space, but they tend to be quite big corporations. I think we’re maybe sort of one of four or five kinds of independent, more small-scale businesses well, businesses that did start out, we’ve just single founders more small scale. So, there are a lot of complications around actually just getting the product made. And also, this is something I didn’t realize, because I always assumed starting out you’d ring up a manufacturer and say, you’d ask what their minimum run sizes were, and then you’d placed an order. Actually, it’s quite hard to be able to be given a slot to produce because, for a manufacturer, they’d rather work with as few customers as possible, and be producing the same products continuously. So, for them to flex with even more risk for them, I guess. Yes. So, for getting a phone call from a kind of, two guys in their early 20s, saying, We want to launch your tonic brand, is quite a big leap of faith for them to actually give you the opportunity to bottle with so I didn’t sort of requite realize about the complications there. And then more starting out on the sales side of things, we were a little bit more fortunate because we’d worked in sales that we understood the nature, in how deals are done. So, photonic waters, if it’s a group of bars, they’ll typically sign a contract with a brand. And they’ll sign that deal for maybe one year or two years. So, you could walk into a bar and pitch your brand, but there’s nothing you can… Actually, you might not be able to do for 18 months because they are in a contract until then. So that makes it quite hard as well.

That’s the thing, that’s always what kills the motivation for so many business owners, and entrepreneurs, like with b2b businesses, a lot of opportunities. But anytime you make like a b2b, large scale type of a sale, it’s the lifecycle of that sale is so long, it’s like six months is a good time, 12 months, 18 months, sometimes even longer, and then that itself becomes an issue, right? You might have a product market fit, they might say, we love this, and it looks great, but then you have to hold your breath for 18 months, which is a very unpleasant experience for a first time, or even a second-time founder, but a small company.

Yes, exactly. And that’s, again, like looking at our market, in particular tonic waters, you don’t tend to get that style in gins or rums, a bar can often add a gin to their back bar, and then there’ll be no contract there. Whereas, because it’s more one-in, one-out with tonic waters, it’s hard enough finding, customers that are interested, but then ones where they actually there aren’t any contracts in place or the contracts up for renewal. It does mean you’ve got to really have a clear plan on what kind of groups and customers you’re targeting.

And then the difficulties in the challenges fit the production process aside. Tell us about your growth in terms of the sales and point of sales that you’ve reached. Your number of customers, what are the metrics that you follow that most frequently? I don’t know. But I would love to hear your thoughts on that.

Yes, so there are the metrics we look at obviously, the number of distribution points we have. So, the number of bars and restaurants that are stocking our product, and then we look at the number of cases we’re selling and the revenue and the profit that generates. So, we try and have quite a mix of customers, we don’t want to be reliant on say one national customer, and that makes up 90% of the business. Because if we lose that we’re in quite a bit of bother. So…

Huge risk. A lot of businesses have gone down and worked out.

Yes, exactly. And we felt that to some extent when the first lockdown happened because up until that point, our strategy was we’re going to solely focus on the on trade, which is, the hospitality side, we’re not really, we’re going to build in the on trade, and then we’re going to generate demand and that consumer awareness, and then at that point, we’ll go into retail. Because then the kind of the pool from the consumer will be there at that point, whereas that, in a way, it was our Achilles heel when the first lockdown came in hospitality closed, because, we saw some businesses, that lost 50, 60, 70% of revenue, whereas we literally lost about 99% of our, our revenue overnight when the industry shut because we weren’t in retail, we didn’t really focus on like D to C or online. So that was a huge learning for us. So throughout COVID, we pivoted and gained a lot more presence online. So we launched quite a good online store ourselves and we got a listing on Amazon. And now at this stage, we’ve looked to develop the right pack formats to start entering more retail hopefully in the years to come. But to give you just sort of a Have a flavour of where we’re at at the moment where, in the UK, we are stocked in about 400 to 450. Bars, we supply all those through about a dozen different wholesalers. So it’s actually sometimes hard to tell how many accounts you’re listed in because you might find a bar that sees the brand and a catalogue and they will just order it. And you don’t see that so we sort of estimate within the region of around four to five 450 accounts. And then we also sell into 10 export markets at the moment as well, again, through wholesalers or distributors.

That’s an impressive growth. So well done on that. Sometimes do you take a break and congratulate yourself and your co-founder on what you’ve achieved?

No, not really, actually, if I’m honest…

I knew you were going to say that because it’s one of the founders that I know, too, right? So, this is my reminder to you and your co-founder. Just take a moment, the next time that you meet up and like, celebrate and have one of your Lixirs.

Yes, definitely.

Just look back, take note of your learnings over the years and then reenergize. And then when people don’t do it, I think it’s just a huge opportunity last because I think we deserved that as well.

Definitely, yes, I think like over times, like Christmas and things when you’ve got some time to switch off and reflect, you realize, actually, if you’d have said to us a year ago, we’d have been, selling to this customer, or we recently became the first mixer brand to become a B corporation.

Amazing.

Yes, so, we got that accreditation late last year. And obviously, that was a big achievement, that it’s one of those, but I think when you’re sort of in it day to day, you’re always, on to the next thing, or unfortunately, I think the reality is that… there’s obviously hurdles and challenges on the way. And that takes up a lot of your time and attention as well. So, you do often neglect actually sort of the small and sort of the bigger Wednesday today.

Do you think how people perceive founders has changed over the last five years?

I think there’s more around especially when you look at like LinkedIn and platforms like that, there’s probably a lot more kind of openness. And, I see a sort of people post on quite vulnerable posts now on LinkedIn, and there are conversations around sort of, your, your mental health. So, I would say in a way, I think there’s just, sort of, there’s a lot more, openness there around it. But what about you, would you say there has been?

Honestly, I think it has changed for the worse, I think, yes, the perception of this is not something specific to the UK, I would say but it does mix, to use an analogy, in a certain way with the healthy dose of scepticism that is inherent to the UK culture with the fact that with the US influence, in my experience, founders were seen more as heroes. Now they’re seen more as villains if that makes sense.

Yes, especially there’s a lot when you look at Netflix programs and things, there’s always… it’s traumatised a lot, isn’t it as well. Now, the founder story, when you look at things that have happened with like, we work and Spotify and other businesses like that. You’re right. The founders are often perceived as villains.

It is kind of like what you said, a lot of people who use that title. Because the title itself doesn’t mean anything, right? But it then creates this problem where if you’re genuinely an entrepreneur, trying to build a business, you’re like a serial founder and trying to create value and you do it, perhaps even though you earn less than your data, right? If you were to be an employee, and you’re trying to create value, and you’re kind of this idealistic warrior, right, in some ways, no, that’s kind of perhaps a caricature. But still, I think there are people like that. Now, the conversations that those people have when they say, Okay, what do you do, like, I’m an entrepreneur, I’m a founder. The reaction they get used to be more encouraging is what I’m finding out. Do you know what I mean?

Yes, definitely. I think I try not to sort of think things too much or get caught up, in that. I think actually, having a co-founder really helps. Because it can be, quite a lonely thing; to be a founder. So, kind of having, especially someone like Matt, who’s, one of your best mates as well. He understands it. He gets it, whereas, I could chat with family or friends, and, they definitely would offer some good advice and counts. But they just so don’t quite understand it. So yes, it does massively help me having a co-founder. Yes, not so getting too caught up. And so, the negative side of running your own business.

We are running towards the end of our time. But I just want to finalize this conversation by quickly touching upon a topic, which I find is amazingly important for the success of your business, which is the people relations, and especially the relation that you have with your co-founder. Do you have conversations about whose skill sets match better with certain parts of the business? Do you have like a division of tasks and responsibilities? And with that perspective, if you could also tell me as a founder, what are your growth areas? What are the things that you would like to perhaps focus on in the coming years and be better?

Yes, for Matt and I, it’s developed, we’ve now been, we’re coming up with sort of six years of running leaks here, and it has changed over time. The good thing about having, a really close old friend, as your co-founder is that you can be open and honest. So, we would disagree on things quite a lot. But we’ll do it in a way where we can talk it through.

Healthy disagreements.

Healthy disagreements. Yes. I say we’ve never had a big fallout. But, we certainly, disagree on things from time to time, but we just checked those through. So, I’d say, going back to when we first started out, there was a bit of a plan there on Okay, who’s going to look after what department. I think we’re best placed at selling really. When we get in front of customers, or investors, we tend to convert and do really well. And, we know the business and the product inside out. And there’s definitely that passion there. But we do have different skill sets indeed. how we’re organized, and Matt’s probably a bit more of an extroverted character than I am. So, typically, this is day-to-day at the moment, sort of dealing with more of our shareholders and some of our key customers, whereas I sort of tend to now sort of focus more on the day-to-day and kind of managing, the team we have. And, just making sure we’re sort of moving forward more on a micro-scale. And I’d say for sort of this year, it’s the biggest learning for me, I only was in my sort of sales roles for about years, about a year. So, I didn’t really have a manager to look, I only had one manager to really sort of look up to at that time. And now we’ve got a small team, ourselves. I think just kind of my management and leadership skills are probably something that I’d sort of continue to like to improve on in the coming year.

Jordan, this was an amazing chat. I know what I’m going to do next time. I’m at the bar, I’ll ask Do you have Alexa and I leverage and, and tonic, and I’ll try as many different flavours as I can. And I will think of you and your co-founder, and I wish you the best. I think this is a good success story. As long as you’re happy as a co-founder, I think that’s a big part of building a successful business as well. It is something we tend to overlook, right? It’s like, sometimes I think people make that mistake. Yes, the business needs to be commercially successful. But if you’re having a miserable time, in that five, six years, then why are you doing it? Right? So, I hope this makes you happy, this business and your co-founder. And it makes your customers delighted as well. So good job on everything that you’ve done. It was a pleasure having you on

Yes, thanks. Thanks, Ozan. It’s been great. Thanks for the time.