The story of Toms’ new coffee venture is about more than just beans. It’s also a tale of clean water, lessons learned, economic development, and rebranding a company around its business model rather than its products. All in all, it’s a pretty tall order for a simple cup of joe.
The pioneer of the one-for-one business model, Toms got its start in 2006 by giving away a pair of shoes for each pair of shoes it sold. The concept was simple, easy for consumers to adopt, and incredibly popular – especially with highly prized Millenials. In June, Toms gave away its 10 millionth pair of shoes, and it plans to double that number in the next two years.
Five years later Toms moved into eyewear and now, coffee: Toms Roasting Company will donate a week of clean water for each bag of coffee sold.
Like many mid-sized businesses, however, Toms suffered growing pains from its surge of start-up success. Critics of the one-for-one model say giving away shoes neither alleviates poverty nor creates jobs — and may actually hurt the communities it tries to help by putting local vendors out of business.
“Initially I thought it was ridiculous,” says Toms Founder and Chief Shoe Giver Blake Mycoskie. “This whole business is built on helping people and giving back, and we give a significant amount of our revenue away every year. Now I’m getting criticism because I’m not giving it in the right way?”
At first Mycoskie ignored his critics. Then he got angry. “Ultimately, my anger turned into empathy,” he says. “I recognized that I hadn’t done a good enough job of explaining the level of sophistication of our giving model to the media and to our community.”
For example, many critics thought Toms gave the same rope-soled canvas shoes it sells to consumers to kids in developing countries. Instead, Toms gives away different types of shoes depending on the location — including an athletic shoe, a cold weather boot, and a black school shoe with a reinforced sole, he says.
But there was one criticism Mycoskie couldn’t ignore: the importance of using local manufacturing to create jobs and economic development, rather than just giving aid.
Last year, Toms responded by making and giving away over a million locally manufactured shoes in India, and a million more in Kenya. Last month, Toms also opened a factory in Haiti. Previously, the bulk of Toms’ shoes were made in China.
The move not only created local jobs, but also cut Toms’ shipping and distribution costs. “That focus on economic development came from me responding to a fair criticism,” Mycoskie says. “Embracing that was really good for my business.”
The process of researching economic development also led Mycoskie to the coffee business. He traveled to Rwanda, Malawi, and other places to meet coffee farmers and learn about direct trade. He also learned that water is the top ingredient in making coffee – and that clean water is scarce in the local farming communities where Toms buys its beans. The one-for-one proposition of water for coffee was born.
But Toms doesn’t want to be known as a coffee company, an eyewear vendor, or even a shoe maker. Mycoskie wants his business to be known as a global giving company.
This requires continually evolving product lines – especially with offerings to attract more male customers. “It’s about making sure that we continue to focus hard on the product, because the product is what allows us to do the giving,” Mycoskie says.
Toms also faces competition from the many companies that copied its one-for-one model, from startups like eyeglass retailer Warby Parker to corporate giants like General Mills (sales of Betty Crocker fruit snacks generate computer donations to kids in Africa).
The most successful buy-one-give-one companies will have an authentic story, choose the right markets, and as Toms recently learned, create effective messaging, according to the Stanford Social Innovation Review.
Over the next couple years, Toms plans to expand into new industries, such as hospitality, banking, food and beverages, and technology. The company will also invest in its own retail spaces, like its two stores (with coffee bars) in Venice, California, and Austin, Texas, and about eight more set to open this year. “It gives us the opportunity to tell our own story,” Mycoskie says. We’re all excited for the next chapter.
Lisa Wirthman writes about business, women, & social good. She contributes to Slate, Forbes, and other publications and writes a column for the Denver Post. Follow her on Twitter @lisawirthman.