Coffee Joulies Before Shark Tank
Dave Petrillo and Dave Jackson, mechanical engineers from New Jersey were the brains behind the development of the Coffee Joulies. The Joulies were small, stainless-steel capsules that contained an ingenious material designed to cool a hot beverage to a drinkable temperature quickly. The capsules would then maintain the drink at that temperature for a long period of time.
They sought initial funding from a Kickstarter campaign in March 2011. Their target goal was $9,500 and they achieved this within 3 days. By the end of the month long campaign they had received a big boost from Kickstarter. 4,800 backers pledged over $300,000 to help them see their vision through to completion. Their early success and the large amount of financial backing allowed them to complete the manufacturing process and develop their idea into a finished product.
Coffee Joulies on Shark Tank
The partners appeared on Shark Tank in early 2013 seeking a $150,000 investment in return for a 5% stake in their business.
Dave Jackson began the confidently delivered pitch by revealing that coffee was usually served at 179 degrees Fahrenheit, far too hot to drink. The drinker would have to wait until the beverage was at a drinkable temperature and then drink it rapidly before it became too cold.
Dave Petrillo explained the function of the Coffee Joulies. When placed in hot coffee, they would absorb the heat from the drink, allowing it to reach an optimum temperature within minutes. The Joulies would then release the stored heat back into the drink, keeping it within the perfect drinking range for twice as long. If they were used in a vacuum-insulated travel mug, the drink would be at the perfect temperature in five minutes, and would stay that way for over five hours.
The sharks were given coffee that had been poured three hours earlier. The visibly steaming drinks seemed to impress them, particularly Robert Herjavec who raised an eyebrow at how hot the coffee was after such a long time.
Lori Greiner pointed out that a Thermos would keep coffee hot. Dave Petrillo countered that a Thermos would keep coffee too hot, and it would remain that way for a long time, unlike the Joulies which would cool it quickly.
Mark Cuban asked how the Joulies monitored the heat of the drink. Dave Jackson explained that a material within them absorbed heat from the drink until it reached a comfortable drinking temperature of 140 degrees. At that point the process reversed, releasing the stored heat back into the drink to keep it warm.
Lori asked what the product was made out of. Dave Petrillo explained the casing was high grade stainless-steel and the heat absorbing material was a propitiatory phase change material.
‘Did you come up with it?’ Robert Herjavec asked.
Dave Jackson admitted that they hadn’t, explaining that another manufacturer produced the phase-change material. He confirmed that the material was fully-tested and safe, it was primarily plant-based, edible and non-toxic. Mark Cuban pushed for more details, inquiring exactly what the material was. ‘As soon as you sign a non-disclosure agreement we can talk about that’ answered Dave Jackson with a smile.
Dave Petrillo spoke up, they had already been issued with a design patent and had a utility patent pending, the brand had also been trademarked.
‘Does this work with tea as well?’ asked Daymond. The partners confirmed that Joulies would work with any hot drink, from soup to hot-chocolate.
‘And you only need one?’ asked Lori, looking interested.
‘One per 4 ounces of coffee, is our guideline’ divulged Dave Jackson, to mixed reactions from the sharks. ‘There’s five in your coffee right now’ added his partner.
‘You’ve got to walk around like you’ve got a pack of marbles on you.’ stated Daymond, looking unimpressed.
Robert Herjavec was a coffee drinker but didn’t carry a mug around, he couldn’t see himself carrying Joulies around either. He asked the partners who the product was aimed at. Dave Petrillo said that previous sales had largely been promoted as gift items.
Lori asked about manufacturing costs, Dave confirmed that each Joulie cost $3.65 to make and test. They retailed at $50 for a set of five.
Robert inquired what the previous years sales had been. $575,000 was the answer. Both Lori and Robert looked impressed at that, but Kevin O’Leary wanted to know how much profit had been made from that figure. Dave Petrillo admitted that they had only made $50,000 profit, however, that included hefty expenses in tooling, patents and legal fees.
When asked by Robert what sales could be expected in the coming year, Dave confidently predicted over a million dollars. He explained that previous sales had mainly been online but they saw themselves moving into the wholesale market.
Daymond John remarked on the low amount of equity being offered, only 5% in exchange for $150,000. He seemed unimpressed with such a low amount of equity on the table and he believed the other sharks would feel the same way. He dropped out of negotiations at this point.
Kevin O’Leary initially seemed of the same mind, he stated that when funding start-ups he would usually seek a minimum interest of 33%. He made an alternative offer, he would provide the required $150,000 in exchange for a royalty of $6 per unit until the investment had been repaid. The royalty figure would then drop to just $1 in perpetuity.
‘I’ll go into the deal with you’ Lori said to Kevin ‘If you’d like a partner’, confirming that she was confident that QVC could get behind the product. Kevin quickly welcomed her in. Robert wanted part of the action too, he asserted to Kevin that he could help get the Joulies into retailers quickly.
Kevin attempted to sell the idea there and then to the two Daves, pointing out that they would have three sharks behind them, and yet still retain 100% of the business if they took the deal.
Dave Petrillo wanted to see if Mark Cuban had an offer before accepting.
Mark, glad of the chance to speak, suggested that retail and wholesale was not a good direction for the business to go in, calling the idea ‘crazy’. He felt that that approach would cause large costs for the business and would leave the product in the control of the large retailers selling them. He favored a slower build-up, for the product and the business. ‘You’ve got to crawl before you can ball’ was his advice.
Lori disagreed passionately, affirming that she had achieved half a billion dollars in sales by doing the exact opposite. She explained her approach was based on getting a product sold as much, and as quickly as possible. Getting the brand known to as large a consumer base as was achievable was the way to succeed in her opinion, following Mark’s advice would lead to the business progressing at a snail’s pace.
Clearly swayed by the enthusiasm shown by the other sharks, Daymond had a change of heart at this point and said that he would like to join the collective offer made by Kevin, Lori and Robert. There was some gentle ribbing from Robert about his earlier dismissal of the business but Kevin spoke up in his defence, describing Daymond as ‘Mr Retail’. The other sharks agreed that he would be a great asset to the partnership and with that he was back in the negotiations.
Mark Cuban preferred to invest alone, he made an offer to the partners, $250,000 for a 12% stake in the business with no additional royalties involved. He didn’t like the idea of a retail business and envisaged the business as one that could be sold after further development. He felt that on-going royalties would have a negative effect on any future negotiations selling the company.
Kevin disagreed completely ‘It happens every day’ he stated.
Mark continued, claiming that a company could not grow sufficiently just by being on QVC every day. Lori, the queen of QVC, wasn’t going to let that pass. She cited the immensely successful George Foreman grill that had started off doing exactly that and had still managed to become one of the biggest selling products ever.
The Daves requested a break in order to consult with an advisor at this point as the two offers were so different in nature, and each were connected to a different strategy.
While the partners were speaking to their advisor, Robert pointed out to Kevin that the royalty figure of $6 was too high for wholesale sales, mainly due to the manufacturing cost of the product. Robert had perceived misgivings from the partners about the royalty amount and was convinced that if the shark partnership didn’t offer a more attractive arrangement then they were in danger of losing the deal. All four sharks involved in the offer were swayed by Robert’s convictions and Kevin interrupted the consultation with their advisor to propose an improved deal. Royalties would remain at $6 per retail unit, but would be only $3 per wholesale unit until the $150,000 investment was recouped. The royalties would then drop to $1 per unit in perpetuity, as agreed previously.
The sharks were clearly keen to strike a deal, ‘They’re talking a long time’ noticed Lori. ‘They are, its not usually a good sign’ replied Robert, looking slightly concerned.
When the partners returned, Kevin quickly summarized the two available offers, emphasizing that only one of the offers contained several covenants.
Mark Cuban defended his offer ‘No covenants, just a difference in strategy and approach’
Dave Petrillo thanked Mark for his offer but confirmed that he and his partner would be taking the deal offered by the other four sharks, there were smiles all round and a flurry of handshakes. Mark took the rejection well and sat through some banter directed at him from the other sharks, but he kept on smiling.
Coffee Joulies after Shark Tank – 2018 Update
After such a successful appearance on the Shark Tank, and the interest shown by all the sharks, its no surprise that Coffee Joulies have continued to build on their success there. They had already won the Shopify build a business competition by the time of their appearance on the show and the prize included high-end marketing advice from experts in the field, as well as a cash prize.
With such unanimous support and assistance from a variety of sources they have gone from strength to strength, sales online have surged and the promotion of the Joulies is extensive. Bed Bath and Beyond offered a similar product for a while, but its no longer available now.
There have been some grumbling reviews that question the efficiency of the product, mainly due to ceramic mugs also absorbing heat from a hot beverage. This can negatively affect the length of time a product can be kept warm. It doesn’t seem to have affected the business too much, with the Joulies available both from the friendly looking website and Amazon, who offer a reasonable and well marketed discount on Joulies being bought alongside a Thermos insulated mug.
In 2015 the business announced Booze Joulies, a similar product that worked in reverse, able to cool down a glass of scotch and keep it cool.
Throughout their time building up the Joulies brand, the Daves kept cool in the face of pressure and never gave into the challenges before them, eventually turning their dream into a reality. I’ll raise my own cup of slightly lukewarm coffee to them and wish them all the best for the future.