Cove’s (naturally) sweet taste of success
Maclellan brothers of Antigonish Co. fonrdecasting annual revenue of $100 million
Eight years after Ryan and John Maclellan founded their company at a kitchen table in Malignant Cove, Antigonish Co., Cove Drinks is forecasting annual revenue of $100 million this year.
And that could double the following year.
“It wasn’t very long ago our goal was 10 million,” John Maclellan said during an interview on Tuesday, along with his brother, at a shared work-space facility in Halifax.
The two had just heard from a cousin visiting Maui, who sent a photo of a case of Cove Soda on a Costco store shelf there. Last week, Cove Drinks started shipping cases of soda to 575 Costco warehouses across the U.S., from its canning plant in London, Ont.
“Basically, we were doing really well in Canada, and a couple of buyers in the U.S. reached out to us for samples and for us to come down to meet them. And one thing kind of led to another, they liked it a lot and started quarterbacking it internally and pitching it to each region,” John said about how this giant deal came together.
Maclellan met in person with Costco buyers in San Francisco, Los Angeles, Washington state and Texas. He spoke with other regions on Skype, and they were unanimous in ordering the Nova Scotia-invented drinks.
“It was definitely a little daunting to think about 575 locations. We rolled out Canada last year and … we faced some recipe challenges and a few scale-up things, but it was also a big beta test for us to say, ‘OK, it worked in a hundred clubs, now we’re going to have to do 575,’” he said. “We did each region as a wave. The first region was week one, rolling out as we speak, the Northeast launch was this week, Texas is the week after, San Diego the week after that and then the Pacific Northwest, so we’re still in the midst of it.”
The exponential increase in business meant the Maclellans had to take another look at what they were paying for everything, from ingredients to trucking.
“We were able to put it out to tender and got a super competitive price, so we ended up working with somebody we hadn’t worked with in the past, but that did a lot of U.S. business. With all our new volume we were able to get some of the bigger players in freight, in packaging, across all the different inputs and reduce our costs, due to the volume, by 20 to 25 per cent,” said John.
With Cove now accounting for half the capacity of the plant that cans its products, the cost to manufacture was reduced by 15 per cent, and the brothers are looking at having additional manufacturing done in California, and also possibly in Wisconsin.
The first fleet of a hundred trucks to the U.S. carried 400,000 cases of soda, each retailing for $20, with Costco taking a cut of 10-14 per cent.
“There was definitely some back and forth. You never want to show them your best price at first because you know they’re coming back at you. But they were pretty good to work with,” John said.
Ryan Maclellan, who has R&D under his umbrella of responsibilities, has recently expanded the number of soda flavours to 11 and said he isn’t done.
“I’m not satisfied yet,” he said. “I think we’re at a good place right now with the number of flavours we have, I’d even argue we might have too many flavours. But for me, it’s all about creating excitement and buzz about flavours. There’s always going to be holiday seasons, always going to be partnerships, with let’s say a new movie, or someone famous who wants to invest in Cove and do a custom flavour. There’s always something to do.”
Ryan also had to design new cans for the U.S. market.
The no-sugar sodas, created only last year, have overshadowed Cove’s line of kombuchas, on which the company was founded. The fact the kombucha needs to be kept cold at all times makes it a more complex product to ship and also makes it easier to think about eliminating it.
“It’s part of the foundation of how we got into the business and that was our mission, to push that. Now, kombucha represents less
“We’re getting to the point now where we used to have to fly out to meet somebody, now people are flying in to meet us. They want to see where this all started.” John Maclellan Cove Drinks
than 10 per cent of our business. The plan is to keep it in Canada, it’s growing organically, and Costco U.S. is also bringing in kombucha,” John said. “We’re going to find out in the next year where kombucha lives, overall. Costco is bringing it into the Northeast; it didn’t go boom like the soda, just one region testing to see how well it sells. If that does well, though, we could end up with both products being national.”
The new deal means Costco represents by far the biggest chunk of Cove’s business, about 70 per cent of sales. For now.
“We just got a phone call (Monday) from Whole Foods USA, they want it as well, in almost 600 of their locations, and then someone else who reached out was Target, and they have more than 2,000 stores. So, Costco will soon be around 30 per cent, once we bring these two other national locations online.”
Cove Drinks employs 17 people in Halifax, a figure that’s expected to grow to 25-30 in the next six months.
“We keep building our base of employees here in Halifax,” said John. “We’re getting to the point now where we used to have to fly out to meet somebody, now people are flying in to meet us. They want to see where this all started.”