Juicero, the high-profile connected juicer startup founded by cold-press juice pioneer Doug Evans, is laying off 25% percent of its staff in an attempt to lower costs as it accelerates the development of a second generation juicer.
According to a report in Fortune, Juicero CEO Jeff Dunn sent a letter to employees which said the company is planning to lay off a quarter of the staff as part of a plan to lower costs as it transitions away from a premium pricing strategy.
“The current prices of $399 for the Press and $5 – $7 for produce Packs are not a realistic way for us to fulfill our mission at the scale to which we aspire,” wrote Dunn.
Much of these struggles come in the wake of a Bloomberg article in April that showed how the company’s juice packs can be squeezed by hand without the company’s $400 juicers. The article and accompanying video resulted in dozens of similar blog posts all asking essentially the same question: How on earth could a company raise $120+ million to build a $400 juicer when all you need is your hands?
As I wrote back in April, Juicero brought much of the crisis on themselves. Not only did their premium pricing strategy for the juice press and pods rub many the wrong way, the company also brought out the snark with talk of their product as a “platform”. With popular shows like HBO’s Silicon Valley mocking the excesses and faux gravitas of today’s tech entrepreneurs, more and more people are quick to question why every gadget has to be viewed as more than just a gadget.
However, I also felt the Bloomberg article didn’t paint a full picture of the company. While the post’s authors pointed out the folly of investing $120 million in a juicer that could be replaced with one’s hands, they never discussed how the company spent much of that initial investment to create an entire juice pack factory and delivery supply chain system. The article also failed to mention that while pretty much any form of automated kitchen task performed today such as blending, cutting or squeezing can be done without a machine at a lower price, people have shown they are willing to pay for convenience in the form of task automation. It’s this very idea of paying for convenience that is the foundational principle behind pretty much any store that sells tools, whether it’s the corner hardware store or a Williams-Sonoma.
Nitpicks of the Bloomberg article aside, the reality is the company needs to lower pricing to reach a bigger audience. As I wrote in January when the company dropped the price to $399, while they are still in a unique position as the only company making a pod-based cold-press juicer, they needed to drop pricing to reach significant growth. The company’s next-generation juicer, expected to be priced around $200, could stimulate significant demand, particularly if the company could just figure out how to lower the price of its juice packs to three bucks or even lower.
Long-term, the company has an even bigger challenge: figuring out how to scale its juice pack production. With only one production plant currently (located in Los Angeles), they will eventually need to figure out how to get packs to customers around the company quickly. The answer is likely more production facilities which, of course, will likely require tens of millions of dollars to build.
CEO Dunn, which at one point oversaw Coca Cola operations for North America, clearly has ability to scale production and distribution of a drink. The challenge will be whether he can now do it with a startup that has much more limited resources than his former employer.
