❧Brunch-a-go-go

A drink and food carrier for your go-go life

UC Berkeley Extension - Spring 2014, New Product Development, Stephen Sorger

❧Process

1.

Assemble Design Team

2.

Identify Market Need

3.

Define Product

Spec.

4.

Generate Product

Concepts

5.

Select Product

Concepts

6.

Design New

Product

7.

Protect Intel

Property

8. Prototype and Test

9.

Develop Econ

Model

10.

Launch

❧Team

Kyle Garton

Project Manager

Ziyue Zhang

Industrial Designer & Engineer

Hristina Bencheva

Marketing and Finance Manager

Robert McKee

Legal Counsel

Ashish Virmani

Mfg Engineer & Technician

Lead

Project Coordination

Schedule

Budget

Calculations

Design parts

Create ideas

Aesthetics

Human Factor

User Interface

Market Need

Competition

Launch

Funding

Costs

Break-even

Name

URL

Patent

Competition

Launch

Manufacturability

BOM

Processes

Prototype

Market Testing

❧Market Need

54% of

Americans over

the age of 18drink coffee

every day

Americans

drink avg.

3.1 cups/

day

65% drink it with

breakfast

30% drink it in b/w

meals

19%of Starbucks

sales are food

items

52%take out and

consume it

off-premises

The

U.S. spends

$40 billion

on coffee each

year and rising

Source: Harvard School of Public Health

http://www.hsph.harvard.edu/news/multimedia-

article/facts/

http://www.sbdcnet.org/small-business-research-

reports/coffee-shop-2012

❧❧ Need 2 hands to carry

❧ Focused on holding multiple drinks but not food

❧ Are unstable

❧ Not reusable

Current Solutions

❧B2C

❧ Busy individuals (students, professionals, etc..)

❧ buy drink & food item (for breakfast/lunch)

❧ wish to consume offsite or deliver

❧ Individuals who need “giftbag” for branded mugs, cups etc.

B2B

❧ Coffee shops & tea houses

❧ Restaurants offering breakfast and lunch

❧ Gift stores

Market Segments

❧Specifications - Market Comparison

MetricBrunch a go-go

Cup Tray Cup Carrier Bag

Cup Capacity 1 4 2 or 4 N/A

Designed to hold food Yes No No Yes

Stability High Low Mid N/A

Cost inexpensive inexpensive inexpensive inexpensive

❧❧ Metrics

Final Specifications

Item Name Target Description

1 Load >2 Lbs Could lift big coffee (20oz/590ml) and food (2 lbs).

2 Depth 13<x<18 cm

Deep enough to have cup in the bottom and food on the top.

3 Variability(Hole Size)

7<D<8 cm

Make sure to meet all sizes cups’ bodies. Not too deep, not too shallow.

4 Stability -- Cup would sit in the hole stably on horizontal without any leaking.

5 Cost <10 Cents Unit cost should be less than 10 cents (per 100,000).

❧Methods:

❧ Brainstorming - discussed available solutions and their flaws

❧ User input - team members, friends, survey

❧ Competitive Study

Design:

❧ Team members each created a design

❧ Decomposition & Combination of best features

Concept Generation

❧Concepts

Insight: stability is important

Carrier Handle -Decomposition &

Combination

Carrier Base -Decomposition &

Combination

❧

Improvement Ideas: Nicer handle; increase structure rigidity for stability, reduce cost

Concept Selection

Selection Criteria

Capacity + 0 + +

Stability - + - -

Cost + 0 + -

Ease of Mfg. + + + -

Aesthetics 0 + 0 -

Material 0 0 + -

Total 2 3 2 -5

Ranking 2 1 2 4

❧Design

❧ Schematic

❧❧ BOM (per unit)

Design

Item Name Description

1 Body Hard paper (made by 7-layer soft paper), 0.5mm

thickness, 41*41 cm

2 Handles Wrapping paper, 25*50 cm

3 Glue Safe, non-toxic, 2g

4 Print Customized Logo/print

❧Alibaba Cost Quote

❧❧ Cost (per 100,000units)

Design

Item Name Description Price

1 BOM Material cost listed in BOM. $800

2 Fixed Cost Board cutter, paper folding, handle

rolling, paint printing. All outsource.

$1600

3 Assembly

Cost

Most of assembly work are done by

machine.

$200

4 Others Burden rate 10% for materials, 80% for

labors.

$320

Total $2,920

❧Intellectual Property

Trademark Search Domain Search

❧Patent Type: US Provisional ($130).

A PCT application will be filed if market demand is proved in EU or China

Class: 206 Special Receptacle or package

Subclass: 194 With apertured receptacle retaining wall

Inventor: Ziyue Zhang

Patent Search: Patent 599579276 Food and Beverage Container

❧holds multiple beverages side by side or one beverage and one snack item side by side.

Patent Des. 397,911 Combined Beverage and Snack Holder

❧A container that connects to a canned beverage to hold snacks, with a hole to allow a straw into the beverage

Features: A carrier with a bottom panel with a perforated hole for holding a beverage container. Four side panels connected to form a container for food/snack items. Two handles attached to opposite side panels.

Patent Strategy

❧Prototyping

❧❧ Face to Face Interviews

❧ Online Survey

❧ Main Purpose of Online Survey

Determine market need

Determine purchase intent and price?

Get Product feedback

❧ Target Segment: Coffee Shop Visitors

❧ Sample Size Planned – 1000 [Actual 17]

❧ Survey Link: http://www.instant.ly/s/td5Vr

Market Testing

❧Market Testing-Survey

❧Survey Results - Market Need

100% feel inconvenience

60% moderate to high

93% taking out keys, unlocking,

73% opening doors

53% carrying additional bag/talking on the phone

Market need is evident.

❧Survey Results - Product Feedback

Product Sturdiness, Size, Spillage, Straw, Foldable, Reusable

69%

19% 6%

Price target to be 10c or less

38% “definitely” willing to pay

56% “maybe”

Willingness to pay for

convenience is present.

❧Economics – Cost & Revenue

Costs (Start-up) Amount ($) Details

Development $1000 Design, testing, refinement, labor-40h$24, Materials-$40

Ramp-Up $20,000 Preparing production systems, 1 million units

Marketing & Support $5,000 Ad-$50, trade shows-$4,000 (4 shows), B2B sales- $950

Legal Fees $500

$325 for Trademark Filing$130 for Provisional patent app as a small entity status$45 to get the brunch-a-go-go.com url for 4 years

Total Cost $26,500.00

Revenue (per unit) Amount

Sales Volume $16,000,000.00 Total volume for 3 years

Unit Price $0.05 Per unit

Unit Cost $0.03 Per unit

Unit Contribution $0.02 Per unit

Costs - Outflows

Revenue - Inflows

❧Economics - ProForma

Interest (hurdle) rate = 10%

Total NPV(1+2+3+4)= 198,240.22 NPV>0 Go forward with project!

Category Year 1 Year 2 Year 3 Year 4

General Expenses

Development ($1,000) - - -

Ramp-Up ($10,000) ($10,000) - -

Marketing & Support - ($5,000) ($5,000) ($5,000)

Legal Fees (500) - - -

Total ($11,500) ($15,000) ($5,000) ($5,000)

Sales Revenue

Quantity Sold - 1,000,000 5,000,000 10,000,000

Revenue - $50,000 $250,000 $500,000

Cost of Goods Sold - ($30,000) ($150,000) ($300,000)

Contribution $20,000 $100,000 $200,000

Net Cash Flow ($11,500) $5,000 $95,000 $195,000

Annual NPV = (10,454.55) 4,132.23 71,374.91 133,187.62

❧Economics – Break-Even

❧Fixed Cost: $26,500

❧Price= $0.05

❧Variable unit cost (VC)= $0.03

0

100,000

200,000

300,000

400,000

500,000

0 2,000 4,000 6,000 8,000 10,000

Revenue,Total Cost,Variable Cost

Sales Volume in units (mil) Thousands1,325,000 units

Revenue

Total Cost

Fixed Cost

Break-Even Vol = Fixed Cost = 26,500(Price – VC) ($0.05-$0.03)

= $1,325,000 Units

Break-Evenafter 1 year

❧Economics – What-if Analysis

Greatest positive impact

Greatest negative impactUnit price increase, sales volume increase & unit cost decrease have the greatest impact on NPV

ScenarioSummary (1) (2) (3) (4) (5) (6)

Current

Values:

WhatSales

Volume

NPV=0

Increase

Sales100%

Decrease

UnitCost1

centto$0.02

Increase

General

Expenses

100%

Increase

Develop.time

1year,file

PatentApp

IncreaseUnit

Price100%to

$0.10

ChangingCells:

SalesYear1 - - -

SalesYear2 1,000,000 - 2,000,000

SalesYear3 5,000,000 (0) 10,000,000

SalesYear4 10,000,000 2,197,825 20,000,000

UnitCost 0.03$ 0.02$

CostsYear1 (11,500)$ (23,000)

CostsYear2 (15,000)$ (30,000)

CostsYear3 (5,000)$ (10,000)

CostsYear4 (5,000)$ (10,000)

CostsYear5 N/A (21,000)

UnitPrice 0.05$ 0.10$

ResultCells:

TotalNPV 198,240.22 (0.00) 426,503.31 312,371.76 168,217.33 161,912.59 768,897.96

%change 115% 58% -15% -18% 288%

❧Launch – Marketing Mix

Bru

nch a

go-g

o

Product

Price

Place

Promotion

❧Launch – Product

❧Value Proposition - easily and securely carry a beverage and snack item with one hand or finger

❧Positioning - Convenient, quick, safe, reusable

❧Tagline:

“Brunch-a-go-go makes life easy!”

❧Launch – Price

❧Differential pricing

❧Wholesale for bulk orders - $0.05 ~ $0.30

❧Retail: $0.1 ~ $0.8 depending on the channel

Quantity Price Shipping Option

B2C (gift shops) $0.8 Standard shipping.

B2B Samples (<100) Free Standard shipping.

1k $0.3 Standard shipping.

10k $0.1 Free shipping.

100k $0.05

Customized Ask for a quote.

❧Launch – Place

❧Local coffee/tea shops & brunch restaurants near business offices and colleges

❧Mega chains -Starbucks/Peet’s/McDonald’s, etc.

❧Craft & gift shops

❧Launch – Promotion

❧Industry events e.g. coffee expo, trade shows, festivals

❧Direct to corporate buyers, partnerships with food accessory suppliers, etc

❧Online: Website, Social media, Search Ads

Flyer Ad

Brunch-a-go-go Areyourushinginthemorningandhavenotime

forbreakfast?Doyougotothelocalcaféandtakeoutbutdon’thavethreehandstodoitall?Brunch-a-go-goiswhatyouneed.Order,carry,enjoyanddoallwithonehand!800-333-3433

❧Launch – Promotion

❧Industry events e.g. coffee

expo, trade shows, festivals

❧Direct to corporate buyers,

partnerships with food

accessory suppliers, etc

❧Online: Website, Social

media, Search Ads

Brunch-a-go-go Areyourushinginthemorningandhavenotime

forbreakfast?Doyougotothelocalcaféandtakeoutbutdon’thavethreehandstodoitall?Brunch-a-go-goiswhatyouneed.Order,carry,enjoyanddoallwithonehand!800-333-3433

Thank youQ & A