Several possible issues to future growthI am listing a few issues to growth:
(a) Issue of Water
- tap water is known to have high levels of iron, some water is contaminated, other water is simply not drinkable (turns yellowish). As I parent I would be fearful to use tap water.
(b) Bottled Water
- studies have shown that bottled water is no better than tap water, because most of the water used is from tap water, so we revolve around similar issues as in point (a)
(c) Target Market for Allergic toddlers is small
- we are not looking at 23 million babies in USA but at 2% to 3% that are allergic and, even in this crowd you will have many parents that simply do not care and will not look for alternatives, so market can be much smaller. Targeting vegan market is a tough sell as people already have other choices like soya.
(d) Reaching your target market - Big advertising $$$$
- companies that are in the baby food market will spend millions, if not hundreds of millions on advertising to reach their target audience. Right now company is selling online through website but if you want to reach the masses you need a big budget, and this in turn is very costly and affects bottom line.
(e) Issue of delivery of baby food formula
- parents are usually negligent and always wait from the last minute. Imagine you run out of baby powder, now you have to order online and wait a week to 10 days for delivery. What are you supposed to do with the baby???
(f) Issue of Affordability Cost
- most parents live check by check and buying the Else cannester at $ 32 each is expensive, I have already tested it on a few families and their eyes glowed big, showing they could not afford the cost. Many parents may stick to cheaper version for affordability reasons.
(g) Taste issue
- I did not see any tests done on flavour, to ensure that babies love the formula. If there are issues on taste then babies may reject the product.
(h) Toddler Issue
- Toddlers are between 1 and 3 years of age. By the time they are 1 they already got used to the milk or soya that the parents gave them, and probably are no longer in crisis crying out in pain. So with parents in comfort level having done 1 year, why would they want to switch from 1 to 3 years of age when hard part is done, and baby formula costs more.
(i) Issue of Valuation
- Baby trades at a market cap of $ 160,000,000 but their financial statements of year 2019 show minimal sales, losses and long term assets that are mostly intangible. I do believe that the company will get their initial 5,000 to 10,000 toddlers but afterwards it will be a very tough sell. Therefore I expect $ 8 million in sales based on 10,000 toddlers maybe done within 18 months and most probably loss per operations (this is my estimate).
(j) Track Record
- best way to evaluate any company is to look at their track record. Last year sales $550,000. We can throw any figures around, but facts are facts. That is track record.
I shared a few thoughts of possible risks,
MPO