This was published 7 years ago
How Nick Stone built a $20 million business selling Australian coffee to New York
By Cara Waters
At Nick Stone's Bluestone Lane cafes in New York you can order an Australian-style flat white or magic but don't try asking for a frappuccino or caramel syrup.
The 36-year-old former AFL footballer has built a business turning over $20 million a year despite having no hospitality experience by selling the Australian coffee experience to New Yorkers.
"Look at me, I'm not a hipster, I don't have a beard, don't have tatts, I'm a friggin banker and footballer," Stone says.
Coffee and cigarettes
Stone was working as a director for ANZ in New York when he started Bluestone Lane in 2013, inspired by a gap in the market rather than a passion for coffee.
Nick Stone pictured in Sons of Mary cafe in Brighton.Credit: Simon Schluter
"I was drinking coffee twice a day every day to escape from banking because I was working big hours," Stone says. "Going to get coffee wasn't part of the daily ritual because it was a much more functional product, rather than an experience. Secondly, they didn't have much connection with their local establishment, it was just very routine. No one had a local, nobody had any connection. It was just crazy when you think about it. Coffee was so transactional it didn't have deeper meaning, it was just where can I get this commoditised caffeinated product."
Even though 75 per cent of hospitality ventures in New York fail within five years Stone says he realised there was potential in coffee after identifying the similarities between coffee and cigarettes.
"[Warren Buffett] said cigarette companies are the best investment of all time because they are addictive in nature, there is incredible brand loyalty and low capital intensity and phenomenal GP [gross profit] margins," Stone says. "When I look at coffee it's addictive, it has tremendous brand loyalty, all you have to do is look at Starbucks' success, it has incredible GP margins and if you apply the prescriptive focus that we've applied it can be low capital intensity. That pretty much sums up the way I looked at the business."
The Silicon Valley of coffee
Bluestone Lane draws heavily from Stone's home town from a name inspired by Melbourne's streetscape to being one of the first in New York selling golden turmeric lattes and beetroot lattes.
Nick Stone wants to double Bluestone Lane each year: revenue and store count. Credit: Simon Schluter
"In the coffee world Melbourne is the Silicon Valley, it's the most progressed, the most advanced," Stone says. "We lead with that authentic message. We really ideally want to be the leading hospitality exporter in Australia. We now serve over 10,000 people a day. We are certainly the fastest growing, we employ 275 people and will be double that in the next 12 months."
This week Bluestone Lane opened its 20th store in San Francisco and Stone says the aim is for 40 stores next year.
Nick Stone at Bluestone Lane in New York.Credit: Tim Knox
"I want to double every year, double revenue and double store count," Stone says. "We are concentrated on growth and building the brand above profitability because the market is so ripe for it."
Stone has funded this growth through two initial "family and friends rounds", raising $1.5 million and a recent larger investment round raising $15 million.
Stone played for Hawthorn, Collingwood and St Kilda during his AFL career. Here Collingwood's Chris Tarrant waits for the ball while being held by Stone.Credit: Sebastian Costanzo
It's like the F1 car, you can't win the race unless you are borderline out of control.
Nick Stone
"All of our investment has primarily been unsolicited and they are obviously keen observers of the amount of transactions that have happened with our competitors," Stone says.
Near-death experiences
From AFL footballer, to banker to entrepreneur, on the surface Stone has lived a charmed life but he says it has been a struggle at times building Bluestone Lane on the side of a full-time job that he only quit two years ago.
"Balancing that had a big toll on my relationship, it was hard to juggle," he says. "I was working before work and after work and all weekend. I've had some partners come in and out of the business, that has been a big distraction. It hasn't been linear but you have to have that resolve and confidence in what you do."
Stone says Bluestone Lane has experienced "near-death" experiences at least three times.
"Mainly liquidity events," he says. "There have been multiple times I've funded payroll out of my own pocket, it happens, it's that entrepreneurial life. It's like the F1 car, you can't win the race unless you are borderline out of control."
Stone says with 20 stores compared to Starbucks' 25,000 in the US, Bluestone Lane is "a pimple on a whale", with plenty of room to grow and plans to open in multiple countries eventually.
"The support we have from Australians who live in the US or who are tourists," he says, "that has been a little hidden secret of our success. There is no global Australian hospitality success story and we have a chance to be that."