Nearly 56 billion plastic coffee pods are dumped into landfills each year, where they will take some 500 years to decompose, according to the best estimates of the industry.
The founders of NEXE Innovations Inc (TSX-V:NEXE, OTC:NEXNF) took stock of the frenetic growth in the single-serve coffee pod market, the ensuing avalanche of plastic waste, and committed to finding a solution to the environmental emergency.
Started in 2015, NEXE leveraged 3D printing to design, prototype, and patent the world's first compostable single-serve coffee pod born out of the need to replace plastic. NEXE’s patented, fully compostable, plant-based coffee pods can be used in both Keurig and Nespresso machines — the two most popular single-serve machines in the world.
Ripe for disruption
Backed by six years of research, $17 million invested and nearly $50 million currently in working capital, the Vancouver-based company is at the forefront of advanced material manufacturing and automation.
“We want to be as disruptive as possible. That's the whole purpose of this. Nearly 59 billion coffee pods are consumed a year and 56 billion of those pods wind up in landfills. We have a lot of work ahead of us,” NEXE president and director Ash Guglani, who co-founded the company, told Proactive.
“The industry is ripe for disruption. And we are fully funded to be disruptive. We are capitalized to execute on our coffee pod sales, expand our manufacturing capacity, and take advantage of M&A opportunities. We are now positioned to be a leader in disruptive sustainable innovations to replace plastic waste,” added Guglani, who has more than a decade in the capital markets and has also worked for an investment bank in Canada.
Guglani helps NEXE access public and government financing, while steering operations and marketing. NEXE is headed by CEO and co-founder Darren Footz, who previously co-founded the Granville Island Coffee Company.
Boosting production
NEXE controls its value chain by not relying on offshore manufacturers. Instead, it creates products in-house and keeps full control over the design, manufacture, and timelines of its growing pod product lineup.
It has doubled its manufacturing facility in Surrey, British Columbia to 20,000 square foot and increased space for labs, the factory floor, and offices. The plant expansion houses key equipment for manufacturing the company's Keurig and Nespresso style compostable coffee pods.
The company recently closed an oversubscribed $34.5 million bought deal financing, which NEXE plans to funnel into increasing production capacity.
“We have ordered some lines from Italy that will give us production capacity of 100 million pods on the K-Cup side. We're on the verge of actually getting those lines here so over the next few months you'll see our production capacity go from 20 million on the K-Cup side to about 120 million,” said Guglani. “There’s capacity that we're trying to build on the Nespresso side as well. You'll see more news around that.”
NEXE CEO Footz told Proactive that the firm’s rapid plant expansion will see NEXE soon receive the first of two customized and automated filter forming, dosing, and sealing lines for the Keurig capsules.
“NEXE Coffee will launch its new coffee in the Nexe Pod that enables the highest grammage and extraction in the space. This line will open up opportunities to significantly scale our business not just with our own proprietary brands but to launch new brand partnerships," added Footz.
NEXE said each scaled manufacturing line will be designed to add a capacity of around 50 million pods per year.
The company has enhanced vertical integration in its supply chain to increase product margins, protect intellectual property and blunt supply chain risks.
“The pandemic has highlighted supply chain vulnerabilities around the globe, and by increasing vertical integration in our production, we can reduce or eliminate many uncertainties in production as NEXE scales up,” said Guglani. “The exciting thing behind our Nespresso launch is that the pod is actually made in-house. We're not relying on third parties to send us parts for the product. We have a good supplier for the lidding, but other than that everything is made in-house so it's really a Made in North America solution.”
NEXE expects accelerated revenue growth, improved IP protection and higher operating margins as a result of these initiatives.
"What separates us is the fact that everything can be done in-house. We have sophisticated injection molding machines to mold our proprietary capsules. We have our design people in-house,” said Guglani. “We have a machine shop so we can make parts really quick from a R&D perspective. That's where we're trying new things and iterations. We've not relying on third parties, but are vertically integrated.”
Robust brew
In July 2021, NEXE unveiled its premium compostable espresso pods as it entered the single-serve coffee pod sector, a market that is valued at more than $25 million annually.
NEXE's first espresso product was crafted in collaboration with Jason Rennie, former production manager from Ethical Bean. The team spent a year looking for just the right combination of beans to create the best-tasting, highest quality coffee. The final blend was made from three fair-trade, hand-selected beans grown in Ethiopia, Sumatra, and Peru.
"This new offering is for coffee purists: a flavourful, rich dark roast espresso, packaged in one of the most sustainable coffee pods available, made right here in North America," said Guglani.
Xoma Superfoods
NEXE’s other business is its popular Xoma Superfoods product line which is now available on both Amazon.com and the Amazon.ca e-commerce marketplaces in the US and Canada, as well as xomasuperfoods.com.
“The superfood category is a category that will grow over time. We've got four SKUs right now and we're going to be adding more SKUs,” said Guglani. “Superfoods is about the health-conscious consumer who wants a good cup of coffee and the daily nutritional intake that comes from being on a keto, or a high-fat diet or from turmeric.”
XOMA Superfoods brand features:
• XOMA Micro-Ground Soluble Coffee with MCT (medium-chain triglycerides) made from virgin coconut oil
• XOMA Mindful Mushroom Coffee with chaga, cordyceps and lion's mane mushrooms
• Xoma Turmeric Golden Milk Coffee, with a blend of turmeric, ginger, cardamom, cinnamon, and black pepper
• XOMA Keto Coffee with quality fats and MCT oil, flavoured with hints of cocoa
Joining forces
Ultimately, NEXE is about the finest coffee sourced from around the world.
“More than 90% of our consumption is going to be coffee, whether it's Nespresso pods or the K-Cup. We have a product that not only breaks down quickly into compost but is a great cup of coffee! It tastes great because we're able to get more volume inside our capsules,” said Guglani. “Superfoods will always stay with us, but we expect most of the business to come on the coffee side.”
Not surprisingly, NEXE is a magnet for like-minded businesses and coffee roasters who want to protect the environment and reach more customers.
“We are talking to companies that have stayed out of the coffee business because of the waste issue. There are many companies that are environmentally conscious – that’s why NEXE could be disruptive,” said Guglani.
“There are specialty coffee roasters that are talking to us, and they've tried our pods. They are super excited about us having capacity and potentially allowing them to be in our pod. We are in discussions to strategically offer capacity to selective, well-known coffee roasters in North America.”
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
Follow her on Twitter: @UttaraProactive