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Standing out in a crowded coffee market
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The Toronto Star-Elvira Cordileone
Canadians chug 14 billion — yes, that’s billion! — cups of coffee per year, and Diana Olsen helps pump them out.
Olsen, founder of Balzac’s Coffee, runs five coffee houses in southern Ontario and a small wholesale sideline through its roastery in Stoney Creek.
Balzac’s niche is its quality product and European-style cafés embedded in neighbourhoods. In marketing terms, the company positions itself as artisanal, sustainable, local and natural.
Coffee is certainly where it’s at. In a 2010 report, Agriculture and Food Canada indicates it is the most popular hot beverage and the top food-service drink in the country.
Olsen incorporated in 1993. She bought a kiosk and set up shop at Ontario Place. Today, she has annual sales of more than $3 million and a roster of 40 to 60 employees, depending on the season.
“What makes it work is I have an intuitive sense of what customers want, because I’m the customer,” Olsen says. “I look at the sounds, the smells, the touch, the taste from a customer’s point of view.”
Olsen, a native of Vancouver, saw early signs of our appetite for the black brew in 1987, when Starbucks opened its first Canadian store in her hometown. Soon after, she went to France, armed with a degree in French literature from the University of British Columbia, where she worked as an au pair for two years. “That’s where I cultivated my love of coffee and all things French,” Olsen says.
She also developed an appreciation for the welcoming, relaxing cafés she found all over Europe.
After returning to Canada and settling in Toronto, Olsen, 47, ended up in a dead-end job.
She admits it took her two years to summon the courage to start the business.
She named the company Balzac’s in honour of 19th-century French author, Honoré de Balzac, a man so mad for coffee that he wrote a treatise about it.
Balzac’s opened its first store in 1996 in Stratford, around the time, Agriculture Canada notes, that coffee-themed restaurants began driving coffee sales upward.
“The No. 1 rule of life: Don’t launch something into a crowded marketplace unless you’ve got a differentiable proposition,” says Alan Middleton, a York University assistant professor of marketing and executive director of the Schulich Executive Education Centre. A “differentiable proposition,” is a clearly defined idea, targeting a slice of the market, which enables you to craft your sales message to appeal to a set of potential customers, Middleton says.
He lists four rules for niche businesses, all of which Olsen has followed:
• Watch social trends. When Olsen started out, she tapped into the emerging slow-food movement and entered the market with a premium product. As early as 1997, her stores offered fair trade organic coffee, sugar and cocoa.
• Find the right location. Olsen has situated her cafés inside neighbourhoods, in beautiful old buildings and decorated the spaces with a European feel to reflect her theme.
• Manage growth. Do not compete with the big operators before you solidify your niche position.
She opened in Toronto’s Distillery District in 2002, six years after Stratford, in Liberty Village in 2006, and in Kitchener’s Tannery District and Niagara-on-the-Lake last year.
• Move fast when opportunities arise. Once you’re well-established, you have to be nimble or risk pre-emption by the big guys.
Olsen jumped at the chance to bid on two important downtown Toronto sites and won. Next year, Balzac’s will open in a refurbished visual arts building on Ryerson University’s campus and in the Toronto Reference Library, when construction finishes on the five-year, $34-million renovation.
Last month, Olsen appeared on the CBC reality show Dragon’s Den, looking for money to fund the expansion. The program features entrepreneurs pitching ideas and products to five business moguls with the cash and the know-how to make things happen. Olsen asked for and got $350,000 in exchange for 20 per cent of her company.
Bright as Balzac’s future looks, Olsen has taken her lumps along the way. In 2008, she opened a café in Niagara Falls that failed.
The last two years have been hard, she says, but with new partners and new locations on the horizon, Olsen has good reason to wear a big smile.
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