G-Kup awakens single-cup brew giants with its environmentally friendly pod
Imagine if instead of a stone, David slung a sustainable coffee pod at Goliath’s head. Darren Footz, CEO of— a company that patented a 100 per cent compostable single serve beverage pod — will be taking his shot in 2016. And like David, disruption for Footz is key.
In the $13-billion coffee industry, single-cup brewing is all the rage, with nearly half of all coffee makers sold in Canada being single-serve. Mintel Group reports combined sales of single-serve plastic coffee pods for Keurig, Nestle’s Nespresso and Starbucks’ Verismo rose to $3.8 billion in 2014.
The serial entrepreneur from Vancouver said he is entering this mammoth market with gargantuan players to save the planet and meet consumer demand. An article in the Atlantic magazine in March 2015 reported that in 2014 Keurig sold enough pods to circle the equator 10.5 times, though some estimate that’s closer to 12 times. K-Cup inventor, John Sylvan, has said he regrets building the environmentally unfriendly design. It was during his last venture with Granville Island Coffee that Footz heard the grumbling. “Consumers said, ‘I love the K-Cup but feel guilty about using it, I wish there was another way’; it was a eureka moment,” he said.
Footz partnered with scientists at the University of British Columbia and is spending $10 million to make a compostable option made from corn-based biopolymer and bamboo fibre . “I wanted to make sure the K-Cup was replaced, completely, at some point,” he said. Nothing but 100 per cent compostable would do. “When you say you’re 92 per cent compostable, the consumer asks, ‘why can’t you be 100? Why can’t you meet that threshold?’”
And with disruption on the agenda, licensing wasn’t. “We’re not going anywhere,” Footz said. Although Footz would not reveal the amount of’s initial financing, he did say that it met with strong demand and was on the higher end of what is typical for a company at this stage. Its backers include the National Research Council and from its financing round former Dragons’ Den star and CEO of Venture Communications Arlene Dickinson.
“One of the things I always look for is an entrepreneur that is driven by a burning passion to do something that, against all odds, he feels the need to do, and has actually made progress against that vision,” Dickinson said. “It’s one thing to say I want to change the world; it’s another thing to find ways to make that happen.” She admits, there will be challenges ahead: “He’s dealing with some really savvy, really big competitive marketers.”
K-Cup and alternative producers already have shelf space, distribution and adoption by consumers and Footz will have to convince those consumers to change their habits. He said the price of his Keurig compatible pod will be close to, if not on par with other single serve beverage pods.
Building a new mousetrap in an industry dominated by giants is not for the faint-hearted. Startups have to contend with brand loyalty, sunk costs and switching costs, said Sean Wise, associate professor of Entrepreneurship at Ryerson University.
The good news is there’s often a lower cost of customer acquisition for new players entering a market with an already large customer base. And there’s the startup’s ability to be nimble. “Giants often lack the agility of a David,” said Wise, co-author of Startup Opportunities: Know When to Quit Your Day Job. In recessionary times, Goliaths tend to slow innovation investment and downplay R&D, focusing on lowering costs more than increasing revenues,” giving Davids the chance to leapfrog into the “next big thing.”
Chris Nicol, co-founder of natural skincare producer, Fable Naturals, is a newbie in the $115 billion skin care market. The a three-year-old Vancouver -based startup’s handmade products — some even packaged in 100 per cent compostable material — use organic and fair trade ingredients sourced from farmers around the world. They also make giving back core to their business. It’s a big venture for a young duo whose passion runs higher than their profits for now. But their David moment may come yet.
I wanted to make sure the K-Cup was replaced, completely, at some point
“People are more and more cognizant of what they’re putting in their body and on it,” Nicol said. And, while other (read: bigger) players are already carving shelf space for their alternative options, Fable Naturals’ capacity to attract on so many levels may just give it the edge. Sometimes being local is the greatest driver, other times it’s organic or fair trade. One consumer may just enjoy the personal touch, unique to a business run from home. “We can appeal to different people depending on their priority; that’s a differentiator,” he added. Of course, there’s no substitute for high quality products and he stands by that claim too.
Still, taking on the heavyweights is no easy task. Fair trade certification is pricey so they haven’t taken that route yet. Similarly, not all ingredients are organic. And though they’d like to use compostable packaging for all their products, “it’s hard to get pricing that keeps us competitive,” Nicol admitted. Compromises are necessary for the sake of financial sustainability. “We just want to keep our values and grow to a place where we can make a big impact on people.”
G-Kups’ compostable pods will be available in the new year but Footz said others’ are already nipping at his heel. K-Cup recently committed to an environmentally friendly pod by 2020 and Toronto’s Club Coffee announced it had one ready to roll. But competition is neither surprising nor worrisome, Footz said. “Whether we’re second or third to market doesn’t matter, we know there is strong market pull and demand from large and small roasters all looking for a viable solution to a major problem.” Either way, one thing is clear: “We’ve already awoken the giant.”