Milestones make you realize how far you have come in your journey, and how every intuitive decision that you made and risks that you took led you to where you are today. Being a young professional who is taking uncertain and misguided steps to break out of my shell and make something significant and meaningful out of my life, I often confront myself with the impregnable question “Where do I go from here?” And, I wonder how many youths like me, following their own individual journey find themselves in this cross-road.
Searching for genuine, wise and unabashed answers I pursue Mr. Aashish Adhikari, Founder, and CEO of Red Mud Coffee who has always been brutally honest and opinionated. Before start-up culture and entrepreneurship enthusiasm became popular, Mr. Adhikari started his humble start-up with a simple idea “Nepali Coffee for Nepali youth” and today he has built himself a “mini” coffee empire. An inspiration to many youths and hustlers, Mr. Adhikari has strongly critiqued Nepal’s entrepreneurship ecosystems and haughtiness that follows.
Before you dive into reading this article, I would highly recommend that you listen to him narrating his story at Story Yellers.
1. You have talked about the challenges that you faced as a young immigrant to America on several platforms. You are one of the few people to come back to Nepal and find potential here. Why did you choose coffee and how did this journey start?
Some of my friends ran cafes in Pokhara. I am a curious person by nature so I wanted to explore how they did what they did. When I learned that their business was based on Nepal grown coffee I was further intrigued and I asked them to take me along in their sourcing trips to meet coffee farmers. So, I was on a Kavre-Dolakha bike trip, meeting farmers, after finishing the trip I went to visit my grandma in Kavre, there in her garden were two fully grown coffee plants that I had never ever noticed prior to this trip. Upon asking what she did with coffee cherries she told me that she sold it to a cooperative for forty rupees a kilo. In that aha! moment I asked myself two questions: What is the global market for coffee and what can I do about it? If I have to pin it down, my coffee journey started from here.
At that point in time, I had no job, no money but lots of free time in my hand. So, I started meeting and interviewing people from NGOs and started gathering information on how to grow coffee, how to receive organic coffee certification, I was reading data published by coffee board of Nepal and pursuing NGOs involved in coffee industry all with an objective to either be in coffee agriculture or coffee trade, all I thought I had to do was: procure enough coffee for which I needed 50000$, I was in full confidence and I was also in talks with one of my friends in California. But, life had other plans, and I very soon realized that for a new player with no backup cash and support system it was not easy to crack coffee trade.
During those days, I used to regularly go to a cafe in Thapathali (this cafe will, later on, be the first Red Mud Coffee outlet) to basically use their wifi during 16 hours of load shedding and to Skype with my friends back in the U.S. I always felt a certain degree of fondness with that place, partly I was also dissatisfied with their customer service and I used to think to myself if I had this place, I would do so much of a better job with it!
Surprisingly, around October 2012 I discovered that the place was up for sale, so I dropped everything thinking maybe I will be that guy who sells the end product and that’s how I will enter the coffee industry!
2. Are you saying that you made the ultimate decision at that very moment?
I made the decision after receiving a call from a friend who was already running a cafe in Pokhara and wanted to partner with me to run this cafe. However, we could not continue with the partnership, I somehow managed to raise enough capital through friends, family, and friends of friends. And, somehow I bought that cafe in Thapathali. At that point in time I had only one thing in mind, let’s do this business one cappuccino at a time. I started with two helpers and I applied everything that I learned living in the US. For one year all I did was open the shop, run the shop and close the shop. So, that’s how my coffee journey started.
3. We often talk about anchoring effect, founders often fail to fall out of love with their initial ideas how were you able to pivot?
When I started this journey I was already 31 years old! So, all the experiences I had had came into play. Before starting Red Mud Coffee I had worked on other side ventures, although they did not grow to be as significant I learned how to be pragmatic in my approach and learned about my strengths and weaknesses. About 3-4 months into research I knew that coffee trade was a tough nut to crack. I would need to procure in tons. Red Mud was a pivot into different ventures of the same industry with limited sets of challenges one of them being that I had no prior experience in running a cafe. However, despite skepticism, I took upon this challenge.
Well, to answer your question, I am a natural risk-taker. In the past, I had taken some critical decisions that had shown me radical ups and downs. I had also handled business for other people so I had decent clarity about what I was taking upon and what needed to be done in terms of revenue, break-even, and sustainability of the business. I guess my past experiences helped me a lot. Pivoting, was just a mature decision that I had to take at that point in time.
4. Do you consider yourself to be an impulsive decision-maker?
I mentor younger entrepreneurs and I always tell them that you cannot figure out all the questions that are in your head. When you start out on a new journey you never know where it will lead you to. If you find something that keeps you motivated, pursue it. You do not need to be 100% sure. It is essential to take that leap of faith, I just do not believe that everything will be perfectly aligned to ensure that things will work for you. Entrepreneurship is risk-taking and I have an appetite for it. I knew that by investing 25 lakh rupees into a venture and by taking loans at different rates, my decision was being guided by intuition more than logic.
5. In a span of less than a decade you have built a Coffee Empire, what is your process how do you remain persistent despite challenges?
The idea is to focus on small goals. Once you start knocking those milestones off, you will start to see the progress that you have made and traction that you have created. That will keep you motivated and not let your mind wander off. Even with our podcast “Mero 2 paisa” we began with 28 subscribers in December 2018 and now we have 1.32 k listeners. I am guided by my experience I think experience teaches you patience. Moreover, bit of spirituality and visualization also helps. Setbacks are part of the business so spiritual grounding helps you remember why you started out in the first place. We want to be the biggest coffee chain of Nepal and we want to create job opportunities. In the last two years, we have faced several hurdles, raising investment is one of them. But, we know that we can do it maybe two years late but we can do it. Obstacle is the way. There is no straight way to success.
6. How has your style of leadership changed since you started?
I have evolved as a person and my style of leadership has also changed in many ways.I used to be very territorial and reactive. I believe more mistakes you make you have a better understanding of what not to do! I also used to be very interpersonal, stay up late and eat with my staff. But, now I do not get to engage as much. However, I still believe business is run by people and I make a point to share everything with my team and attend training. Although, now I have to focus on the bigger picture so that everyone can benefit from it.
7. Could you recount any particular moments that changed you as an entrepreneur?
The first two years of running Red Mud coffee shaped me in many ways. When you become aware that the brand that you have created has become a lifestyle brand is very special. The second was Rockstart impact of course, where I was an underdog who got the investment. That was the first time when someone had acknowledged my capability, allowed me to believe in myself and also mature in some ways.
Also, earthquake and Blockade taught me how to thrive under uncertainty. We had just opened our second outlet in Jhamsikhel in March of 2015 and had invested 40 lakhs. Imagine receiving investment in one hand and battling a crisis in another. 2015 changed me as a person and an entrepreneur, it made me realize how short life is. It enabled me to understand the importance of the network, good management and potential of young people in Nepal.
8. What are the other challenges that you have faced?
I am actually facing one right now with changed FDI laws. I had an approved file from DOI to open 6 corporate-owned stores and 9 franchises that were our 2019-2022 business plan, we were hoping to receive investment from the same investors in the form of debt. But then investment policies changed. So, now I had to find local funds, revise business plans, and convince investors to come through different investment channels. And then, the government announces that it has raised the investment threshold! How are SMEs expected to thrive if the government makes fickle policies out of thin air?
9. What are your thoughts on Nepal’s entrepreneurial ecosystem?
We are creating heroes out of entrepreneurs but we are not doing anything to support them. Our laws are too twisted and our policies neglect the potential of SMEs, but entrepreneurial ecosystem builders are not doing anything of significance to support entrepreneurs. All these acceleration programs that you hear about are bogus! My only concern is don’t create heroes out of early-stage startups, give them 2-3 years and numbers to show. A start-up has to focus on finance, sales, due diligence, state of the economy, banking regulation, but I see that no one is focusing on these aspects. Entrepreneurs have become the new rockstars, but someone needs to uncover the facade and talk about real issues.
10. When are start-ups ready for investment? And how can start-ups and investors find common grounds?
Once you know you have a working business model, meaning even if you die the business keeps running that’s when a start-up is ready for investment.
Entrepreneurs are good at doing one particular thing very well but that’s not enough to make an investable company. Entrepreneurs excel at building brand value and social currency but often fail at accounts and maintaining balance sheet and that’s where a dispute between investors and start-ups arise. When verbal negotiation does not get reflected in the book of account.Similarly, there are not enough conversation happening in regards to how to do your taxes, how to spend, or how to carry out compliance so that whatever you build in investable tomorrow.
Moreover, both the entrepreneur and investors should share the same goal and roadmap to achieve that vision. If you and your investor are not in the same page dispute is sure to arise. There should be no difference in opinion or in approach.
11. Why did you feel the need to provide employment opportunities to socially disadvantaged groups?
First of all Hotel management graduates do not want to work for a start-up. They would rather work for a five star with lesser pay than what we have to offer. Basically their ambitions do not match with our ambitions. So, I do not see scope in engaging with people who have one foot here and one foot in the airport. Most of my employees are from the far east and the far west. They have responsibilities and families to take care of and they have better drive and motivation to stick with us for a longer period of time. When we started Red Mud we had a helper who is now working in a management position. Instead of choosing to hire a big shot MBA, I thought it was far more rewarding to hire someone who had helped me build this business. One of our past employees now owns his own independent business. Employees who started with 8k are now earning 40k, riding scooters and getting married. It is so fulfilling to see lives change for people because of us. I help them grow and they help me grow my business. That’s why we hire people from NGOs, YTS. Momos that we serve in our outlets are prepared by girls rescued by Maitighar Nepal. This way we have trained and more than 100 people.
12. What are your thoughts on balancing social impact and profit?
You cannot create an impact if you are not stable yourself. Do not be gimmicky, because every business should create an impact. Red Mud does not just provide employment to disadvantaged youth, we pay better salaries than our competitors, we bring them into the digital economy, and also provide them with insurance. With the right leadership and intention, every business can have a social impact. But, your business can not create a social impact if you yourself are not sustainable. Because at the end of the day everything breaks down to finance. However, it is also an entrepreneur’s responsibility to be socially mindful. The key is to find a sweet spot where profit and impact overlap.
13. What is your supply chain like?
Our coffee comes from Nuwakot from one of the biggest single owned farms of Nepal. We have a roasting facility in Swayambhu and a central kitchen in Jhamsikhel. Our warehouse is in headquarters.
We tried different ways to outsource coffee, we tried some local suppliers, bought coffee on our own from farmers of Arghakhanchi and Syangya but it was way too time-consuming and capital intensive. 90% of cherry pickers in Nuwakot farm are women. And we buy 3 tons of coffee from them which helps in boosting the local economy of Nuwakot.
14. What is one coffee myth that you would want to debunk?
There are many retailers who say that they buy from local farmers, but if you do the math the number does not add up. If there is a demand for 100 tons of coffee in Nepal, 40 tons is produced by our farmers. The major part of which is exported by Zaika and Helvetas. We buy 3 tons. So not every coffee that is being marketed as organic is organic and locally produced. Similarly, not every cafe has SEA certification, although they might market them as one.
15. Do you see potential in the coffee industry?
Massive. Coffee is the second largest traded commodity. Nepal has huge potential but we have not developed the capacity to meet global demand due to various reasons. Primarily because it is time, labor and capital intensive. On the flip side, it can grow on sloped lands and are not easily infested. But, it is one product that can change a life. If the Nepal government pushes it from the national level it has great potential and value.
16. What is the Red Mud Vision and what are your future prospects?
A local Nepali coffee shop for Nepali coffee drinkers. To see Red Mud cafe in every corner and see people walking with red mud coffee cup in their hands. Our future plan is to expand to 20-25 new outlets all over Nepal by 2022 If I am able to raise enough capital.
17. In your episode of Story Yellers, you said pursue what your heart wants. For us youth, how do we figure out what your heart wants?
Just keep living, experience all the experience. I decided my life had to change at 29. You do not have to figure out what you have to do by 21. When I decided to leave the US many of my friends who had respectable careers were leaving the country, but I decided to come back. I was homeless for 10 days in the US. I had already hit rock bottom. So, make mistakes, gather all the experiences and learn from them. That’s when you will know what your heart wants.
Interviewed and article by Shambhavi Singh.