Blender drinks go for a whirl

Each week, Financial Post contributor Mary Teresa Bitti revisits a previous week’s episode of CBC’s Dragons’ Den. We capture what the cameras didn’t and in the process provide 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

Jim Jackson has been in the food business, owning and operating restaurants, working in food manufacturing, importing and exporting, his entire adult life. In 2011, just as K- Cups and singleserve beverages were beginning to take off, a former supplier approached him with an opportunity to enter the burgeoning category. “He told me he had a new piece of filling equipment for three-ounce pouches and could I do anything with that?”

In June 2012, Jackson began selling Blender Boyz single- serve fruit smoothies, cocktail and iced coffee mixes commercially. Manufactured in Mississauga, Ont. with its head office in Markham, Blender Boyz products are sold online, in Walgreens in Florida and HEB grocery stores in Texas. In Canada, Blender Boyz is listed in Sobey’s wholesale division. “We just shipped our first delivery for their independent grocery trade in Ontario,” Jackson says. “We also have distribution in independent single- cup coffee stores. On the food service side in Canada, we have distribution into up to 600 different operations across the country. If you order a smoothie at Sunset Grill, it’s our product.”

Dairy-, gluten-, fat- and nut- free, Blender Boyz uses real fruit (its smoothies contain 55 per cent to 65 per cent fruit purée) and the fresh- packed pouches mean no refrigeration is required — a key differentiator. While its products are shelf stable, similar products from competitors such as Barfresh are frozen. Still, Jackson admits it’s been frustrating building traction, particularly in Canada. Part of the problem: the high cost of listing fees in Canada’s consolidated grocery industry.

Another challenge is that Blender Boyz products fall into three categories. “One of the key mistakes early on was not recognizing that buyers would see these as three different categories. We just saw them as frozen blender drinks.”

Jackson describes Blender Boyz as an old early- stage company and is focused on driving growth across Canada and the U. S. by landing strong retail partners. Sales for fiscal 2016 were about $ 550,000, the majority of which was generated in the U. S. Online costs for a box containing 24 pouches range from $26.99 to $32.99.

THE DEAL

Ja c kson a s ked for a $ 300,000 loan to be repaid at 6 per cent plus a $ 1 per case royalty and a 10 per cent equity stake. It was a generous offer — by design. “We recognized our position and we did not want to have to dilute the company’s value,” Jackson says. The money was targeted to building out infrastructure, sales support, inventory and to fund a package redesign. He received offers from two of the three Dragons he had targeted: Michael Wekerle and Manjit Minhas (Jim Treliving, who Jackson saw as an obvious fit, did not make an offer). Jackson accepted an on- air deal from Minhas, who offered $ 300,000 in exchange for a 25 per cent equity stake plus a royalty of 50¢ a case.

That deal is still in due diligence.

For his part, Jackson is keen to close as Minhas would bring “experience in the category as well as a new energy, younger perspective and strength in social media that could help advance sales.”

Starting April 1, Blender Boyz cocktail mixes will be on Bed Bath and Beyond’s store shelves across the U.S.

“We have hopes that they can do for us what they did for K- Cups.”

He is also working to land retail partners in Canada. On his list: Canadian Tire, London Drugs and Bulk Barn.

A DRAGON ’S POINT OF VIEW

Manjit Minhas t hinks Blender Boyz is a great idea and the cocktail mixes are a good fit with her company. She respects the entrepreneur and the experience he brings. “The product is simple to understand and use. A lot of thought and science has been put into the packaging and making it shelf stable,” she says.

“The challenge is cost. I think the priority needs to be the back end — not retail — which is where I could help. The design of the packaging needs updating. It’s too clinical and should be more fun. As well, manufacturing costs need to be cut. That said, the products are great for cafés and restaurants as well as individual consumers. The potential is huge.”

AN EXPERT ’S OPINION

John Cho, Partner, KPMG Enterprise, says the key will be creating a buzz about the product. “Getting it into retail is fine, but it could get lost in a large store if people aren’t looking for it. If it tastes good and it’s convenient and the price point works, then it comes down to marketing. He should be going to events his target market goes to and doing promotional campaigns.

He should also be on social media creating a following. He needs people talking about it. If it’s a good product, it will gain momentum.”