- Investment sought:
- Equity offered:
In professional sport, teams of different sized individuals often have an in-house nutritionist who custom-builds a tailored exercise recovery drink for each team member. As the body-type and training aim of each individual varies (think giant second row forward versus small scrum-half), so too does the macro-nutritional dosing within each of the team members' recovery drinks. This is the most effective way of ensuring that each team member achieves optimum recovery from their workout and reaches their training aim in the shortest time possible.
Using a patented vending platform, our aim is to bring this practice into the retail marketplace in an easily managed and intuitive fashion.
Current sports nutrition brands often offer only generic serving sizes to customers (eg, 1 scoop of protein powder or a fixed 330ml ready-made drink). MiTonics allows the customer to easily create their own personalised recovery drink in exactly the same way that they do in the pro sport community for optimum results.
MiTonics machines are stationed within leading gym facilities meaning there is 24 hour availability of the best sports recovery drink on the market at the time and place the customer really needs it - immediately after training, offering ultimate convenience.
The branding and range of drinks in the machine (Muscle Gain, Lean Performance and Diet Meal Replacement) are designed to appeal specifically to the entire gym customer-base unlike traditional products. The availability of the Diet drink and personalised dosing means the drinks are equally applicable to both male and female members. In some cases where MiTonics has been added to an existing range then overall supplement revenues for the gym have been seen to increase. Furthermore, we have been told that where MiTonics has replaced an incumbent brand the comparable supplement sales at the site have increased.
The platform requires the input of some personal data (Training Aim, Weight and Body Fat Ratio). This then leads to deeper engagement between gym staff and their clients as the member is required to think more carefully about their training targets and also gain a basic understanding of body composition - a service that most gyms offer on induction and then as an ongoing supplementary service. In this way, MiTonics pulls together disparate services that gyms offer and provides a tangible medium through which this personal customer data can be put to use.
We see reports from gyms of increased PT (personal trainer) engagement, improved member sign-up (as the gym demonstrates its commitment to cutting edge services), increased member retention, enhanced customer results with accelerated body-change, not to mention an increase in secondary revenues in a highly competitive marketplace.
We aim to help regular gym goers to achieve enhanced results from their training by giving them access to professionally tailored recovery drinks. Globally, we see this as a wholly new category of drink in a sector where true innovation is in short supply.
Substantial accomplishments to date
In 3 years we have taken the idea from Powerpoint concept to formal operational roll-out. We have over 20 machines sited around the UK (including: Nuffield Health, The Reebok Club, The Third Space, Anytime Fitness). Our first overseas machine is off to Dubai to one of the best gyms in the world: the Nad al Sheba Sports Complex.
We received our European Patent (2292126) in May 2012. US patent is pending.
We have sold over 125,000 drinks to date and have developed a highly robust and easily operated platform.
We have tested various financial models and believe we have a strong understanding of the gym marketplace, have developed a clear and effective engagement protocol for our consumer customers, have significant opportunities for scaling the business up in a relatively short space of time and are now ready move ahead on our formal growth strategy. Following our first formal trade advertising campaign in Q1 2014, we have also generated a long list of other active enquiries which we feel further strengthens our proposition.
We have agreed formal trials at two of the largest chains in the UK which, if successful, would lead to national rollout and immediate growth.
We are now set for the formal growth phase of our company life-cycle.
Our business model is relatively straight-forward. We typically retain ownership of the machines and agree a 2yr rental agreement with the site owners immediately providing us a monthly rental income for each asset. The rental income covers the asset cost and allows us to potentially use asset financing for machine purchase from our suppliers.
We then wholesale the disposables (ingredient mixes and cups) to each of the sites at an appropriate margin that provides sufficient margin to MiTonics to support and grow the business and also allows the site owner to make a meaningful return from his/her investment.
The site owner is responsible for servicing the machine, usually on a twice-weekly basis (refill ingredients canisters, refill cup stack, basic cleaning protocol). With the financial commitment from the site in place, we see that the sites are diligent in looking after their machine and actively promoting the service to members. MiTonics is, after all, often a 'point of difference' for them and should become embedded in the customer journey from prospective member through to training strategy and ongoing member progress review.
We outsource as many of the operational elements of the business as we can to specialists (machines built to order, ingredients custom designed by leading supplier, disposables stored and distributed by logistics company, emergency technical support to specialist vending support company) which means we are able to focus almost entirely on marketing.
With the sites as our sole route to market, we view them as partners and are able to focus on experiential onsite marketing, dynamic POS (point of sale) material, development of brand ambassadors at sites, use of social media channels and trade/consumer press. There is a direct correlation between this style of marketing and drink sales, and being our sole route to market, we are able to focus on this, aiming to take market share from traditional brands who view 'in gym' sales as a small contributor to their overall revenue streams.
Use of proceeds
These funds are specifically marked to support two formal 6 month trials agreed with two of the UK's largest gym chains. We expect that a successful outcome of the trials would lead to significant and immediate growth of our estate to over 250 sites by end of 2015.
The first trial is already underway and drink sales here are 200% of the target after just 4 weeks. The site owner is actively promoting MiTonics to fellow site owners and senior management. We expect that the other chain will be installing and starting their trial during July/Aug.
As a company of only 3 people, operating from a modest home office with limited resources, we cannot now support the trials as we would like to, which will negatively impact the likelihood of securing a successful outcome.
The funds would largely be used for trial marketing requirements:
> Trial Account Director
> Junior Onsite Brand Manager
> Enhanced machine graphics
> Onsite marketing collateral
> Branded peripherals
> Office rent
> Vehicle hire x 2
MiTonics is currently targeted at the gym marketplace. We are actively engaged in penetrating the UK gym sector and believe that we are the only company in the world that can offer truly personalised nutrition drinks at the point-of-sale.
Gyms are constantly fighting to differentiate themselves from their peers, demonstrate that they are offering value and quality for money and give their members the 'personal' experience.
From our experience, the current range of ready-to-drink 'protein shakes' available in UK gyms and elsewhere is generally of very low quality. Top brands often supply limited information to the customer that allows them to promote drinks as 'high in protein' whilst not mentioning that these drinks are usually comprised of inappropriate kinds of protein for the users exercise routine - predominantly slow absorbing casein protein.
Optimum recovery from exercise is shown scientifically to come from consumption of fast absorbing whey proteins. Our marketing strategy is on two-tiers: firstly, to the gyms themselves, to whom the quality of MiTonics appeals but also for whom margin and return are a key consideration. MiTonics aims to bring numerous peripheral benefits to each site (point of difference from peers, PT engagement tool, better results for members, increased retention, increased sign-up for body MOTs, increase in one-to-one PT sessions). MiTonics also offers an attractive revenue stream through its business model, whether as the exclusive offering within the site (Marlow Club saw a 300% increase in supplements income when we replaced their incumbent supplier) or as an addition to their existing protein brands. The 45% Gross Margin (GM) for sites also resonates.
Secondly, we use an experiential marketing strategy to engage with the consumer. This requires relationship building with the gym fitness staff that, if successful, would result in them buying-in to the quality of MiTonics and wishing to see their clients get improved results so implicitly become our ambassadors. We couple this with the presence of MiTonics staff onsite to undertake experiential marketing directly engaging with the customer.
Characteristics of target market
The UK is serviced by about 6,000 healthclub venues which include: public leisure centres, private member gyms, spas, hotels and similar sites. We believe that penetration of just 10% of this market would create serious financial return for our business.
The ready-to-drink sector has grown strongly over the last 3 years and is forecast to continue to grow in similar fashion. Worldwide sales of sports related protein products grew from £2.5bn in 2007 to £4.9bn in 2012 and are likely to reach £7.8bn in 2017. In the UK sales increased from £73m in 2007 to £170m in 2012 and are expected to reach £358m by 2017. We believe this to be a booming sector in which our personalised technology sets us significantly apart from the competition.
Although we are currently focused on the UK, it should be noted that we have also received numerous serious overseas enquiries offering further potential for growth. A machine is being delivered to the Dubai Olympic team next month for example, a great showcase for the Middle East.
Our access to the sports related consumer is primarily through the gym/healthclub marketplace. Our financial model has been developed to encourage these gate-keepers to open that door. It aims to offer attractive financial returns to the gym and also gives them a service that sets them apart from their peers and fundamentally deepens the relationship they have with their members - a key target in reducing member churn.
We have run a modest advertising campaign in Workout magazine in Q1 of this year and generated over 50 solid enquiries, some from multiple site owners including the two largest chains in the UK with whom we now have trials agreed (with a view to national roll-out pending successful results).
We intend to continue with trade advertising and PR, utilising the quoted experiences of existing clients in our marketing to trigger inbound enquiries.
On the consumer side, we plan to use primarily an 'experiential marketing' strategy. From our experience, this has proved both to give tangible results and to be cost effective. On one level, by the very nature of the drink, we believe that the PTs and fitness staff become ambassadors for the product for free as it is of genuinely the highest quality and helps their clients achieve better results...making the PTs look good.
Underpinning this, we want to develop an onsite experiential marketing team, that would visit sites on a regular basis, talking face-to-face with members and staff alike, answering questions, offering taster sessions and generally keep us at the forefront of the consumers' minds. We have developed various tools that can be used to help strengthen these relationships - reloadable loyalty cards that can be redeemed against the machine, promotional tokens that can be handed out at events, co-branded brochures and posters for different chains highlighting the results of "members of the month" and so on. Only later, would we consider the consumer press due to the expense involved.
We have already seen repeated instances of where we have performed better than much larger established brands at our sites. We believe that the established brands offer a commoditised product of limited quality with little true differentiation between the brands. Furthermore, we believe that MiTonics stands alone as the world's only truly personalised nutrition drink comprised of the highest quality ingredients.
The nature of the financial model with the sites' owners requires the site to make a financial commitment via the 2yr rental agreement and so often results in MiTonics being the only protein drink available at the site. We understand that several customers have removed much larger brands from their site in order to ensure they obtain the best return possible from their MiTonics investment.
Personalisation is becoming a buzzword in nutrition as a whole, especially in the weight control market, where we also see application of the service. One could imagine SlimFast or Weight Watchers looking at MiTonics as a medium through which they could offer a genuinely beneficial product to customers based around our Diet Meal replacement drink.
We have been awarded our patent on the personalisation algorithms we use in the machine and which mirror those used by the world's top pro sport nutritionists. This would provide some protection against competing products coming online.
We also know, that developing the whole system is not easy. Protein and vending machines do not sit easily together and we have been told, for example, one of the largest sports nutrition brands in the world tried something similar several years ago but failed to produce a successful result. More recently, we have been actively developing a communication channel with some of the largest existing brands in Europe who may look at partnering with us. This could present a potential exit opportunity and drastically accelerate our growth and profit potential.