Juicero - Cautionary tale
A cautionary tale for budding entrepreneurs
While Juicero is no Theranos, it has got itself into a life-threatening mess that we suspect has come about solely because it got its business model wrong.
Juicero is a Silicon Valley company that claims to offer the kind of juice purchased in a store but prepared freshly at home and is totally mess-free. This works through a cold press that can deliver up to 4 tons of force to squeeze the liquid from pre-prepared pouches of fruits and vegetables that the company also sells. The press can only make juice from the pouches which combined with an app and a database, is able to keep track of the produce the user has, when it will expire and send alerts and so on.
The juicer is priced at a pretty punchy $400 (reduced from an eyewatering $700) with each pouch selling for $5-$8 meaning that each glass of juice is going to cost somewhere in the region of $7-$8 depending on how long the machine lasts. With each pouch delivering about 9oz of juice, this adds up to $0.83 per ounce which is broadly in line with the top-of-the-line juice companies in Silicon Valley which charge around $0.86 per oz.
We think that the business model is based around breaking even on the pouches and the service with most of the margin coming from the machine. This explains why the company will only sell the pouches to owners of the machine as without it, the business model would collapse. This is where the problems really begin because it turns out that it is possible to produce a perfectly good glass of juice using nothing but bare hands.
A female reporter was able to extract 8.5oz of juice from one of the pouches faster than the machine could produce 9.0oz. NASA has measured that the human hands of the average male are capable of producing around 90Kg of force. This means that the other 3.5 tons of force that the machine can produce only increases production by 6% demonstrating that Juicero is massively over specified for the task for which it has been designed.
Furthermore, if there is a power cut or the Internet is down, no juice is produced whereas hands work all the time and can even offer juicing on the move with limitless battery life. This is where we think the company has gotten its business model wrong. We think it should have followed the tried and tested printer and cartridge model where the printer is sold at break even or a loss and the money is made on the cartridges.
We suspect Juicero could have designed the press to deliver 200Kg of force rather than 4 tons with no perceptible difference in performance other than a much cheaper price. If the company had then sold the device for $50 rather than its starting price of $700, we doubt whether anyone would have even bothered to try and squeeze the pouches by hand. This way the company could have hoped to have achieved much greater volume and in doing so it would have been able to get better prices from its suppliers and make good margins on the pouches.
The problem now is that everybody knows that the Juicero machine is surplus to requirements for everyone who can read an expiry date. Hence, a change in strategy is urgently required. Juicero offers convenience and in that regard it may have a future as a subscription service for very high quality juice that one prepares at home. However, it will have to confess its shortcomings, ditch the expensive machine and reorient itself around the printer / cartridge model with something much cheaper. On its current trajectory, it is likely to be squeezed out of existence.
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