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BIOCHAR BRIQUETTE FEASIBILITY STUDY
BARD MBA IN SUSTAINABILITY TEAM MEMBERS:
JACQI ROSE
JUZER RANGOONWALA
KERRY SINCLAIR
SARAH BODLEY
TONY NOGALES
MAY 9TH, 2014
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EXECUTIVE SUMMARY .................................................................................................................... 3
PART I: MARKET SEGMENTATION .................................................................................................. 4
PART II: DISTRIBUTION STRATEGY .................................................................................................. 7 PART II-‐A: NEAR-‐TERM DISTRIBUTION STRATEGY -‐ CSA PARTNERSHIP ................................................... 7 PART II-‐B: LONG-‐TERM DISTRIBUTION STRATEGY -‐ RETAIL MARKET ....................................................... 9 PART II-‐C: LONG-‐TERM DISTRIBUTION STRATEGY -‐ RESTAURANTS ....................................................... 12
APPENDICES .................................................................................................................................. 13 APPENDIX A: NATURAL MARKETING INSTITUTE REPORT ...................................................................... 13 APPENDIX B: NYC DEMOGRAPHICS DATA (CENSUS) .............................................................................. 14 APPENDIX C: COMPETITIVE PRODUCTS ................................................................................................. 15 APPENDIX D: CSAS .................................................................................................................................. 16 APPENDIX E: RETAILERS ......................................................................................................................... 17 APPENDIX F: RESTAURANTS ................................................................................................................... 23 APPENDIX G: ADDITIONAL FACTS AND RESOURCES ............................................................................... 26
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EXECUTIVE SUMMARY The following report is a feasibility study for Community Development International’s (CDi) biochar briquette, and its introduction into the New York City (NYC) marketplace. CDi’s focal areas are Community Building, Sustainability, Advocacy, and Health & Wellness. CDi needs a steady, dependable revenue stream to fund its several projects related to their focal areas, including the “Hygiene & Sanitation”, “Organic Agriculture”, “Alternative Fuels & Clean Cook Stoves”, “Miles of Trees Reforestation Campaign”, “Farmer to Farmer Exchange”, and “Social Enterprise Incubation”. These are designed to be mutually reinforcing and to relate local sustainability issues to their global interdependencies through tangible community-‐based projects and exchanges. CDi has an innovative biomass briquette solution that may help establish a revenue stream. CDi engaged the Bard MBA in Sustainability team to conduct a feasibility analysis for a potential market for the briquettes, and subsequently analyze the related logistical considerations of supply chain and production planning. This analysis took into account the population of NYC, the charcoal briquette market as it exists today, the lifestyles and habits of our target consumer and the distribution channels that are a best fit to access the target consumer. Following our analysis and evaluation of the charcoal briquette marketplace we have determined three recommendations. First, that the market does exist for an artisanal, socially aligned biochar briquette, and the target market to pursue is household grillers. Second, that CDi should partner with a local farm to distribute briquettes through CSA shares. Finally, we recommend that CDi delay entry into other distributions channels until operations can scale. In the following pages, we explain our methodology in reaching these conclusions, and include additional supporting resources and reference materials.
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PART I: MARKET SEGMENTATION
The objective of this section is to provide CDi an estimate of a target market for their charcoal product. We start by determining the total addressable market for household charcoal grilling in the specified target area. We define household grilling as families that enjoy outdoor grilling at home and those that avail facilities at public parks for their grilling needs. We then narrow our market size based on the qualities of the CDi product and the behaviors of our target customer base. For the purposes of this exercise we will assume the marketable CDi product properties to be artisanal, all natural biochar briquette with an underlying social cause associated with the resulting revenues. The target area includes the five NYC boroughs; additionally we will include data for the adjacent counties.
The analysis was conducted in the following steps as presented below:
1. Households with Grills – we use two different methods to determine all households in our target area that have charcoal grills. We will use the lower number as a conservative approach.
2. Total Addressable Market – we use marketing data to narrow our potential customer base to those who find the artisanal all natural and related social cause appealing.
3. Potential Market Size – we use estimates for market penetration and conversion rates to size the potential CDi briquette market.
4. Potential Sales Volume – we use volume estimates to determine the annual potential sales volume.
5. Revenue projections – we use competitive products pricing to provide an annual top line revenue range estimate
MARKET ESTIMATES
1. HOUSEHOLDS WITH GRILLS
SURVEY METHOD – NYC 635K HOUSEHOLDS, ADJACENT COUNTIES 442K HOUSEHOLDS
According to the 24th Annual Weber Grill Watch survey1 62% of American households own a grill, and 51% of those are charcoal grills; which means 31.62% American households own charcoal grills. A survey of 25K American households by Statista2 indicates that 32.6% American households use charcoal to grill. We will use the lower 31.62% for our calculations going forward.
US Census data shown in Appendix B include the number of households in the NYC and adjacent counties region. These are households with income in the $25K to $150K range. Applying the percentages from above, we get 635K households in the 5 NYC boroughs and additional 442K households in the adjacent counties.
1 http://weber.mediaroom.com/index.php?s=41&cat=1 2 http://www.statista.com/statistics/275456/us-‐households-‐usage-‐of-‐charcoal/ 2 http://www.statista.com/statistics/275456/us-‐households-‐usage-‐of-‐charcoal/
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Addressable Market Households
19% LOHAS Consumers
Potenoal Customer Base :
60% Supporong Social Causes
GRILLS SHIPPED METHOD -‐ NYC 595K HOUSEHOLDS, ADJACENT COUNTIES 407K HOUSEHOLDS
The table below shows the number of charcoal grill shipments by year as published by the Hearth, Patio and Barbeque Association (HPBA).3 We assume the average life span of a charcoal to be 5 years, which is conservative. Based on that assumption, the total number of active grills in use today would be the sum of grills shipped in the past five years.
2009 2010 2011 2012 2013 Total
Charcoal grill shipments
6,164,000
6,232,500
6,047,000
5,917,000
600,000*
24,960,500
To Northeast4 16.10% 14.80% 18.40% 16.40%* 16.40%*
Charcoal grills shipped to NE
992,404
922,410
1,112,648
970,388
98,400
4,096,250
* Average of previous years used since actual data not available
Northeast United States as designated by the US Census has a combined population of 55,317,240. Using a straight population ratio between the Northeast and our target areas, an estimate of charcoal grills active in NYC 5 boroughs will be about 595K and another 407K in adjacent counties.
2. TOTAL ADDRESSABLE MARKET – NYC 68K LBS; ADJACENT COUNTIES 46K HOUSEHOLDS
Using the conservative of the two numbers from the above two scenarios, our total addressable market is 595K households with charcoal grills in the 5 NYC boroughs and an additional 407K in the adjacent counties. According to the National Marketing Institute’s (NMI) 2007 report (See Appendix A), 19% of those would fit into the consumer category known as “Lifestyles of Health and Sustainability,” or LOHAS, and of those 60% are likely to support businesses with social causes. Applying those two percentages would give us households that own charcoal grills and who are likely to be influenced by our product. Our potential customer base is about 68K households in NYC and an additional 46K in the adjacent counties.
3 http://www.hpba.org/statistics/barbecue-‐statistics/bbq-‐grill-‐shipments 4 http://www.homechannelnews.com/article/barbecue-‐grills-‐numbers
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3. POTENTIAL MARKET SIZE (HOUSEHOLDS): NYC 516-‐1418; ADJACENT COUNTIES 353-‐970
Once the total addressable market was established, we apply two filters to determine the potential market size for CDi. First is a market penetration rate, which is a measure of CDi’s ability to reach its potential customers. This rate will depend on CDi’s overall market distribution strategy, channel strategy and investment. For the purposes of this analysis, we were able to determine a range using the following methodology. According to the Department of Agriculture, there are about 828 grocery stores in the five NYC boroughs.5 There are about 31 potential retailers we reviewed that would align to CDi’s artisanal product genre and social mission based approach, which gives us a penetration ratio of about 4%. On the other hand, if we use the number of CSA drop points as a representative number of CDi’s market reach, we get 11% penetration rate using the number of drop points of the one recommended CSA (with 9 drop points) over the total of number of drop points of all the Just Food CSAs serving NYC (85 total drop points). The second filter is the conversion rate which represents the ratio of people in our target who will actually spend their money and make the purchase. We conducted a non-‐random survey of the BARD MBA community who can be classified as the LOHAS segment. 52% of the respondents agreed to pay more for a product with environmental and social benefits, and 37% would pay $1 more for these products; these two statistics give us a 19% conversion rate. Applying the two filters gives the potential market size of 516 to 1418 households in NYC, and 353 to 970 households in adjacent counties.
4. POTENTIAL SALES VOLUME: NYC 25K TO 70K LBS; ADJACENT COUNTIES 17K TO 48K LBS
The HBPA estimates that on average each household barbeques about 20 times in a season.6 Assuming an average usage of 5 lbs. of charcoal every grill event, the average usage per household would be 100 lbs. per grilling season. The HPBA estimates 68% of all charcoal shipped to be briquettes; the rest is lump charcoal. Of the briquettes, 73% are regular briquettes; the remaining are instant light briquettes. The behavioral aspects of our potential market base would not use the chemical laden instant light briquettes, so we stay on the conservative side by eliminating that 27% market share. Factoring these numbers the total volume projections per season for an artisanal, all natural charcoal briquette with a social cause would range from 25,000 to 70,000 pounds in NYC and another 17,000 to 48,000 pounds in adjacent counties.
5. ANNUAL TOP LINE REVENUE ESTIMATES: NYC $19K TO $105K; ADJACENT COUNTIES $13K TO $72K
Using the potential sales volume numbers, we can now estimate the annual potential top line revenue estimates. A competitive products analysis (see Appendix C) revealed a price point range from $0.57 for the Whole Foods 365 Real Hardwood charcoal brand, to $1.51 per pound for the all Organic, made in the USA Big Green Egg brand. Considering the artisanal and social cause alignment of CDi’s product, a retail price range of $0.75 to $1.50 would be reasonable depending on the sales channel, packaging volume, and a detailed cost analysis. The estimated annual top line revenue estimate ranges from $19,000 to $105,000 for NYC, and an additional $13,000 to $72,000 for adjacent counties.
5 http://www.nyc.gov/html/nycfood/downloads/pdf/ll52-‐food-‐metrics-‐report-‐2013.pdf 6 http://static.hpba.org/fileadmin/factsheets/bbqFAQ.pdf
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PART II: DISTRIBUTION STRATEGY
The following section outlines three channels of distribution explored: Community Supported Agriculture (CSA) Partnerships, Retail/Grocery outlets, and Restaurants. Our findings indicate that the best strategy is to begin by establishing a partnership with a CSA, and in the long-‐term, consider pursuing restaurant and retail channels, with caution.
Omitted channels are not described in detail in this report, but are summarized here: Farmers Markets: we ruled out farmer’s markets due to their extremely stringent guidelines on product types and local production.7 However, if CDi is able to establish a connection with a local farm that can either sell on CDi’s behalf, or produce biochar briquettes, this may be a viable avenue to explore. There are currently very clear rules prohibiting this type of product, so a strong case would need to be made, and a partner farm in good standing would certainly help. Camping retailers: we ruled these out quickly because there are only 2-‐3 reputable retailers in NYC area, and they are large chains (REI, EMS) that would involve challenges with corporate barriers to entry. Again, this may be something to explore once CDi has a well-‐established production line, but not something we recommend currently, or in the near future. Street Cart Vendors were ruled out early on, upon learning that they primarily use propane, and are mostly concerned with low costs, due to their typically very low margins.
PART II-‐A: NEAR-‐TERM DISTRIBUTION STRATEGY -‐ CSA PARTNERSHIP According to University of Kentucky research, CSA customers generally fall into two categories, Upper-‐middle class consumers with above-‐average incomes and some interest in buying higher quality or local food, and consumers valuing the idea of local food enough to invest a substantial amount in it for an entire season. Some customers will be extremely interested in the farm and the way crops are grown. Others will be more concerned with the end-‐quality of the produce, product diversity and the freshness of the product. These descriptions fit well into the LOHAS market segment that we’ve targeted as the best consumer for CDi’s biochar briquettes.8 Another added bonus of the CSA community is that they are comfortable taking suggestions from their local farm. They trust the farm’s judgment. In many cases, farms provide recipes and tips to their customers, especially at the beginning and end of the season when shares contain more unfamiliar products like beets, turnips and kale. Farms also send out newsletters and weekly emails to their customers. Information on CDi, how to use biochar, what the biochar is made of, and even updates on the Haiti projects could easily be included in the farm’s regular emails and newsletters. In 2014, over 43,000 people will receive food through a New York City CSA. This market includes over 28 farms that service 84 drop points. With such a large selection, where should CDi start? Just Food is a non-‐profit organization that connects communities and local farms with the resources they need to make local food accessible to all New Yorkers. They have helped farms launch CSAs in NYC, as well as aggregated a map of CSAs so that consumers can find the CSA drops nearest their homes or offices, for easy pick-‐up. Using their data, we compared the number of drop points for each CSA to the number of boroughs that each services. Each farm is represented separately in the graph in Appendix D. The Y-‐Axis represents the total number of drop points for the corresponding farm. The different colored bars represent the number of boroughs covered by the farm –
7 http://www.grownyc.org/files/gmkt/questionnaire/nonfarmer.pdf 8 http://www.uky.edu/Ag/CCD/marketing/csa.pdf
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orange is three boroughs, green is two, and purple is one. By addressing the largest number of drop points, CDi can access the most individual consumers. The addition of borough coverage maximization allows a more distributed word-‐of-‐mouth customer network. Our recommendation is to pursue a partnership with Garden of Eve Farm. We believe this would give CDi the best market coverage, while starting small with only one partner. By starting small, the CSA market allows CDi’s distribution to grow incrementally as production increases. Once production is high enough that Garden of Eve’s distribution network is not big enough, CDi can partner with another farm.
POTENTIAL SALES VOLUME CALCULATIONS FOR GARDEN OF EVE CSA: By using average CSA size, and the conversion rate from our previous market segmentation section, we are also able to project the possible sales volume for CSA partnership as 3,300 pounds. We believe this approach is the best short-‐term, first step distribution strategy for CDi and will allow entry into the market while scaling production. Number of Drop Points = 9 Average Customers Per Drop point = 100 Total potential customers = 9 x 100 = 900 Per the Weber survey, 31.6% Americans use a charcoal grill. Potential charcoal grillers = 900 x 31.6% = 288 customers. Now, these are already considered LOHAS since they are sourcing from an organic CSA. So, per our previous segmentation analysis, we take 60% of them who are willing to pay for a product with a social cause. Then, apply our conversion rate of 19% to get our total estimated customers. Total estimated customers = 288 x 60% x 19% = 33 Using previously mentioned 20 grill events and 5 lbs per event consumption, we find: 33 x 20 x 5 = 3,300 lbs. of sales volume for the one CSA.
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PART II-‐B: LONG-‐TERM DISTRIBUTION STRATEGY -‐ RETAIL MARKET Selling in a more mainstream retail market would bring CDi’s biochar briquettes to a wider audience, but depends on a few critical success factors. Most importantly, retail sales are time consuming and require a larger scale that CDi will need to develop. Hence, we suggest that CDi delay pursuit of this channel for the time being, until the production process has been streamlined and you have a clear understanding of the resources and scale that is possible to maintain. When CDi is ready to pursue entry into the retail market, it will be necessary to approach multiple potential retailers (see Appendix E for recommendations on stores, and a recommended order of approach). We suggest starting by approaching co-‐operatives and small, local health-‐food stores, many of which have community at the core of their missions, and which will have fewer barriers to entry. CDi should cultivate relationships with retailers that could be long-‐term sellers of your product. Expansion in retail market – depending on the outcome of CDi’s initial entry into the market, as well as production capacity, it may be possible to expand your reach via additional types of retailers. The bigger chains (e.g. Whole Foods, Trader Joe’s) may have more paperwork and potentially some challenges in terms of paying for shelf space, but are very much in line with CDi’s mission, so would be an excellent fit, if you are willing and able to produce at a larger scale.
HIGH POTENTIAL SALES VOLUMES The Park Slope Food Coop’s website indicates currently that it has 15,500 members.9 Assuming that the Coop is primarily frequented by individuals in the LOHAS category, and knowing that it is only open for shopping to members, we assumed the total potential customers to be 15,500. Per the Weber survey, 31.6% Americans use a charcoal grill. Potential charcoal grillers = 15,500 x 31.6% = 4,898 customers. As noted, these are already considered LOHAS since they are members of a Coop. So, per our previous segmentation analysis, we take 60% of them who are willing to pay for a product with a social cause. Then, apply our conversion rate of 19% to get our total estimated customers. Total estimated customers = 4,898 x 60% x 19% = 558.4 Using previously mentioned averages, 20 grill events per season and 5 lbs. per event consumption, we find: 558.4 x 20 x 5 = 55,837.2 lbs. of potential annual sales volume for just one Coop.
CRITICAL SUCCESS FACTORS: PRODUCTION CAPACITY AND COST ANALYSIS. We recommend CDi perform a detailed analysis of your production costs, and impacts of scaling your operations, in order to determine whether retailing, which depends on scalability, truly is a cost-‐effective channel for the organization. PRICING ANALYSIS. Selling via retail channels requires setting a wholesale price point significantly lower than the consumer price. Pricing analysis should consider both the end-‐price and the markup you need in order to cover 9 http://www.foodcoop.com/go.php?id=32
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your costs, but not be so high that it deters the retailer from purchasing your product. Retailers mark up wholesale prices differently depending on the commodity, but a safe rule of thumb is to assume a 50% markup when targeting a price. OPERATIONAL LOGISTICS MANAGEMENT. Retailers will want to know the ins and outs of the sales processes: how quickly can you fill an order? Do you have minimum/maximum order sizes? What is the best way to submit the order? What is your mode of delivery? How often do you make deliveries? Who is the point person for orders? How do you handle problems with an order? INTEGRATED MARKETING STRATEGY. CDi’s social mission is a primary distinction in the sale of the briquettes. It is important for you to clarify the distinction between a need for exposure to CDi’s mission, and a need to generate revenues, as you design your marketing strategy. We suggest that during the near-‐term distribution via CSA partnerships, you continue to develop a strategy for entry into retail and restaurants separately, with careful consideration of your revenue needs, and distinct benefits to entry into each channel.
RETAILER IDENTIFICATION METHODOLOGY: The list of potential retail partners included as Appendix E has been compiled primarily through internet research on various platforms, including Yelp, Google, and various independent “health food store” raters. This is not intended to be a complete list of the many grocery stores located in the five boroughs of NYC, but is a comprehensive sampling of a range of possibilities within the health-‐foods arena, which we believe includes the most prominent and best known options catering to LOHAS consumers. Our team has examined each candidate looking for certain indicators as to whether or not they would be a good fit. The methodology described in below is shown in parts 2 and 3 of Appendix E. A simple list of vendors including contact details and notes is also included as part 1. CDi should target the retailers with high scores in both of the following categories.
ALIGNMENT WITH CDI’S MISSION AND VALUES In order to determine the best potential matches, we identified a set of specific criteria based on CDi’s mission and values. Each potential retailer was ranked on a scale of 0-‐3 according to the identified criteria. A score of 0 indicates a firm “NO,” 1 indicates “unknown/unlikely based on other indicators”, 2 indicates “unknown/likely based on other indicators”, and 3 indicates a firm “YES”. For example, if a retailer indicates that they sell “natural produce”, but makes no mention of “organic produce” specifically, they would be ranked as a 3 for natural, and a 2 for organic. Each of the criteria is also weighted giving more importance to items that are more aligned with CDi’s mission and values.
CRITERIA (WEIGHTED %) – DESCRIPTION AND REASONING • Social mission (25%) – CDi’s biochar briquettes are distinct in their revenues supporting a social mission,
so this characteristic was given more weight. • Organic (10%) – though CDi may not plan to pursue organic certification, LOHAS consumers are attracted
to organic products. Therefore, stores that carry organic products were acknowledged for this, but with a lower weight.
• Local (20%) – though currently CDi’s production site is not local, LOHAS consumers are attracted to local and artisanal products; knowing that CDi plans to ensure sustainable delivery methods, and possibly local production in future, this was given slightly more weight.
• Fair-‐trade (15%) – CDi’s use of human and natural capital is sustainable, and stores being approached
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should have an awareness of supply chain issues and treatment. • Natural (15%) – ranked slightly higher than “organic” since “natural” labeling has no restrictions, and is
still attractive to LOHAS consumers. • Value-‐driven (15%) – retailers that are driven by strong values and vision may be more aligned with CDi’s
mission.
POTENTIAL BARRIERS TO ENTRY To further narrow down the approach, we also considered potential barriers to entry for each retailer. Using the same scale of 0-‐3, we plotted each potential retail partner. These answers were not weighted. Some information was less readily available, but the questions we examined were as follows.
CRITERIA -‐ DESCRIPTION AND REASONING • Mission Statement -‐ if a store has a mission statement and values in alignment with CDi, we assumed they
would be more open to a pitch (rated higher). • Ownership structure -‐ smaller stores and cooperatives were rated higher, based on the assumption that it
will be easier to identify the correct person to pitch. Larger chain stores were assumed to potentially have a single location that handles incoming vendors, or work with an agent.
• No similar products -‐ if stores carry similar products they may be less inclined to add CDi’s briquettes to their shelves.
• No agent/3rd party vendor recruitment -‐ assumption that stores who work with an agent or third party recruiter will be more difficult, due to barrier between owner and vendor. Those without an agent or 3rd party are ranked higher.
• Single location -‐ assumption that a single-‐location store will be less challenging to meet demand, and to make a pitch.
MAKING THE PITCH Be able to describe the product and why it stands out, in just a few minutes. Highlight the things that differentiate it, e.g. “artisanal, all-‐natural biochar briquettes with an underlying social cause.” Market research & customer testimonials -‐ as you begin to sell the product, try to get direct responses from consumers. Proven demand will improve your pitch.
PACKAGING. The packaging design should beautifully identify those characteristics that differentiate CDi’s briquettes from otherwise similar products. Make sure your packaging is sustainable; perhaps it can be burned with the product. Use it to tell your story!10
CO-‐BRANDING Larger stores with their own product lines may consider co-‐branding opportunities. Co-‐branding would help to avoid some of the typical barriers to entry, particularly slotting fees and packaging design, which in most cases the store would take care of. For example, Whole Foods’ Whole Planet Foundation includes the Scanback program, which allows Whole Foods suppliers to donate a portion of their sales back to the Whole Planet Foundation supporting microloans to entrepreneurs in 59 countries around the world. Currently there is one project in Haiti.11 The Whole Planet Foundation website does not indicate a process for accepting proposals, but we suggest that you consider this option as you develop your existing relationship with the Virginia branch.
10 http://supermarketnews.com/sustainability/store-‐brands-‐2014-‐packaging-‐purpose?page=1 11 https://www.wholeplanetfoundation.org/project/haiti/
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PART II-‐C: LONG-‐TERM DISTRIBUTION STRATEGY -‐ RESTAURANTS
Opportunities in the restaurant market for CDi are both lucrative and complicated to endeavor. Presently CDi is developing its ability to meet consumer demand, and looking for a distribution channel that will provide sufficient revenue to the organization. While restaurants offer the possibility of a high demand for biochar briquettes, they are extremely cost sensitive due to the quantity of product required for cooking. The most commonly used source of energy for cooking is propane, followed by charcoal. Because restaurants buy in bulk, there is no opportunity for CDi to charge a premium on its briquettes in this market. There are one or two restaurants with the capacity to produce briquettes for use in their establishments; this channel may provide an opportunity for CDi to co-‐brand with the restaurant to further its social mission.
METHODOLGY In order to determine the best fit for CDi within the restaurant industry, we compiled a list of the 5 best restaurants for CDi to approach as either a supplier, or a partner in production. The restaurants were chosen based on reviews of organic and otherwise sustainable establishments; tools such as Google and online culinary blogs aided this investigation. The analysis of each restaurant was based on the same methodology as the retail market; including critical success factors, criteria weighted for alignment with CDi values, and potential barriers to entry. Most NYC area restaurants using charcoal/wood fire cooking methods are more interested in the flavor that the method produces, than the environmental benefits. The complete list of restaurants used in this study, and the full outcome of the analysis is charted in Appendix F.
LONG TERM STRATEGY – WE RECOMMEND BLUE HILL AT STONE BARNS FOR PARTNERSHIP Based on this methodology, we have concluded that Blue Hill at Stone Barns is the best restaurant for CDi to enter into this market. As both a farm and restaurant chain, originating in Pocantico Hills, New York, The Stone Barns Center for Food and Agriculture supplies all 3 of its restaurants: 2 in upstate New York and 1 in New York City. The farm is a producer of biochar, and CDi has already engaged with the company to determine better practices for producing biochar briquettes. This establishment may represent the opportunity for CDi to expand its network north into the Hudson Valley, and to partner with a reputable organic farm for increased briquette production. At this time the coalition opportunity remains uncertain and we, the NYCLab team, recommend developing another channel of distribution first. We believe that as CDi increases its brand equity, as well as its capacity to produce briquettes, a co-‐branded relationship with Blue Hill may be attractive to both parties. As CDi operations grow, it will be necessary to source raw material for biochar, and produce the subsequent briquettes in a location proximate to the New York metropolitan area. The capacity of Blue Hill to act as producer, distributor, and/or coalition partner in the CDi social mission is evident from the operations already underway at the Hudson Valley location. CDi should continue to develop a partnership with this company for future operations.
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APPENDICES
APPENDIX A: NATURAL MARKETING INSTITUTE REPORT
• According to a 2007 Natural Marketing Institute Report:
o 19% Americans are LOHAS -‐ 40 million in 2007
§ They conserve, recycle and use environmentally-‐friendly products and services to
support personal and planetary health. They are the most politically-‐active
consumers and will also boycott businesses that they perceive to be socially
irresponsible.
§ 60% more than likely care about socially-‐responsible business
§ Mean Age -‐ 46.7; Median income $64.4K
§ They are significantly more likely than any other segment to be willing to pay 20%
more for eco-‐friendly products and services; 66% affirmative
§ Vote heavily on the Democratic side; 45%
§ Significantly more likely to have a library card
§ Most likely to support civic-‐oriented groups than any other; 37%
§ Strongest ties to building a sense of community
§ Physical fitness is a significant part of their lifestyle (NY has 19% Gym Membership
rate)
§ Twice as likely interested in using the internet to buy hard to find green products
o 19% Americans are Naturalites -‐ 40 million in 2007
§ They are primarily motivated by their personal health and wellness, are a “lighter
shade of green” compared to LOHAS consumers. They have the strongest will among
non-‐LOHAS segments to learn more about, and to do more to protect, the
environment in the future. This is a tremendous opportunity.
§ Of that -‐ 36% care about socially-‐responsible business
§ Mean age 45.5; Median Income $45.6K
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APPENDIX B: NYC DEMOGRAPHICS DATA (CENSUS)
NYC 5
Boroughs Adjoining
Counties* Both
Total Population 8,036,697 5,499,843 13,536,540
Households ($25K -‐ $150K) 2,009,631 1,398,933 3,408,564
Males (20-‐45 years) 1,541,877 902,209 2,444,086
* includes Westchester County, Nassau County, Rockland County, Bergen County NJ, Hudson County NJ, Union County NJ, Middlesex County NJ
NYC PARKS USAGE
According to the NYC Parks Bureau12, there are 56 park areas in the five NYC boroughs. We estimate an average of 5 grills for each park area, for a total of 280 grills. There are 32 weekend days between Memorial Day and Labor Day. Current Results estimates 68% of days annually are sunny13 which gives us 22 potential days for outdoor grilling. Assuming 75% capacity utilization for each of the grills and usage of 5 lbs per grill event, potential market size will be 23,000 pounds of charcoal.
12 http://www.nycgovparks.org/facilities/barbecue 13 http://www.currentresults.com/Weather/New-‐York/annual-‐days-‐of-‐sunshine.php
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APPENDIX C: COMPETITIVE PRODUCTS
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20
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22
VISUALIZATION OF RETAILERS’ RATING
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BARD MBA in Sustainability CDi Team
CDi Biochar Briquette Feasibility Study
23
APPENDIX F: RESTAURANTS
LONG TERM STRATEGY – POTENTIAL RESTAURANT PRODUCERS AND BUYER
BARD MBA in Sustainability CDi Team
CDi Biochar Briquette Feasibility Study
24
RATING CRTIERA FOR CDI + BARRIERS TO ENTRY
BARD MBA in Sustainability CDi Team
CDi Biochar Briquette Feasibility Study
25
MATRIX BASED ON EVALUATION CRITERIA – BLUE HILL AT STONE BARNS TOP CHOICE
BARD MBA in Sustainability CDi Team
CDi Biochar Briquette Feasibility Study
26
APPENDIX G: ADDITIONAL FACTS AND RESOURCES
USES OF CHARCOAL: CURRENT MARKET TRENDS IN US
• US consumption 2012: (total tons of charcoal shipped) 26% instalight, 643,300; 68% regular briquettes, 244,400; 6% lump, 51,800 TOTAL 887,700 + 51,800 (HPBA)
• Average retail price: $8.92 (regular briquettes); $15.23 (instalight); $7.55 (lump) (HPBA) • 85% is used in food preparation • Most producers use bags that hold between 5 and 20 lbs., with the most common sizes in the 8-‐10 lb.
range (Virginia Tech) • Lump charcoal is gaining market share over the past 3 years, interest in it growing as part of “organic”
movement (HPBA) • Regular briquettes declining, losing market to lump • Instalight briquettes unaffected by lump charcoal • 60% of charcoal reaches northeastern users in 2-‐4lb bags; 25% in 5-‐10lb bags; 15% in bushel bags
(industrial users) (US forestry report) • Most individual users prefer “one shot” packages of 2-‐4lb, best for single use grilling; other individual
users and restaurants tend to buy 5-‐10lb bags • Market is seasonal • New producers are recommended to develop local markets • Consumers prefer gas grills to charcoal grills, making charcoal increasingly a niche market overall, and
more so for the biochar market (Kingsford case study; appendix, exhibit 1: https://docs.google.com/document/d/1yFH6dJTUdveTcz8vtMdbkSLr9KONfkgZeF0SyhL0Ano/edit)
• US ranks 10th in charcoal production (FAO) http://rankingamerica.wordpress.com/2009/02/18/the-‐us-‐ranks-‐10th-‐in-‐charcoal-‐production/
COAL FIRED PIZZAS • Are gaining in popularity around the country, especially in the Northeast. • The preferred coal is what is called Anthracite coal. • The Northeast especially Pa. is a great source and most of it comes from there (local, more or less). • The most common preferred characteristic is the high heat (upwards of 1,000 degrees) that it can achieve
13,000 BTU/ #, as opposed to wood which is 6,500 BTU/# • The high heat gives it a characteristic char and quick cooking times, somewhere around 3-‐4 minutes
depending on size of pizza. • According to Woodstone, a manufacturer of wood and coal fired ovens, estimates the coal usage to
somewhere around 60-‐80 pounds a day. o This depends on size, desired temperature and production needs.
• Coal can be purchased in 50# bags, by the pallet or ton, and requires 1/2 the storage capacity of wood for the same amount of BTU.
• Coal fired ovens are challenging to operate and require at least 1 1/2 hours to 2 hours to come up to temperature.
• A short ton (2,000 #’s) of anthracite coal around costs $300-‐$400, a typical restaurant will use 14-‐18 short tons a year. (Delivery depends on your location)
• More challenging to light.
BARD MBA in Sustainability CDi Team
CDi Biochar Briquette Feasibility Study
27
ADDITIONAL RESOURCES
Barclay, Eliza. “The Great Charcoal Debate: Briquettes Or Lumps?” (2013). The Salt: NPR. Retrieved from: http://www.npr.org/blogs/thesalt/2013/05/24/186434261/the-‐great-‐charcoal-‐debate-‐briquettes-‐vs-‐lumps
Better Business Bureau: www.bbb.org
Bureau of Labor Statistics: http://www.bls.gov/iag/tgs/iag445.htm
Cooperatives information: http://www.foodcoopinitiative.coop/ http://www.kehe.com/treeoflife/Home.aspx http://www.coopdirectory.org/distributor.htm http://www.cooperativegrocer.coop/
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