Shark Tank US | NuMilk Score An Impressive $2M Deal

Introduction to New Milk

Pitch Overview

• Ari Tolwyn and Joe Savino from New York seek $1 million for 5% of their business, New Milk, which offers fresh, dairy-free milk alternatives.

• They highlight the shift from traditional cow's milk to plant-based options like almond and oat milk, emphasizing the drawbacks of hyper-processed products.

The Product: Fresh Dairy-Free Milk

Unique Selling Proposition

• New Milk features a custom machine that allows grocery store shoppers to make fresh, nutritious dairy-free milk at the push of a button.

• Ingredients include organic almonds from Spain and a blend of cacao, vanilla bean, and maple for chocolate milks. The product aims for convenience without mess or fuss.

Demonstration and Machine Functionality

Live Demonstration

• Mark Cuban participates in making almond milk using the machine, which processes pure organic almonds into fresh milk instantly. He notes it tastes significantly better than store brands.

• The machine can produce various types of milk (e.g., cashew, hemp), showcasing its versatility in meeting consumer demands. It has a shelf life of 7 to 10 days when refrigerated.

Business Model Insights

Financial Considerations

• Each machine costs $30,000 but could drop to $15,000 at scale; they generate about $50,000 in revenue annually per unit without requiring staff or rent space in stores.

• Sharks express concerns about capital requirements for maintenance and leasing space within grocery stores as part of their business model evaluation.

Founders' Background and Experience

Entrepreneurial History

• Ari has experience in aviation catering and co-packing food products; Joe previously ran Happy Tree Maple Water with national distribution before starting New Milk together. Their combined expertise supports their venture's credibility.

Pricing Strategy and Market Positioning

Cost Structure

• Consumers pay $2 for an initial bottle of almond milk; refills cost $3.99 with grocery stores taking approximately one-third of sales revenue. They have raised $12 million with a pre-money valuation of $40 million during previous funding rounds.

Future Plans: Countertop Device

Expansion Potential

• A countertop version is being developed for home use priced at around $199 after landing costs; this device aims to bring fresh dairy-free options directly into consumers' kitchens while maintaining quality control over ingredients used.

Financial Performance Overview

Revenue Growth Analysis

• In 2018 they reported only $40K revenue due to R&D expenses totaling around $2 million; by 2019 revenues increased slightly but losses accumulated to about $5 million across two years due to ongoing R&D investments amidst market challenges like COVID delays affecting launches with major retailers like Kroger and Whole Foods.

Shark Reactions

Investor Feedback

• Some sharks express confusion regarding the business model's clarity while others appreciate the innovative concept but remain hesitant due to financial losses and prototype status.

Lori Greiner mentions time constraints hinder thorough explanations needed for investment decisions leading some sharks to opt out despite recognizing potential value in the idea.

Investment Offer Discussion in Plant-Based Product

Initial Impressions and Offers

• The speaker expresses strong belief in the demand for the product, noting enthusiasm from Mark regarding plant-based items. They humorously mention being a "modified vegan," indicating a personal connection to the product.

• An investment offer is made: $1 million loan at 9.5% interest for three years, costing $8,000 monthly, plus a request for 5% equity.

• The speaker emphasizes their expertise in digital marketing and offers support to help grow the business if they engage with them.

Business Valuation and Financial Strategy

• The entrepreneurs acknowledge the value of the offer but express that it wasn't what they initially envisioned; they wish to continue discussions.

• A specific product (stainless steel version) is highlighted as having high sales potential, with an optimistic projection of selling one million units.

• Pricing strategy is discussed; while currently set at $699, it's suggested that raising it to $899 could significantly increase profit margins.

Negotiation Dynamics

• Tension arises during negotiations over equity percentages; initial offers are deemed insufficient by both parties.

• A revised offer is presented: $2 million total—$1 million for 7% equity and another million as a loan at 3%, with additional advisory shares contingent on loan usage.

Final Agreement

• The entrepreneurs express excitement about the new offer but remain firm on their original equity expectations. They recognize the increased funding opportunity compared to their initial ask.

• A deal is reached after negotiation; both parties celebrate this milestone. The entrepreneurs acknowledge that while they secured funding, significant work lies ahead to ensure success.