Kahawa 1893 – Premium African Coffee
DEAL
EPISODE SUMMARY
🕓 Air Date: February 17, 2023
Asking For:
$350,000 for 5%
Investor:
Emma Grede
Deal:
$350,000 for 8%
PRODUCT SUMMARY
Kahawa 1893 Coffee sources coffee directly from women farmers in Africa and allows customers to tip the farmers, with the tips matched by the company.
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Background Story
Margaret Nyamumbo, the founder of Kahawa 1893 Coffee, grew up on her grandfather’s coffee farm in Kenya and later moved to the United States for her education. She holds an MBA from Harvard and gained financial experience working on Wall Street. Her personal background and heritage in coffee farming in Kenya inspired her to create a company that would fairly compensate women coffee farmers in Africa.
In Kenya, male members of households typically own the land, resulting in female farmers not being properly remunerated for their labor. Margaret’s mission is to change this by sourcing coffee directly from women farmers and enabling customers to tip them, which the company matches.
The Product
Kahawa 1893 Coffee offers a variety of coffee products sourced directly from women farmers in Africa. Customers can purchase these products at grocery stores and through the company’s website.
The coffee comes in different flavors and blends, including a popular African spiced coffee with chai spices. Customers can leave tips for the women coffee farmers by scanning a QR code on the coffee bags, and the tips are matched by the company to provide additional support to the farmers.
How It Went
The company’s position before Shark Tank
In the past 12 months, Kahawa 1893 Coffee generated $2 million in sales. The company primarily distributes its products through grocery stores and wholesale, accounting for 85% of their sales, with the remaining 15% coming from direct-to-consumer sales. The company achieved a significant milestone by launching its products in Trader Joe’s, becoming the first Black-woman-owned coffee brand to do so.
This success led to other retailers, such as Target and Sprouts, expressing interest in carrying their products. The company aims to reach $4 million in sales for the current year, with plans to achieve $10 million in the following year. The business operates with margins, selling their products to grocery stores for $8 per unit, which costs them about $5. Despite the impressive growth, Kahawa 1893 Coffee’s profitability stands at approximately $150,000 on $2 million in sales for the past 12 months.
The Negotiations:
Margaret initially sought $350,000 for a 5% equity stake in her company, valuing it at $7 million. She received offers from both Robert Herjavec and Emma Grede. Emma proposed a deal for $350,000 for a 12.5% equity stake. Robert offered the same terms as Emma, effectively doubling Margaret’s investment but requiring a 25% equity stake.
Mark Cuban expressed concerns about the business’s need for substantial funding and decided not to invest. He recommended a much lower valuation than Margaret’s initial ask. Kevin O’Leary also declined to invest, citing concerns about the business’s potential to scale quickly and raise substantial capital. In the end, Margaret accepted Emma Grede’s offer, which included $350,000 for 8% equity. This deal was simpler and more aligned with her vision for the business’s growth, with the possibility of scaling organically.
