Le Renoir deal’s sudden delay
Each week, Financial Post contributor Mary Teresa Bitti revisits CBC’s previous week’s episode of Dragons’ Den. She captures what the cameras didn’t and in the process provides a case study for readers, zeroing in on what pitchers and dragons were thinking and what the challenges for the deal are going forward.
The pitch Mathieu Desjardins and the late Claude Pinet, partners in Montreal-based Zeronext Enterprises, which develops high-performance thermoelectric products, entered the Den to pitch their game-changing wine fridge.
Silent and compact, the 30-bottle wall-mounted Le Renoir features cutting-edge electronic cooling technology developed by Mr. Pinet, which eliminates the need for a compressor.
The two men met in the early 2000s over a shared passion for cycling. Mr. Pinet, an industrial designer, had his own design business and had just started working on this new technology. Mr. Desjardins is a chartered professional accountant, who works with small to mid-sized businesses through his own firm.
In 2010, Mr. Pinet sold his industrial design business to focus on Zeronext. “He had shown me the prototypes and the maturing of the technology over the years,” Mr. Desjardins said. “As a friend, I told him to let me know if I could help in any way and he asked me to become a partner.”
Because it has no compressor, Le Renoir is much slimmer than traditional products — only eight to nine inches in depth. Plus, it does not require freon gas. “It allows us to make design driven products for people living in smaller spaces,” Mr. Desjardins said.
“A lot of people have their wine cellars hidden in a basement. Claude’s idea with this product was to present the fridge as art. It looks like a painting and we offer frames for it. Your guests see lovely wine bottles and you don’t have to go to the basement.”
While the applications for the technology are broad, Mr. Pinet focused on wine fridges because the refrigerator market is dominated by giant players such as LG, GE, Samsung, etc. “In the wine fridge space, there is room for newcomers. It’s a good way to enter the market,” Mr. Desjardins said. In addition to selling to individual consumers and to home builders and hotels, he sees the potential to sell to hospitals, schools and the airline industry. “This technology is light, does not consume much energy and is easy to maintain.” While the focus has been on refrigeration, Mr. Desjardins said the technology can also create heat, which opens up new opportunities for product development.
When Mr. Desjardins and Mr. Pinet entered the Den, they had orders worth $400,000. The retail price of Le Renoir is $4,499. The deal The business partners asked for $500,000 in exchange for a 20% equity stake, a $2.5 million valuation. The money was to be used to start production and build inventory. They fielded three offers and accepted an on air deal from Michael Wekerle and Jim Treliving who offered $1 million in exchange for a 40% stake plus representation on the board. In June 2014, Mr. Pinet passed away unexpectedly and the negotiations were put on hold.
“My plan is to call the dragons when we reach $1 million in sales to see if they are still interested,” Mr. Desjardins said. In the meantime, he hired a new technology person with a PhD in physics who further developed Mr. Pinet’s technology.
Zeronext is now in pre-production of a new generation of Le Renoir that is higher performing. They are also developing a smaller unit that holds about 15 wine bottles and can easily fit into a kitchen. “We just got a call from a condo developer here in Montreal who wants 100 units.” A dragon’s point of view “I think the product is great. I’m very keen because the response during the due diligence we did conduct was very positive. It’s unique, beautiful and very functional,” Mr. Treliving said. “We’re hanging tight right now but would love to move forward.” An expert’s opinion John Cho, partner, KPMG Enterprise, says as long as the technology works, the potential is big.
“Le Renoir differentiates itself in an existing market. The key will be marketing that promotes both the aesthetics and the functionality,” he said.
“It’s a matter of getting the word out and penetrating the right communities: consumers, hospitality, builders. As demand grows, they will need adequate working capital and a supply chain that works in sync with demand to ensure they have the right amount of inventory.”
My plan is to call the dragons when we reach $1 million in sales