The other night, like a couple million other Canadians, I was watching Dragon’s Den.
I better back up, my Canadian is showing. For those of you not from the great white north, Dragon’s Den is a reality show that gives entrepreneurs the opportunity to pitch their idea to 5 wealthy dragons. The dragons listen to the pitch, weigh in on the business and ask all sorts of questions about it. They then decide whether to invest in the company, based on the entrepreneur, the pitch, and the numbers. Once they agree on a price for a percentage, lawyers jump on the deal, ironing out the details, verifying the financials, etc. Finally, if the company passes scrutiny, one (or more) of the dragons will invest their actual cash in the business.
American readers may be familiar with Shark Tank, which is a similar show. Personally, I don’t miss an episode of Dragon’s Den, and try to catch Shark Tank whenever I can. Watching the pitches is riveting television.
Back to the episode of Dragon’s Den in question. An entrepreneur from Quebec had one of the coolest ideas I’ve seen on the show in a while. He invented a machine that people would use to refill detergent bottles. They choose how much detergent they want, either bringing their own container or buying a reusable one at the store. The customer presses the button and presto, the machine fills the jug. The cost? About a $1 less than the equivalent bottle of detergent.
I like the concept. But there are some problems. Let me lay out the bullish case and the bearish case for the company.
Bullish reasons for liquid filling machines
Considering I’m writing on Sustainable PF, I’d be amiss if I didn’t start off with the ecological benefits. From a consumer’s point of view, a refillable bottle could save 2-6 bottles per year, depending on how many cloth diapers you’re washing. Just imagine how many bottles of detergent the average family would throw out over a decade and the volume of plastic involved. The last time I was at the landfill, I saw at least a couple detergent bottles, and I sure wasn’t looking very hard.
Demographics are also going in the right direction for this business. Just take one look at the comment section of this site, and you’ll see all sorts of people who legitimately care about the environment. This whole sustainable living thing isn’t just a passing trend, and more and more people are jumping on the bandwagon. For the detergent business, this means a growing base of potential customers.
The concept has kind of been proven as well. A similar machine exists already in many grocery stores, which dispenses bottled water. Customers like it because it’s cheaper than buying the already bottled stuff, and they can refill whatever size of container they want.
Another big plus for the company is the potential for grocery stores to make more money selling detergent this way. You know how detergent is cheaper per use if you buy a big bottle of it? Well, multiply that by about 50, and you can see how a store could use these savings to give the consumer savings while making a higher margin. Detergent sales are competitive, each store wants to have a good price on the big brands to draw people into the store.
Bearish reasons for liquid filling machines
There’s really only two negative things I can think about the concept.
Firstly, the concept needs to get people to change their habits. Grandma Mildred has been buying her Tide since 1951, and she’s not about to change her habits now. Like any business, there needs to be a certain volume of business to make it worth everyone’s while.
Secondly, and this is the elephant in the room, is how long the big players in this space are going to tolerate a new competitor.
In Canada, the detergent market is basically owned by two companies. Proctor and Gamble makes Tide and Gain, while Unilever manufactures Sunlight. Those 3 brands control probably about 90% of the market.
At some point, once the detergent dispensing machine gets to a certain mass, one of the big players will awaken from their slumber. If I was in charge of Proctor and Gamble, I’d either:
a) Copy it
b) Buy it
Considering the reach of P&G, nobody would be surprised if they rolled out their own filling stations. The consumer would know they’re getting the proper brand, P&G would make a little more profit, and the consumer would get a little break on cost. They’d squash the little guy faster than he can beg for mercy.
This is where we ask for your opinion. Would you use one of these liquid filling machines? Water, detergent .. other? Do you think it’s a viable business? The comment section is all yours.