He explained that while this may be his first time founding a CPG business, he knows from years of experience covering the food and beverage industry first as a journalist and then at the VC firm Springdale Ventures that long-term success also hinges on sufficient capital, consumer engagement, founder charisma and a hefty dose of pragmatism – all of which he says he is bringing to the table along with the help of prominent investors, including the CEO of GNC, Dream Ventures, Entrepreneur Ventures and Kali Mata.
“Market data and tools are so readily available these days, it has become easier than ever to identify the whitespace opportunity [and] come up with another disruptive brand,” but building a successful business is more than evaluating the market size, being better than the competition and identifying potential acquirers – it is also requires emotional intelligence, impulse control and obsession with consumer engagement, said Yu.
“From day one, I promised myself to ditch this playbook and build a new brand by leveraging common sense as an everyday consumer, just embracing uncertainties, iterating continuously based on real feedback” and bringing to market “something truly differentiated,” Yu explained, adding, “I am proud to say that Diamond Brew is pioneering the brewless revolution here in the US” so that consumers can skip the machine and the line and still enjoy barista quality coffee.
Differentiating ‘brewless’ from instant to sidestep stigma and communicate quality
Yu is positioning Diamond Brew as ‘brewless coffee’ – a term he has trademarked – to help differentiate it from traditional instant coffee that carries a negative connotation of less caffeine and lower quality.
He explained that traditional instant coffee typically is made through a spray drying process that “essentially evaporates coffee liquid with extremely dry air to create a fine powder,” which “also eliminates the origin coffee’s finest aromas and flavors, as well as the caffeine content.”
A typical instant coffee made via this method delivers about 60 milligrams of caffeine compared to a typical cup of home brewed coffee which delivers 80 to 90 milligrams. Diamond Brew delivers 160 milligrams per pod.
In addition, the spray dry process can cause the finished product to taste burnt and unbalanced, he said.
Diamond Brew, on the other hand, uses freeze drying and a patented process to preserve the flavor through a combination of low temperature and an airtight environment, he added.
The result is a more flavorful and caffeinated granule that “resembles the appearance of shattered diamond pieces,” which inspired the company name, said Yu.
He further differentiates Diamond Brew from traditional instant coffee by carrying the image of the “diamond” through the branding and packaging, including in the shape of the pods, which also sets them apart from single-serve pods used to brew coffee.
‘My approach to entrepreneurship is more of a combination of idealism and pragmatism’
Whether described as “brewless” or “instant,” Diamond Brew still faces stiff competition within the soluble coffee category, including from well-known competitors, such as Blue Bottle Coffee, which recently introduced NOLA Craft Instant Coffee Blend, as well as Starbucks, Verve, Intelligentsia and more.
Yu says he plans to standout from other players through strategic pricing and engaging directly with coffee drinkers via social media and direct-to-consumer sales.
“My approach to entrepreneurship is more a combination of idealism and pragmatism. So, I understand that there is a demand for high quality coffee but in the current economy” many consumers also need an option that is affordable, he said.
As such, Diamond Brew is priced as “an affordable luxury” coming in about $2.49 a cup compared to more than $5 for a regular iced Americano at Starbucks in Chicago where Yu is based.
“Research has shown that Gen Z, or younger consumers in general, are spending $31 per week on average at coffee shops and our full pack of 12 coffee pods costs less than $30 for nearly two weeks supply – so in that sense, our price is actually very approachable … while providing that very similar quality that is comparable to a barista experience,” Yu said.
‘Velocity always outweighs volume when it comes to retail’
Diamond Brew is a digitally native brand – going to market first via the company’s website and a TikTok shop – a decision that Yu said will allow the brand to engage directly with consumers and build up a loyal fan base that can help drive foot traffic and sales if and when the company expands into brick and mortar retail stores.
“Retail overall accounts for 72% of the CPG sales,” making it a “channel we are not deviating from in the future,” said Yu.
But, he adds, “velocity always outweighs volume when it comes to retail, so that is why we are approaching each channel with careful analysis and caution.”
He also wants to create a product that will play well in mainstream groceries stores and yet remain “Instagrammable enough so those boutique retail shops” are interested and social engagement online remains high, he said.
