Steep’t Cocktails: No Bartender Required

Do you have to be a bartender to make a great cocktail or need years of experience in the Food and Beverage industry to start a great drink company? Chloe Aucoin, a cofounder of Steep’t Cocktails, talks about what she’s learned with her startup that transforms teabags into skillful, health-conscious, and personalized bartenders. She speaks about the ways customers have surprised her, the ups and downs of entrepreneurship, the value of mentors and partners, funding, and more. Listen, read, or do both.

ERIC: Welcome Entreverted Community, I’m Eric Lomax. I have the good fortune to sit down and talk to Chloe Aucoin. She is one of the co-founders of Steep’t Cocktails. It’s a start-up with a really interesting product. They’ve taken an interesting twist on mixed drinks and it’s the kind of thing I think you can emulate. There are lessons that you can learn from her, and I’m really happy that you’re able to join us. Chloe, thanks so much for joining. Could you do me a favor? And get everybody up to speed on what steep offers.

CHLOE: Oh, absolutely, so Steep’t is effectively a dehydrated cocktail in a teabag. So we use all-natural dried ingredients, like real fruit – ground versions of those ingredients – so real fruit powders, herbs, spices, sugar and sugar substitutes. And they’re all in a familiar tea bag format and the customer just needs to add water and alcohol then let it steep for up to two minutes and you get a restaurant caliber class cocktail.

ERIC: Okay. How did the idea come about?

CHLOE: So we iterated on it quite a bit, but it came about when Alison, my co-founder and I were in business school together, both of us are – everyone these days is a self-proclaimed foodie – we really feel that we are. We went on a trip to Portland, Maine, and really the main objective of the trip was to go to as many restaurants as possible, we had heard that it was like an awesome city for restaurants. And we came across this bar that infuse their own alcohols, and he also had this storefront that had these really cute looking mason jars that have dehydrated fruit and sugars, etcetera. And they were selling them, and we thought, this is so cool, why don’t we take this idea and try to evolve it? And that’s what we did. We took that idea exactly, and took it through a program at our Business School called Startup Bootcamp, and we did a number of customer interviews, realized pretty quickly that no one was that interested in waiting 24 hours or 48 hours for their alcohol to be infused. So we changed the format to start using ground versions of the ingredients, so not only whole pieces of fruit, but also powdered versions, which would speed up the infusion. And then we introduced the tea bag format, and honestly, the other of us really remember where that came from. But we’ve been using that ever since.

ERIC: Now, did you have a… Was there a background in food or as a bartender, was there anything else that kind of drove this?

CHLOE: No, I mean, when I say that, we both just really love the food and beverage industry, that’s really where the inspiration to do something like this came from. I came into business school knowing I wanted to do something entrepreneurial in this space, and the same thing for Alison, and we just – we’re not professional mixologists by any means. We call ourselves professional tasters, but we don’t have any experience in really making drinks. But we just love the concept, and we obviously plan on bringing on a mixologist to our team to make sure that we have that credibility. But at the inception of the idea, it was just a passion for food and beverage.

ERIC: Okay, now, when did you guys start the company?

CHLOE: We started the company midway through our first year of business school, so that was almost two years ago, a year and a half ago. And like I said, we brought it through this program called Startup Bootcamp, and that was a program for students at school who were interested in entrepreneurship, had kind of an idea that may or may not have been flushed out, and we started testing it, and it was really… It was born from there.

ERIC: So what was the background, or what happened in Startup Bootcamp? Was it iterative? Were you sitting back and running ideas across other people? How did that work? 

CHLOE: Yeah, so you bring an idea, you basically create a business plan for it, you do a number of customer interviews, focus groups, and then at the end of the week – it’s a one-week intensive – You pitch the idea. And we learned a lot in that process just through speaking with people. We did so many focus groups; our apartments became labs, and they remained that way for months after. And it was an awesome experience. And after the end of the week, we were like, Wow, this is actually a good idea, and people are really loving it, and we think that it will extend beyond just our inner circles at school, and we continued to test it and it was the case. So, we ran with it.

ERIC: So what surprised you about the focus groups, or I should say, was there something that surprised you about the focus groups, were there things that you thought were going to take off that didn’t… Or something that you didn’t expect that popped out?

CHLOE: Yeah, the biggest and most important takeaway from the focus group was that people want instant gratification. So we moved away from that format of infusion that took 24 hours, to the more instant version of making a drink. The other takeaway was that, really early on when we were working on this, we were like: “we’re gonna be the juice generation of cocktails: we’re gonna have superfoods in all of the cocktails, we’re gonna have all these awesome benefits” and then the more we spoke to people they were like, we don’t care about ginseng in our cocktails. What we realized they did care about was sugar content and carbs. So instead of going the superfood route, we focused on cocktails that people knew and were familiar with, but introduced what we call “skinny” versions of them. Instead of using natural sugar substitutes. like monkfruit.

ERIC: Who’s your ideal customer? It almost sounds as though these are folks that are maybe more… I don’t wanna say health-conscious… We’ll say it that way. Is that accurate or am I missing the mark on that?

CHLOE: No, so we struggled with this a lot at the beginning. We weren’t sure if we wanted to go that route of being a really healthy alternative to making a cocktail, or just really going for that ability to demystify the process for anyone, whether you are conscious of that or not. That’s what we’ve chosen to do is have cocktails that appeal to people who are health-conscious, but also have the full-flavor cocktails that you’ll find it in a bar anywhere

In terms of our customers, at its core, we think it’s women from the ages of 24 to 38, both urban and suburban. It’s people who enjoy indulging,  enjoy the finer things in life. They are not necessarily the experts themselves, but they’re experts in knowing the experts. They have an appreciation for a really well-made drink, but don’t necessarily have fresh orange or bitters on hand. And that’s what we define as our bullseye. But it’s really interesting, because when we look at the data 35% of our customers are men. And while 50% are in the younger age group of 21 to 35, it’s pretty evenly split among the other age groups. So we think we have a really broad appeal, and we’re trying to make sure that all of our branding and everything reflects that.

ERIC: You mind if I ask how you’re getting that kind of data?

CHLOE: Yeah, these are just from Facebook and Instagram ads. Really, we’ve learned a lot about our customer just through testing different ads.

ERIC: I saw your product, I think it was on Fancy.com, and I’m curious, how are you getting the word out? Is it primarily social media, are there other avenues that you’re pursuing what seems to be working best, what seems to be working best, are there things that are working in with some groups of customers that aren’t working in others, could you give a little bit more on that?

CHLOE: Yeah, the most effective way so far has been word of mouth by far. We’re early-stage enough that we are still able to do some research on our customers and try to understand where they came from, even if they didn’t tell us directly. So we found out that we have friends of friends, and friends of friends of friends, and friends of colleagues and co-workers wherever it might be. The word of mouth has been enormous for us, but then Facebook and Instagram have been interesting ways to test, and that’s something that we’re doing right now. We don’t plan on fully leaning into this and using it as our main driver for brand awareness or acquiring customers, but it has been effective so far. We really plan on leaning into the novelty of the product – we’ve gotten a lot of inbound requests for PR. a lot of people just want to know more about it because it’s such a new form factor. So we’re hoping that we’ll be able to get the word out more organically.

ERIC: Okay, now you just mentioned it’s a new form factor, how did you sort of refine that, was there… Did you reach out to consultants, did you just kind of… Did you wing it and how did you come up with the teabag idea and how did you deploy it?

CHLOE: Yeah, no, we didn’t use any consultants, we came up with it really early on. We came up with it through that process of customer interviewing and realizing that instant gratification was so important, and we just thought, “what is something right now that exists that has the same type of delivery mechanism?” And we think that’s how it came up. But, to be totally honest, neither of us remember the exact time when we were like, “Oh, we should use a teabag!” But it’s funny because people know what a tea bag is and are so familiar with it, sp we think that’s one of the main reasons this product resonates so much with people: they’re like, “Oh, we know how to use this”, and even though it’s a different type of application, people understand it.

ERIC: So it’s similar but different at the same time, the…Which is actually pretty cool because then people start to… They know it, but not quite so it’s novel, but not weird, it’s probably the easiest way to put it…

CHLOE: Yeah, and it’s something that we’re really gonna have to be careful about when it comes to messaging and communicating, because we don’t want to create any confusion, which will be easy to do with this type of form factor, but… Exactly, it’s familiar, but different, and so if we can find a really good way just using our packaging or by using one sentence for people to look at and be like, “Oh, I know that is”… Then we’ll have succeeded.

ERIC: Now, you said you co-founded this with Alison, right? How do you guys divide up the work?

CHLOE: So Alison does Marketing and Partnerships, and I handle Finances and Operations. We split it more formally like that, but as anyone who’s working on an early-stage company, we’re both doing everything. We broadly say in our own department, but we work together pretty much all day.

ERIC: I think there’s no way to get around that one. Right?

CHLOE: Yeah, it’s funny, we haven’t figured out the best way to communicate yet. We both just are texting each other all day, just like stream of consciousness, the amount of texts that we can in a day, is insane!

ERIC: Are you both in New York?

CHLOE: We’re both in New York, she’s living in Westchester right now, and I’m living in a city. But we meet up probably about once a week to work together and the rest of the time, we work remotely.

ERIC: Got it. So let me ask you this, are you your own customer or if Steep’t, if you didn’t come up with Steep’t, would you be your customer… Perhaps that’s a better question.

CHLOE: Yes, absolutely! We say this all the time, and I really mean it when we say it. We created this product for ourselves! We absolutely love it. And don’t get me wrong, I love cooking, and so naturally, I actually do enjoy the process of making a cocktail from scratch, but you have to plan to get all the right ingredients, you find a recipe. So it’s actually rare that I will go do that myself, especially now, when we’re not entertaining because of Covid. Nine out of the ten times that my husband and I have made cocktails at home, they have been Steep’t. Easy is really the main reason. The second part is that I’m more careful about my sugar intake now than I was 10 years ago. When you drink cocktails at a bar or even make them from scratch at home, you have no idea what you’re actually putting in it. And that has been a big challenge in the product development process with our formulator. Usually, there is so much sugar in cocktails, so even for our full-sugar SKUs, we’re really careful about not putting above a certain amount in our bags. So yes, yes, yes, I mean it when I say that we are the ideal customer and we really drink it all the time.

ERIC: Okay, I have been known to sit back with tea and leave the thing and they’re sleeping for five minutes or something, does that create a stronger cocktail? is that the kind of thing that… Do you hear that some people are conscious of the amount of time that they steep it? Does that vary or is it just sort of… Or is the goal constant uniformity or consistent uniformity?

CHLOE: No, that’s a great question. One of the great things about this product is that you can really make it your own. The amount of time that you steep will change the flavor. If you steep it for longer, it will add layers of complexity – the flavor will become stronger, it will become sweeter. So we say two minutes because you can get a perfect cocktail out within that amount of time. However, if you leave it in for longer, more of the sugar is going to dissolve, so you’ll get a sweeter taste. For our Spicy Margarita, we use real pieces of jalapeno and pequin chilies. So you’ll get more heat, if you leave it in for longer. If you like spice, we recommend that you just keep your bag in until you’re done drinking. It will get spicier over time, and you’ll taste the sweetness of the pequin chilies, and it becomes really a more complex drink. For Old Fashioneds, we use real pieces of cinchona bark and real pieces of gentian root, which are at the base of what you’ll find in liquid bitters. And so if you leave the bag in longer, the drink will become more bitter. There are ways of making it your own, and that’s something that we think is awesome about the product.

ERIC: Now, how many products do you have in the market right now?

CHLOE: We have three right now, really two and a half. We have our old fashioned and we have our spicy margarita, and what we call our “skinny” version of the spicy margarita, which uses monkfruit instead of sugar. We are currently developing three new flavors. One of them we can say is gonna be a mojito, which I am surprised by how much I like it. I’m not a rum drinker; I’ve never liked rum, but this mojito is so good. So we’re super excited about that. And then we’re also introducing our own take on a Moscow Mule. It’ll be a Moscow Mule with a bit of a flair. And then we’re introducing a third drink, which we’re testing right now. So that’s kind of TBD on exactly what that’s gonna look like. But yeah, there are lots of things that are in the works.

ERIC: Have any other companies reached out to you for partnership?

CHLOE: Yeah, we have had some inbound interest in that. And that’s something that we’re so excited to do in the future. We don’t really have the capability to do it, yet. We don’t have enough inventory to do partnerships really at scale, but we’re so excited to be able to do that. We’re excited to partner with liquor brands; we think that will be a really cool and complementary opportunity. We’re really excited about partnering with different hotels, restaurants, creating limited time flavors, etc. There’s so much we can do, but we have not yet.

ERIC: Or are you running every new product by a focus group or are you just sort of launching it… Taking a swing at it. What’s that look like?

CHLOE: We are… We have a formulator who we love, who’s based in Brooklyn. So, we work really closely with him, and then when we have something that we think is really, really good, we’ll test it. And we’ve been testing it mostly with our inner circles, unfortunately, because of Covid, it’s been challenging to do more. But as soon as we can, we’re gonna be testing on a bigger scale to get more feedback. We’re pretty happy with the way the new flavors are right now, so we might introduce them without having done tests everywhere.

ERIC: What surprised you about the way that customers interact with the product or did anything?

CHLOE: Yeah, part of it was the formulation, everyone has their own tastes and preferences, I happen to be someone who loves spice. We put our 1.0 version of our spicy margarita in front of people and they were like, “We can’t drink this! This is like drinking Siracha.” And so we learned a lot about the formulation, we learned a lot about how people intuitively use a teabag: are they dunking it, are they moving it around, because all those things matter for how long it takes to infuse. Just naturally, when you think about sugar dissolving in something, if you move it around, it will go faster, and so just seeing how people interact with the product has been a really big learning experience. That would be my advice. It doesn’t have to be perfect. Put it in front of people, learn as much as you can. The people who saw version 1.0 still love version 6.0, and we’ll continue to love the final version. Don’t spend your money right away, just spend your time on learning from your customers.

ERIC: If you had 10% more of something, what would it be? I said marketing budget, I said product budget, time in the day, whatever. You can pick one of them, give me 10% more of whatever.

CHLOE: Yeah, that’s such a good question. Right now, I would say product development. If we had more money to spend on product development, I would be happy just because of the stage that we are in the business. We are continuing to develop more SKUs, and we’re continuing to develop more formats. So not only are we gonna have single-serve cocktails, but we’re also planning to introduce a “party size” that can be used in a pitcher, for example. And so product development is really top-of-mind right now. But if you ask me that in four or five months from now, when we re-launch the product with its new branding packaging, etcetera, I think it would be a toss-up between potentially marketing and hours in the day.

ERIC: What if you had to cut 10% of something, where would you pull it out of… And I know that’s a difficult question to ask, but I gotta put it out there to you.

CHLOE: That’s also a great question. I would probably say marketing. It’s tough because Steep’t is a totally new product category, we’re gonna have to spend to educate, but at the same time, I really believe in our product being able to generate organic growth and organic brand awareness for two reasons. First, we’ve noticed that there’s a real viral quality to our product. People love posting, Steep’t. Early on it was our friends that were posting on social media, and then slowly we were like “wait, who are these people who are posting our product on Instagram and tagging us?” And so that was really cool as a founder to see how much attention it was getting on Instagram, just because of the novelty of the form factor, we think. And because of that, we also get a lot of inbound PR requests, etcetera. The second reason is that, because of the nature of our products being dehydrated and light weight and really easy to sample, I think that we can be really creative about how we can get our product in front of people, instead of relying on a model that relies on paid marketing, which we’ve heard horror stories about. We’ve noticed this too, when we’ve done pop-ups. As soon as we get someone to try our product, they convert. The conversion is so, so high, so if we can find a way to utilize sampling, I think that we have a really, really big opportunity to reduce our CAC (Customer Acquisition Costs) and increase conversion. So I would say marketing, because I really believe in our ability to do this cheaply.

We have also someone on our advisory team who is the founder of a really cool CPG (Consumer Packaged Goods) company, and she recently told me that they actually didn’t spend any meaningful amount of money on marketing until they hit $40 Million in sales, which just blew my mind. Again, because of the nature of our product – because it’s so new – that won’t be possible, but I do feel inspired by it.

ERIC: Okay, can you tell me a little bit more about your mentors?

CHLOE: Yeah, so we were really intentional about creating a group of advisors that round it out our knowledge and experience as founders. Alison and I come in with somewhat different backgrounds, but to your point in the beginning, neither of us had experience in the food and beverage industry, so we pulled in a few people that did. We have our commercial formulator as an advisor. He has developed the formulation for a lot of beverage companies that you would know. We also pulled in someone who works in beer and beverage distribution who knows that space really, really well. He’s gonna be an awesome person to have on board, once we start looking at different channels in retail and in grocery. The founder that I was just referencing before, her name is Rosie O’Neil, she’s the founder of Sugarfina. She has been awesome, and obviously there are so many parallels with that company and ours. So we’re really excited to utilize her more. And then… The last person we have is a mentor of mine and Alison’s from business school, who has been with us since the beginning. She’s the one who spearheaded the Startup Bootcamp at HBS (Harvard Business School), and she is awesome. She is an executive coach and she really helped us get this product off the ground.

And we plan on continuing to expand our advisory board, the next person we intend to bring on is the mixologist. We want someone who has a lot of experience in that space, a lot of credibility, and someone who can help ideate on future recipes. Like I said earlier, we consider ourselves expert tasters, but we’re not expert creators, so we want someone to be able to say like, “Hey, have you thought of this flavor combination, or this flavor is really trending right now,” etcetera, so that’s the next person we’re looking to onboard.

ERIC: It sounds like you’ve got a lot of supportive folks behind you, and I always think about those classic cases where it’s like Federal Express and business school was poo-pooed by one of the professors where Warby Parker, I think it was Adam Grant, said he didn’t wanna invest in Warby Parker or up front, but it sounds like you’ve got a lot of folks behind you that said, Yeah, that sounds like a great idea. Is that fair, or if you had a couple of folks that weren’t into it initially, but then jumped in or vice versa?

CHLOE: Yeah, no, we’ve been really lucky. Those around us have been really supportive of the idea from the get-go, we recently raised our first round of funding actually, and we were able to do it only from friends and family and from a handful of angels. We actually were able to not include institutional funding in this round, which is something that we are happy about actually. But we were surprised by the amount of support from our friends and family. I have uncles who we’re close to with, but we haven’t seen in a long time, and I shot over the deck and said “this is what we’re doing. It’s an opportunity if you’re interested in absolutely no pressure” and… We received a ton of support. People really believe in this idea. And we feel really grateful for it. But of course, like any other company, there are believers and there are people who have doubts and we have seen a mix of both, but overall, it’s been overwhelmingly positive and… We’re really excited about it.

ERIC: You said you avoided institutional investors, I can certainly understand why, but can you share why… Or your perspective on that?

CHLOE: Yeah, so at this stage in our journey, let’s call it, I think that we want to maintain the freedom to take the company in the direction that we believe in, not to say that an institutional investor would prevent us from doing that, but you do lose a certain amount of control when you bring in that type of investor. We will likely have to include institutional investment in our next round, which will be great, but we will be really conscious about choosing the right partner, someone really believes in the idea of… Believes in our vision, and we’ll be able to lend the right expertise… I mean, different VCs have different expertise. So in an ideal world, we will bring someone on who, again, like our advisors do just really round out our team. But at this point, we didn’t need to, and so we feel grateful that we’re able to continue to work on it and maintain control.

ERIC: If you could look back to the very beginning, what advice would you give, what would you do differently or what would you share with people to really focus their attention on?

CHLOE: Your product does not have to be in its final state to put in front of customers. It sounds so obvious, but I’m a perfectionist. And this was really, really hard for me. I want it to have a brand right away. I wanted the packaging to be perfect right away. I wanted to have five flavors at launch, but none of that is realistic when you’re so early stage. And not only is it not realistic, it really shouldn’t be the case. You should not be spending time and effort before you’ve spoken to customers – spoken to a lot of customers – and see how they interact with the product and keep iterating on it.

CHLOE: Another big lesson for me was that there are so many… There are so many highs and lows in entrepreneurship, and everyone will tell you that always… If you speak to founders, it’s like, “Get ready, buckle in. This gonna be an adventure.” But I don’t think I realized how low those lows can be and how high those highs can be, and I think that one of the things that really, really helped when things got tough is having a co-founder. I have no idea how people do the type of thing alone. When I’m feeling really low, somehow Alison is always really excited about something else, and vice versa. And I think that we balance each other so well in that way that she has been the reason that I’ve been able to move forward with this project, and I think I speak for her by saying that I’ve been the reason that she continues to feel motivated. So my other piece of advice is don’t try to do this thing alone, you need support, you need someone else who is able to continue to push you through this, so I would say I find a co-founder that complements you.

ERIC: Chloe, that’s it.

CHLOE: Awesome, no, thank you so much for having me.

ERIC: Hey look, I really appreciate it. I hope you have incredible success. Thank you so much. Entreverted community, I hope you enjoyed this as much as I did. Make sure to join in for the next episode where there will be at least one more creative and interesting entrepreneur sharing their experiences with you, keep at it folks.