Juicero: There’s Gold in Cold Pressed Juice

Some of the “disruptive technologies” you see these days just pander to our propensity to seek instant gratification. Take all the food delivery startups you see which VCs are pouring money into. Is there any real value add here? These dime-a-dozen food delivery models all try to differentiate themselves using some clever gimmick but they’re all offering the same exact thing. You order your food from the comfort of your home and they’ll deliver it to you for a fee. That’s hardly disruptive and we already see signs of this bubble deflating. One food related startup we came across recently seemed almost like a joke, yet VCs are pounding at the door to get in on it. Let’s take a look at Juicero.

Juicero_Logo

Founded just this year, Juicero is a “stealth-mode juicing startup” that “is on a mission to help people consume more fresh produce every day“. The Company has taken in close to $90 million in funding so far from 12 investors that include the likes of Campbell Soup Company, Two Sigma Ventures, Google Ventures, and Kleiner Perkins Caufield & Byers. Just last week, Juicero closed their Series B led by Artis Ventures for $70 million.

Now that Juicero is out of stealth mode, we see they want to sell you a 31 pound juice machine made with aircraft-grade aluminum that has 4 tons of squeezing pressure, costs $700, and is operated by pressing one single button. The machine only uses proprietary organic fruit and vegetable “juice packets”, and conveniently connects to your wifi so that it can automatically order more “juice packets” each week. It fits right in to your designer kitchen and you’ll look really cool drinking your 8 ounces of cold pressed juice in the morning like the hip young lad seen below in the merino wool shirt:

Juicero_Machine
(As he thinks, how will I ever afford this thing?)

Let’s take a look at how much lighter your wallet gets as a result of buying one of these machines. The “juice packets” come in bundles of 5, and bundles are shipped once a week. This means that for 2 people to have 1 cup each of cold-pressed juice per day, you’d need to order about 3 packs a week. Taking the average juice price of $7 per 8 ounce glass, you would be looking at $105 per week expenditure or $405 a month just on the consumables alone. If we add in the $700 cost of this machine over a year’s time, you’re looking at $478 a month for exactly 2 cups of juice every morning. Seriously? That’s the equivalent of an average monthly car payment according to Edmunds.com. Juicero tries to throw around the health benefits which may well be the case but using this machine is more expensive than a bad smoking habit.

So why are investors so excited about Juicero? Here’s why. Given the cost of this machine per month, we’re going to have to assume that you would have to be in the top-20% of income earners to afford it. This would give you a salary of at least $92,000 per year. With a tax rate of 25%, this means you would be spending 8% of your net income on cold-pressed juice but never mind that because you can’t put a price on your health, right? Based on the U.S. population of 318 million people or 125 million households, this puts the number of top-20% households at around 25 million. Let’s say Juicero just rocked their marketing like nobody’s business and captured 10% of these households. Going back to our earlier calculations of the minimum orders based on average prices, the consumables alone would be $12 billion a year in revenues and the one time purchase of the machines would add up to $1.75 billion. Those are some incredible numbers and now we can see why investors are lining up to invest in Juicero. If just 100,000 households bought the machine, that still adds up to $486 million a year in consumables revenues.

While there appears to be gold in cold-pressed juices, there’s nothing disruptive about this business model at all because it creates something you don’t need and displaces nothing. Juicero has created a “smart juicer” that I can’t even use to juice my own fruits and vegetables with. Instead, I have to fork over ridiculous amounts of money just so I can feel like I’m getting “my money’s worth” out of it. They are even coming out with a “gift option”. Can you imagine giving someone a “gift” that costs them $405 a month to use?

Lesson here for investors is this. Always crunch the numbers when evaluating a potential business model and never underestimate the power of recurring consumable purchases. Lessons for consumers is to always look at “total cost of ownership” being purchasing a product. For those of you who aren’t privileged enough to be in the top-20% of income earners, or don’t believe that you need another car payment just to drink a glass of juice in the morning, here’s the number one best selling juicer on Amazon.com that will set you back a whole $34.99 or exactly .05 Juicero machines.

Pure-play disruptive tech stocks are not only hard to find, but investing in them is risky business. That's why we created “The Nanalyze Disruptive Tech Portfolio Report,” which lists 20 disruptive tech stocks we love so much we’ve invested in them ourselves. Find out which tech stocks we love, like, and avoid in this special report, now available for all Nanalyze Premium annual subscribers.

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