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Pascal Press: Crowdfunding A New Coffee Revolution Case Solution & Answer

Pascal Press: Crowdfunding A New Coffee Revolution Case Solution

Introduction

Kalbfleisch is completing his Master’s degree in Thermal engineering from the Western University, London. He is tired of standing in queue to get a coffee at local cafes, so he started to apply his knowledge of thermal engineering in order to make a travel friendly coffee press, which he named as the Pascal Press. He is in search for making a high quality coffee. Kalbfleisch wants to add value to his product design, for which he has also taken guidance from the neigh bouring businesses in order to make his coffee maker more innovative.

Problem Statement

Initially, Kalbfleisch was not able to raise funds of $60,000, which was essential for creating a base of making his own travel friendly coffee press, which he named the Pascal Press. Someone suggested him to raise funds by Kickstarter web which pre sells the products to large pool of interested peoples. In 2017, he found that crowd funding is the best option to raise funds.

SWOT Analysis

Being a professional in the thermal fluid engineering field, having an innovative idea with an increasing trends in the coffee consumption in daily routine, nascent market and the presence of strong coffee suppliers project various strengths, weaknesses, opportunities and threats that are listed below:

Strengths

  • High quality coffee maker at a reasonable price.
  • Innovative idea.
  • New market.
  • Expertise in thermal engineering field.
  • Passionate about the new product.

Weaknesses

  • Lack of entrepreneurial background.
  • Lack of required financial resources for commencement.
  • No historical background with coffee production and distribution.

Threats

  • Presence of giant competitors in market i.e. Starbucks.
  • Risk of default.
  • Failure of product in the market.
  • Lack of cost leadership.

Opportunities

  • New markets with a premium quality product.
  • Increasing trends towards coffee as a regular drink in the US.

Industry Analysis

A detailed industry analysis has been performed in whichall related issues have been analysed in order to identify the external environment of the coffee business. The below discussion provides a detailed industry analysis in depth:

Porter’s Five Forces

A detailed Porter’s five forces analysis has been performed by analy sing the current situation in order to identify the external environment associated with the coffee business.

Competitive Rivalry

Kalbfleisch wants to sale high quality all-in-one travel coffee press, for this he has carried out a research, but he did not find any suitable coffee which will be fit for his suggested coffee idea. There are number of competitive coffee ideas that have been already implemented in this market field, such as the drip coffee maker, and the Keurig and the French press method etc. These all are competitive coffee flavours for Kalbfleisch’s Pascal press, each having its unique characteristics. Thus, there is a higher level of threat regarding competitive rivalry in the current coffee market place.

Threats of New Entrants

In the coffee marketplace, there is a high threat of new entrants because this industry is welcoming, and new entrepreneurs are welcomed and provided with the sufficient funding for their ideas. There exists some crowd funding platforms such as Kickstarter PBC, Indiegogo Inc. and Go Fund Me. They offer venture funding on the basis of pre-sales. Additionally, there are several other options available for financing.

Threats of Substitute

There are many substitutes available for the coffee, such as tea and other beverages. Moreover, there are also more substitutes available in form of different coffee flavours. Hence, there is a moderate threat of substitute products in the market.

Bargaining Power of Supplies

Here, the bargaining power of suppliers is high because they offer quality product. The coffee beans are too expensive, because it requires more efforts in cultivation of these coffee beans. Additionally, the business requires more funding not just because of this effect, but also because of the limited number of available suppliers.

Bargaining Power of Customers

As, there is a moderate threat of substitute products present, the bargaining power of customers is also moderate. Kalbfleisch’s research shows that people admire more quality in their coffee, and hence do not give more importance toward price and bargaining.

Strategic Analysis

Mr Kalbfleisch decided to avail the desired fund through crowdfunding. For this, he has done a thorough research of related crowdfunding techniques and the platforms. The crowdfunding requires pre-sell of products to whom who visit the site, and will get some discount offers.The crowdfunding platforms such as Kickstarter PBC, Indiegogo Inc. and Go Fund Me are available in the marketplace. Mr Kalbfleisch’s first step toward crowdfunding, is the pre-launch marketing campaign. First he posted the photos of his product’s prototype on the free social media such as Raddit. His product received a quick response from coffee lovers as compared to the tea lovers. They admired his product and his product idea spread quickly. He, then collected over 1,100 email address for his Kickstarter campaign launch. He is confident that he can raise $40,000 from Kickstarter campaign launch. The first production will be comprising on 2,000 unit with the per unit price of $12.50, and he will offer 20% off for his early birds and 10% off for other buyers. Moreover, he has decided to use wholesale distribution channel for the distribution of his product.

Finding the Money

Kalbfleisch’s Pascal press idea requires funding, for which hehas done an industry research and has examined the potential available sources for funding. He has adopted differentiation strategy for making his product unique by adding separated coffee bean feature. To raise his funding for this idea, he first joined the Propel Entrepreneurship Centre (Propel) in October 2016, with the suggestion provided by Western University’s professor. In January 2017, he made his second major prototype and received a grant of $2000 from Propel for patent as well as other expenses. Furthermore, he examined more funding options and analysed the three major options: the crowdfunding, the traditional source funding and the small business association funds. The traditional source funding is difficult to obtain because it requires greater sales, because it is new project. Additionally, the small business association funds provide with small funding along with some complex procedure as compared to crowdfunding. Thus, Mr kalbfleisch decided to avail the desired fund through crowdfunding. He projected that he would require total $80,000 capital,and estimated that he could collect $40,000 from Kickstarter campaign launch within the 30-day period…………

 

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