Offer closed The Cup Exchange Ltd

OnMarket | The Cup Exchange Ltd | closed

Crowdfunding Type of Offer
$250 Minimum Investment
$500,000 - $1,200,000 Size of Offer
$4,459,500Pre-money Valuation

Success!

163%

$815,133

Raised

10-21%

Equity

324

Investors

 

Offer now closed - payments must be made by 5pm Monday 17 December
 

​Please consider the offer document and general risk warning before investing.

Investors are entitled to a 5 day cooling-off period.

Investments over $10,000 are restricted to Sophisticated investors - Apply here

Introduction

The Cup Exchange Ltd (TCX) is a scalable, technology-enabled subscription service created to provide a convenient and sustainable alternative to single-use cups, benefitting all stakeholders. TCX combines a purpose-designed physical cup with an IT system, providing a solution for the 1.2 billion cups disposed of each year in Australia alone, with 90% ending up in landfill.

Investment Highlights

  • Scalable subscription model designed to replace disposable coffee cups
  • Large target market with 3.3m take-away coffee purchases per day in Australia
  • Heightened public awareness of environmental & economic problems of single-use items
  • Unique solution combining a purpose-built IT system and desirable physical product
  • Lack of genuine competition in the mass market both in Australia and overseas
  • Truly circular economic business, eliminating waste to landfill
  • Potential for tax incentives for eligible investors under ESIC scheme
  • Free 24-month subscription for investments $500 or more
  • System validated by successful pilot with PwC in Sydney and Melbourne over 2,500 users and 25,000 cups saved from landfill
  • Platinum sponsorship of Melbourne International Coffee Expo (Feb 2019) with ~150 exhibitors, and ~12,000 participants using TCX
  • Adopted by the Australian Specialty Coffee Association for competitive use

 

The Company believes that it meets the criteria as a qualifying Early Stage Innovation Company ('ESIC') for the purposes of this offer.

To encourage early stage investing, significant tax incentives are available for investments in qualifying companies, namely:

  • an upfront 20 per cent non-refundable tax offset; and
  • a 10-year CGT exemption for shares held for at least 12 months

 

Problem (Linear Economy)

The current process of continuously producing single-use cups (16,000 per second global), which are used by the consumer for a few minutes and then discarded, is now becoming socially and environmentally unacceptable. 

 

Excessive paper cup production and disposal has resulted in a significant social consciousness condemning the consumption of single-use items, driven by programs such as the ABC’s War On Waste series, while also placing a financial burden on cafés through the ongoing cost of purchasing cups, and on governments (and ultimately consumers) via the cost of waste collection and pollution management.

Lack of genuine alternatives – Awareness of the paper cup problem has driven an increase in the use of BYO cups.  This has now stagnated at around 6-8% of the take-away cup market. Management believes this is because re-usable cups fail to address the convenience of use for the majority of consumers.  Other alternatives include cups certified to be biodegradable or compostable.  They are rarely degraded or composted due to a lack of waste stream segregation and facilities able to process them.

The TCX Solution (Circular Economy)

TCX has developed a circular economy solution based on a technology-enabled subscription service. TCX combines a purpose-designed physical cup with an IT system to solve the issues associated with single-use paper cups for all stakeholders, including the environment.

 

 

The Cup –  is made of 100% Tritan from Eastman, providing:

  • Superior clarity of taste, similar to glassware
  • Insulation and heat transfer
  • Food safe (BPA and BPS Free)
  • Durable
  • Easy to Clean (over 4,000 washes without cracking, warping or discolouring)
  • Standard Sizes: 8oz, 12oz and 16oz with low stack height
  • A sustainable alternative to paper cups

 

 

Production

  • TCX has designed and owns all production tooling, which can be used to manufacture 12,000 TCX Cups per day (~4m p.a.).
  • TCX owns a customised production line with integrated lasering process that supports the final production TCX Cups.
  • Tooling and lasering processes can be upgraded to double capacity within 4 weeks.

IT

  • Back End – The TCX IT system has been designed to cater for the mass-market.  The database engine utilises AWS serverless elastic technologies that scale in real-time to near-infinite capacity.  The upgraded IT system has been tested to support over 2,000 transactions per second, and capable of handling the peak market demand for the entire Australian population. The new system is expected to be completed by January 2019 to enable it to be deployed at the Melbourne International Coffee Expo in February 2019.
  • Front End – TCX uses Progressive Web App (PWA) technology delivering a consistent and convenient UX for consumers on any platform or device (ie iOS, Android, Windows OS) as well as ‘plug n play’ deployment to Café operators.


How it works

 

Achieving zero waste

TCX was founded on the principles of the circular economy: that is, to re-use the material as much as possible, and then re-purpose that material when the consumer no longer needs it.

When TCX Cups reach end of life, we remove them from circulation, crush them down to recover the material, and use 100% of the material to create new TCX Cups. When combined with a subscription model, consumers are also deterred from throwing away cups, as it will cost them money to replace the lost credit. So, TCX cups need never go to landfill or risk polluting the environment.
 

Stakeholders
 

 

Market Opportunity

Australia – Drinking coffee has become part of our culture:

  • $8.3bn industry
  • Over 60% of adults consume coffee, on average 104 take-away cups per annum
  • average consumption is 3kg coffee per annum, equivalent to 1 cup per day
  • people who work longer hours, on average, consume 10 cups/week
  • concentrated take-away coffee purchases during morning commute and office entry
  • Peak: 8:00 to 9:30am

 

At 1.2 billion units per annum, single-use paper cups account for over 90% of the take-away market in Australia.

Overseas

  • After crude oil, coffee is the most sought commodity in the world
  • Worldwide, 500 billion cups of coffee are consumed every year
  • Coffee industry is worth over USD$100bn worldwide
  • Americans consumer over 400 million cups of coffee per day

Business Strategy

Management believes that TCX has an environmentally responsible, scalable solution that appeals to the consumer mass market, café operators, corporate entities and government.

TCX’s strategy is to rapidly expand by:

  • Delivering desirable products that are affordable to consumers
  • Supporting café operators financially through the distribution of TCX products
  • Reducing the waste management burden and costs borne by corporate entities and government

Target Market

Despite some early take-up with first movers adopting reuseable cups, they have failed to attract adoption by the mass market. It is this mass market that TCX is targeting.

Manufacturing

  • TCX have engaged an Australian owned manufacturer, Fountain Products, which owns and operates manufacturing and warehousing facilities in Melbourne and China
  • Fountain Products has over 40 years’ experience and produces items for blue-chip clients domestically and globally, including Kmart, Woolworths, Bunnings and Target
  • The manufacturer is regularly audited by these clients to confirm technical and ethical quality adherence
  • TCX owns all tooling, fibre laser marking equipment and automation systems to produce TCX Cups.

Market Differentiation 

Some of the competing products in Management’s view are mentioned in this table. This is based on publicly available information and on selected attributes only. It is not intended to be an exhaustive list.

Distribution

TCX’s distribution strategy is to supply products to cafes and food retailers for direct distribution to consumers. TCX products are delivered free of charge. This results in cafes acting as distributors directly to consumers at the Point of Sale.

The Company is also partnering with organisations looking to reduce their environmental impact and/or improve sustainability credentials.  By doing so, TCX gains access to a higher volume and concentration of distributors operating within their jurisdiction.  This reduces TCX’s cost of distributor acquisition and increases the speed of the network rollout.

TCX will initially concentrate on rolling out the network to high density food and beverage locations. This includes office buildings and precincts, where consumption of take-away ready-made beverages by consumers is both high and repetitive.  By focusing on epicentres, TCX can rapidly enable distributors, and subscribers can readily realise value. Managements’ aim is to connect those epicentres to create a network with high consumer engagement and convenience.

TCX has developed a ‘plug n play’ kit which will be shipped directly to distributors.  Once arrived, a TCX representative will provide setup support and training either in-person or online, as required.

Roadmap

Exit

While the Company does not have any immediate plans for an exit or liquidity event, the Directors aim to achieve an exit/liquidity event for shareholders in the medium-term if they are able to achieve their goals. While there is no guarantee that this will occur, this could be in the form of:

  • A trade purchase of the Company
  • A listing on a recognised stock exchange (eg the ASX)
  • A private equity investment in the Company
  • A share buy-back by the Company

Offer Details

TCX has a pre-money valuation of 4.46 million.  The Company is looking to raise a minimum of $500,000 and a maximum of $1,200,000 via this equity crowdfund offer (the Offer), as set out below. 

The funds raised from this Offer will be applied to the following areas:

Investor Rewards
 


Key risks

CommercialisationIf the Company is unable to increase the awareness and acceptance of the TCX subscription model by consumers, then this will have a material adverse effect on the Company’s potential revenue and prospects. 

Key person – If TCX is not able to retain its key senior management, this may affect the Company’s ability to achieve its goals.

Competition – If a competitor with a similar product enters the market with more resources and a wider footprint, this may affect the Company’s ability to achieve its goals.

Supply – If the Company runs out of cups and/or lids, or there are supply issues with the current manufacturer, this may affect the Company’s ability to grow and achieve its goals.

Management and Board

Marty Rowell | CEO & Co-Founder

  • 20 years’ experience in the telecommunications industry in Australia and UK with organisations including nbn, Telstra and Cable & Wireless
  • Held senior positions in Product Development and Strategy
  • Passionate about utilising technology to create value in the circular economy
  • Masters Entrepreneurship & Innovation, Swinburne University; Graduate Diploma Applied Finance, Macquarie University; Bachelor of Marketing, Monash University

Jeremy Rowell | Chief Information Officer & Co-Founder

  • Over 20 years’ experience designing and implementing IT supply chain systems
  • Expertise spanning product development, manufacturing, inventory management, warehousing & logistics across wholesale, retail and online channels
  • Deep understanding of mathematics and process design to rapidly expanding businesses
  • Bachelor of Computer Science and Electrical Engineering, Monash University

Rosemary Kennedy | Non-Executive Director

  • Deep capital markets experience across debt and equity
  • Expertise in assisting companies from seed to IPO
  • Previously Head of Bond Trading at what is now UBS and senior management positions at ASIC and ASX
  • Founder and Managing Director at OnMarket
  • Passionate about making capital markets more accessible for retail investors
  • Bachelor of Commerce, University of Melbourne

David Blosfelds | Operations Manager

  • Over a decade of operational management experience in wholesale, retail and online
  • Solid understanding of the TCX IT System and UI gained through the development phase.
  • Experience dealing with manufacturers, inventory management, warehousing & logistics
  • Strong stakeholder management and communication skills dealing with customers, suppliers, distributors.

Early Stage Innovation Company Tax Incentives

To encourage early stage investing, significant tax incentives are available for investments in qualifying companies, namely:

  • an upfront 20 per cent non-refundable tax offset; and
  • a 10-year CGT exemption for shares held for at least 12 months

Based on an objective self-assessment, the Company believes that it meets the criteria as a qualifying Early Stage Innovation Company (‘ESIC’) for the purposes of this Offer. Investors who purchase new shares in qualifying ESICs may be eligible for certain early stage tax incentives. We recommend that investors seek independent tax advice about their investment and their eligibility.

See the link to the ATO website under the Company Releases tab for more information.

 

The Offer is subject to a Maximum Subscription amount of $1,200,000. If the Maximum Subscription is reached, the Offer will close early. Applications will be treated on a time priority basis and may be subject to scale back, so please fund your application as soon as possible.

 

IMPORTANT: Please read the below information before investing in this Equity Crowdfunding offer.

RISK WARNING:  Crowd-sourced funding is risky. Issuers using this facility include new or rapidly growing ventures. Investment in these types of ventures is speculative and carries high risks. You may lose your entire investment, and you should be in a position to bear this risk without undue hardship. Even if the company is successful, the value of your investment and any return on the investment could be reduced if the company issues more shares. Your investment is unlikely to be liquid. This means you are unlikely to be able to sell your shares quickly or at all if you need the money or decide that this investment is not right for you.

Even though you have remedies for misleading statements in the replacement offer document or misconduct by the company, you may have difficulty recovering your money. There are rules for handling your money. However, if your money is handled inappropriately or the person operating this platform becomes insolvent, you may have difficulty recovering your money. Ask questions, read all information given carefully, and seek independent financial advice before committing yourself to any investment.

5 DAY COOLING OFF PERIOD: There is a 5 business day cooling off period for retail investors. During this period, you may withdraw your application and receive a full refund into your nominated refund account. Please note: After the 5 day cooling off period has expired, you will be unable to withdraw your application. More information here.

ONMARKET FEES: Upon successful completion of the Offer, a maximum fee of 7.5% of the funds raised will be paid to OnMarket by the Company.

ONMARKET INTERESTS: OnMarket and its associates will be participating in this offer.

ONMARKET INTERESTS AND AMOUNTS SUBJECT TO COOLING OFF: The funding bar displayed under each crowd funding offer may include applications where payments are yet to be made and amounts that are subject to the cooling off period.

Section 734(6) disclosure: The issuer of the securities is The Cup Exchange Limited ACN 621 364 556. The securities to be issued are fully-paid ordinary shares. The disclosure document for the offer can be obtained by clicking on the link above. The offers of the securities are made in, or accompanied by, a copy of the disclosure document. Investors should consider the disclosure document in deciding whether to acquire the securities. Anyone who wants to acquire the securities will need to complete the application form that will be in or will accompany the disclosure document (which can be done via the electronic application form which will become available by clicking the bid button above).​

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Question time

We'd love to answer your questions, we'll have one of the OnMarket team or the company representative of the offer get back to you asap. So ask away ...

Validity of business model

Your business model seems to be based upon people being willing to pay to do the right thing & the major differentiation to taking your own reusable cup is the convenience of not having to remember to take it with you when going to buy your coffee.
What research do you have that shows that the mass public are willing to pay for this small benefit (aside from a single affluent business)?
Why would people who are regular coffee 'adicts' not remember to take their own reusable cups with them daily especially now with the mass adoption of reusable bags in supermarkets being widespread reinforcing such a habit?
How many monthly subscribers do you believe you need in order to break even & what timescale do you believe this will be achieved?

Ian H (OnMarket member) on 13/11/2018

Hi Ian, Matt from OnMarket here. Ive set out some answers to your three questions below:
1. The founders of The Cup eXchange spent a year conducting in-depth conversations with cafe owners, staff and coffee drinkers to understand their needs. Based on that extensive research, they saw a need for an environmentally responsible, scalable solution that appeals to the consumer mass market, cafe operators, corporate entities and government. They designed The Cup eXchange to meet that need. There is some good information on how they believe adoption in the target market occurs on page 15 of the Offer document.
2. While there has been some support for reusable cups, it is estimated that this has now stagnated at around 6-8% of the takeaway cup market (page 10 of the Offer document). The fact is that Australians consume 1.2b single-use coffee cups per annum, with an estimated 90% ending up in landfill (page 14 of the Offer document). This is why they designed The Cup eXchange to target the mass market, with convenience a key priority.
3. Since The Cup eXchange is an early stage company, we arent permitted to give projections in a retail CSF offer. However, there are details on pricing (page 13), roadmap (page 19) and use of funds (page 32) set out in the Offer document.
Regards
Matt

Matthew T (OnMarket staff) replied to Ian H on 13/11/2018
Barriers to market and competitors

Hello , I am extremely interested in this concept as a cafe owner, I understand and have seen the slow uptake of keep cups as they are known. Personally I dont like them, we have seen some filthy cups presented and for this reason do not discount those that present them. There is a growing discontent for disposable cups I agree. I note that larger centres are to be concentrated on first. This is understandable there are also many smaller cafes outside larger centres and for the system to work the Tcx cup must be available everywhere, obviously costly to your organisation as a tablet and scanner is to be provided to all cafes. Are there any arrangements in place with coffee distributers to date ? It goes without saying that the other cup manufacturers will try to counteract the success of Tcx. One large manufacturer blames everybody else that their cups are not recycled. Like I sang I believe the concept is great but would like to further understand how the above issues will be overcome.

Kind regards
Cameron

Cameron H (OnMarket member) on 13/11/2018

Hi Cameron,

Thanks very much for your interest. We understand where you are coming from regarding growing discontent towards disposable cups as well as some of the difficulties currently experienced with reusable cups.

In terms of our rollout, we have decided to target large high-density precincts first to build traction and awareness. We will then look to expand around those epicentres in areas where there is demand and where it makes sense for our customers. The cost of the tablet and scanner is actually not a great burden for us and we can recover that cost fairly quickly. We also take a deposit from the caf to ensure that the equipment doesnt get damaged and to encourage accountability.

With regards to your question around coffee distributers, we are a platinum sponsor for the Melbourne International Coffee Exhibition, which is known as the largest coffee event of its kind in the Asia Pacific. Our TCX cups will be available for use by the ~12k caf owners, roasters, distributors, baristas and other industry participants in attendance at the event. We are also the exclusive cup provider with naming rights for the Australian Specialty Coffee Associations Cup Tasters Championship. Again, we will be actively demonstrating our service to many of the largest coffee players in the Australian market and see this as a great opportunity to distribute our product and increase awareness. While coffee distributors do offer potential for a path to market strategy, we believe that initially targeting corporates/landlords with a sustainability agenda, caf owners, facility managers and councils offers a more compelling opportunity based on our traction to date (as set out on page 13 and 18 of the Offer document).

Kind regards
Jeremy

Jeremy R (The Cup Exchange Ltd representative) replied to Cameron H on 15/11/2018
How does it make money??

This was all good and well but how does it make money? How much does the cup cost how much do you charge etc etc? Weird this info is missing

Nick R (OnMarket member) on 17/11/2018

Hi Nick,

The Cup eXchange generates revenue via a consumer subscription model. This is explained in section 2.6.2 of the Offer Document. One month of a consumer subscription more than covers the landed cost of a cup.

Regards

Jeremy

Jeremy R (The Cup Exchange Ltd representative) replied to Nick R on 19/11/2018
ESIC Qualification

Will you be obtaining a confirmation/tax ruling? from the ATO confirming The Cup eXchange indeed meets the criteria as a qualifying Early Stage Innovation Company ('ESIC')?

Glenn C (OnMarket member) on 19/11/2018

Hi Glenn, Companies have the option of either self-assessing themselves according to the ESIC tests or seeking a ruling from the ATO. The directors have self-assessed the Company according to the early stage test and the principles based innovation test. The directors were satisfied that The Cup eXchange has met both of those tests, therefore qualifying as an ESIC, as discussed in page 37 of the Offer Document. Accordingly, the Company will not be seeking a ruling from the ATO.

Marty R (The Cup Exchange Ltd representative) replied to Glenn C on 21/11/2018
Cost of Coffee vs Subscription

Hi.
I like the concept as a whole but I am interested in one particular factor.
Apart from the environmental benifit, will consumers using TCX cups receive reduced cost products so that the subscription fees are not simply extra costs on top of the already rising price of coffee?

Heath C (OnMarket member) on 20/11/2018

Hi Heath, TCX supplies the cups and equipment free to the cafe. The TCX system also has a built-in 'loyalty card' so the cafe can elect to give a free coffee to loyal customers after a number of purchases (set by the cafe operator). Whilst both these factors help cafes reduce costs, we respect that each cafe has its own approach to pricing, marketing and customer loyalty. Our role is to empower cafe operators to maximise the attractiveness to consumers to elect not to use a disposable take-away cup. As such it is up to each individual cafe to decide if they would like to offer customers a per cup discount or use the loyalty program with TCX Cups, or alternatively only increase the cost if customers elect a disposable cup (similar to shopping bags).

Marty R (The Cup Exchange Ltd representative) replied to Heath C on 21/11/2018
Valuation

I'm interested in more detail on how you have reached the pre-money valuation of $4.46m. This seems high for a pre-revenue company. Have you any details on the comparable companies used to establish this valuation?

Victoria A (OnMarket member) on 21/11/2018

Hi Victoria
Thanks for your query regarding valuation.
TCX has developed a unique combination of both physical product and subscription service, with a particular focus on high scalability and growth. We have conducted extensive research and have been unable to find a comparable company which uses a truly circular economic model and which has in place the ability to execute a high growth strategy without transferring ownership of any physical product.

Given we are an early stage company, we are cautious about providing forecasts, and please note that the explanation below relates purely to your question on valuation methodology and is not a forecast.

If the target market is defined as adult coffee drinkers in Australia (@60% of the adult population = approx. 12m), less allowance for regular non-disposable cup users (@ 6-8% = approximately 1m), then the total target market is approximately 11m people, who consume approximately 3.3m coffees in disposable cups per day. Our valuation is based on the expected revenue from achieving approximately 0.27% of this addressable market. We then applied a multiplier to this anticipated revenue and discounted the valuation to allow for the early-stage risk for crowd funding investors.

Given the successful pilot with 2,781 registered users (at time of writing), along with the positive feedback from those users, we have observed that there is considerable pent-up demand for this service.
TCXs plan to acquire subscribers in excess of 0.27% addressable market is outlined in sections: 2.8.5 Distribution Strategy, 2.8.6 Promotion Strategy and 2.8.7 Roadmap.
Hope this helps.

Marty R (The Cup Exchange Ltd representative) replied to Victoria A on 24/11/2018
Incentive for subscribers and concerns

Hi, I like the concept and the subscription model for ongoing revenue. However I don't see quick take up as yet by consumers. I am a regular coffee consumer so my concerns here are:
1. I can't even see the cafe locations on your website. EG. How do we know which cafes in Melbourne city that offer this service? I tried looking on your website however couldn't find any sort of look up. It's not encouraging at all then to sign up if you don't know that there is convenient locations for you as the consumer. You need a map (google maps) with all the locations and information.
2. What are the incentives to sign up to this? Obviously it saves the environment (which is a great incentive) and the cafe, however does the consumer save say 10 cents on the coffee price? EG. I purchase 2 cups a day for 5 business days a week (~40 cups a month), saving 10 cents a cup it would save me $4 a month. Covering the cost of the subscription and helping the environment. Everyone is a winner, the cafe with sales, shareholders, the consumer and the environment. I'm not sure if you have thought about this or if its already invovled in the coffee price however it wasn't clear on the presentation.
3. Valuation - I've invested in many crowdcube investments in the UK and looking at your balance sheet/losses/net assets, it looks very light. How do you explain the valuation being in the millions when your net assets ~150k and revenue so low with losses? Are you valuing the technology that high? and if so is there some sort of patent to protect the technology in Australia and globally?
I am really interested here but need to get past these points first.
Thanks,
Brent

Brent C (OnMarket member) on 22/11/2018

Hi Brent,
Thanks for your questions.
1. The location feature has been fully developed with integrated google maps, but is currently switched off. Customers local to cafes currently offering TCX Cups are aware of the TCX service with POS signage, barista support and corporate promotion. This will be turned on post-Equity Crowd Funding and updated as cafes on-board and the network is rolled out.
2. Agree with your sentiment to encourage take-up for everyones benefit, including the environment. Each caf has their own approach to pricing, marketing and encouraging/rewarding customer loyalty. TCX respects this and enables cafes to offer TCX Cups whilst either maintaining or modifying their unique approach. Please refer to response to Heath C. above Cost of Coffee vs Subscription.
3. With regard to valuation, please refer to response to Victoria A. above Valuation.
The primary purpose of the Equity Crowd Funding raise is to accelerate the roll-out of the TCX network to increase subscriber volume and revenue.
With regard to assets, please refer to section 2.11 (page 24) all of which enables TCX the ability to scale production, distribution and service transactions as outlined in sections 2.5.1- 2.5.3 (page 11).
Regards,
Marty

Marty R (The Cup Exchange Ltd representative) replied to Brent C on 24/11/2018

Thanks Marty.
Do you have some cafes setup in Melbourne and/or Richmond? I would like to pop in and give it a try.
I do struggle to see quick take up of the product without a built in financial benefit to the consumer. Of course when the plastic cups are removed and consumers have no choice then it will be a much easier sell. I would like to invest however I am not totally convinced by this.

Brent C (OnMarket member) replied to Marty R on 26/11/2018

Hi Brent,
Regarding take-up, our distribution strategy is based around precincts and multiple close proximity locations to enhance consumer convenience. To that end, we are in the planning phase with a number of facility managers and corporations to support the TCX network roll-out.
In Melbourne, I recommend checking out 30ML coffee at Freshwater Place or Fourteen on 3 at 3/530 Collins Street to use TCX ... both serve excellent coffee.
Regards,
Marty

Marty R (The Cup Exchange Ltd representative) replied to Brent C on 07/12/2018
Is scanning cups inconvenient?

Hi,
As a customer, this is a solution I have been waiting for. However, my favourite cafes get pretty busy and I am concerned that the cumulative time it takes for cafe staff to scan cups is going to be a disincentive for cafes to join the program. Did the pilot highlight any issues with adding extra work onto cafe staff?

Claire R (OnMarket member) on 23/11/2018

Hi Claire,

Yes, the pilot did highlight opportunities for improvement, and in response we did modify some of the UX to further streamline the process from both a consumer and barista perspective.

For the reason you highlighted, the pilots were specifically conducted in busy environments, where queues can get up to 20 people deep.

For busy cafes, the TCX system has the flexibility to install a second presentation scanner on the consumer side. That way consumers can simply present their mobile phone at the scanner (similar process to self-serve checkout at the supermarket) and the information is presented on the baristas screen being: consumers first name and favourite drink (consumer selected). The barista simply picks a TCX Cup off the stack and waves it past their scanner, and a notification is immediately sent to the consumers phone with their cup number. The whole transaction can be done in a few seconds, and in the pilot proved to be significantly faster than a cafe operator taking a verbal order, resulting in shorter customer queues. Interestingly, after a couple of hours on the first day, we observed the baristas encouraging people to register as it made their job easier and more efficient, and it also improved the customer experience by making it quicker for them to place their order and receive their coffee.

For very large and busy cafes TCX can install multiple scan points that are interlinked to allow for simultaneous scanning, thereby increasing the throughput.

Kind regards

Jeremy

Jeremy R (The Cup Exchange Ltd representative) replied to Claire R on 26/11/2018
7 Day Update

It has now been 7 days since OnMarket announced the opening of The Cup eXchange equity crowd funding campaign.

Since then TCX has received:
- Further interest from corporations and facility managers looking to reduce waste.
- Enquiries from government organisations
- Numerous cafe referrals from the public and cafe operators

I would like to personally thank friends, family and associates who have contributed in the order of $150k, showing their support and belief in the TCX business model.

We are pleased to announce that there has been over $540k invested in the ECF offer, from ~150 investors. We have now exceeded our minimum target and are now targeting $1.2m.

Jeremy

Jeremy R (The Cup Exchange Ltd representative) on 26/11/2018

Congratulations on reaching the minimum goal!

Claire R (OnMarket member) replied to Jeremy R on 27/11/2018
Balance Sheet

1. How long has the company been running and can we see a balance sheet?
2. Why would you want to expand production to more than 4M cups per year, after all, they are reusable.?

John L (OnMarket member) on 29/11/2018

Hi John,
The Cup Exchange Pty Ltd was incorporated on 29 August 2017 and converted to a public company on 11 October 2018 (page 8).
The balance sheet as of 30 September 2018 is shown on page 26.
Section 2.5.2 Production (page 11) outlines the current manufacturing capacity as 12,000 per day which is equivalent to 4m p.a. The current usage of disposable cups in Australia is around ~1.2 billion p.a., 300 times TCX's current annual capacity and increasing. Aside from the current target market, increased production may be required to service overseas markets, and/or additional products in Australia or overseas. Ideally we would reach a point where production is in equilibrium with replacement of existing products using recovered material, but the worldwide consumption of single use cups is more in 1 second than we can produce in 1 day. Many governments are contemplating banning or taxing single-use items. We are building and positioning the company for significant scale (and value), which requires the ability to increase production as required in order to be effective in addressing the problem in a timely manner.

Marty R (The Cup Exchange Ltd representative) replied to John L on 04/12/2018
Clean cups

I love the whole concept a brilliant way to disrupt current practice and transform from product consumption to service delivery. I am in 7% who carry their own cup and I'm constantly disappointed by the number of people who don't.
Who cleans the cups between use?
How soon will you roll out in Canberra?

Kirsten D (OnMarket member) on 03/12/2018

Hi Kirsten,
It has been great to see an increase in the use of re-usable cups, and kudos for following through. Rather than being disappointed with ~93% of people who don't have a clean reusable cup with them at the time of purchase (of which there are several reasons), our approach is to help them by making available a solution which is as convenient and desirable as possible, and ultimately deliver a superior experience over single use cups in terms of taste and 'feel good' factor.
Currently cafe's clean the cups using standard hospitality practices. We are currently exploring a range of options in working with facility managers which include centralised and automated washing facilities.
We would love to roll out the TCX network in Canberra as soon as possible (there are some progressive cafes in Canberra), and the more we raise through Equity Crowd Funding, the faster we can deploy.

Marty R (The Cup Exchange Ltd representative) replied to Kirsten D on 04/12/2018
Sign up process

I've just had a look at the sign up process and there are so many steps! Are you sure that you've got this right, considering that people need to be signed up to get their first cup?

Ideally, I'd be able to pay the first month's subscription at the cafe when I pay for my coffee, and then either

- get a code of some sort sent to me by text, so that I can complete the sign up process later on; or

- get something like a loyalty card with the QR code on it so that I don't need to sign up at all, just renew through the cafe each month/quarter.

Why aren't you taking this approach?

Paul S (OnMarket member) on 08/12/2018

Hi Paul,
Thanks for the feedback. We are currently streamlining the sign-up process and have made a number of UX improvements to reduce the steps and time to sign-up.
We have designed the TCX subscription system to provide a unified, persistent and centrally managed customer experience without burdening the cafes with additional financial, administrative and sales responsibilities - ultimately providing a better UX for both consumers and cafe operators.
Regards
Marty

Marty R (The Cup Exchange Ltd representative) replied to Paul S on 12/12/2018
Reposting a question from OnMarket member

OnMarket has received the below question from one of our members. As per our communications facility policy, we have had to remove a link to a discussion board on a third party site, as this cannot be monitored by us. I will leave the question below to be answered by the TCX team.

"Hi,

A solution like this is really needed. I had half an idea like this just a while back (a sort of library system of glasses), but didnt go past my inner head. Youve obviously done your homework.

A bunch of random things.

I was also thinking about the onboarding of the customer. What other avenues might there be? Can the cafe buy a block of subscriptions and sell them directly to the customer at their first coffee? Can a corporate do similar and give them to their staff?

Why do some of the subscriptions have 2 cups and some 3? Where is the line between convenience and excess cups floating around. What does someone do if they have not returned their 2 cups, but want another from a place where they may not usually get their coffee? Extending this further is there a scenario where you offer "unlimited" / higher number of cups but with some sort of approach / encouragement for people to return them a sort of VIP / good user history program?

Similar to this, during the online sign up process, I was a little confused about the differentiation between the concepts of cups, credits and exchanges. I think it's mostly the credit concept that muddles the waters a little. Id almost like to see subscriptions offered by the number of cups I think I might use. For example scenarios, I might be super diligent with my cup and always return them promptly, so a 1 or 2 cup subscription suits my lifestyle just fine. Then suddenly, I am doing work in a neighbouring area and things are more frenetic and I require a little more leeway to not always return my cup promptly, so a plan of 3-4 cups just gives me the freedom I need. An extended scenario - perhaps I live and work in different places and want to use TCX cups, but the reality is that I am often tired, overworked, but will make the effort because I know its the right thing to do; so my work buys me two cups and I buy a 1 cup subscription, because I take my cup home and often end up washing it again.

Do the plans renew automatically?

Whats the approach for when people dont return their cups and just pay the fee because they cant be bothered and who knows where the cups end up.

How high do the cup numbers go / vary by size and when cups start moving around, is this easy for the barista to manage?

Do you envisage a scenario where a caf might choose to replace all of their disposable cups and glasses with the single TCX cup system?

I also found this discussion - [removed]

Thanks!"

Richard L (OnMarket member) on 08/12/2018

Matthew T (OnMarket staff) on 09/12/2018

Hi Richard
Answering your questions.
For economic sustainability, the TCX system does not depend on cafs purchasing products and on-selling as per a standard linear economic model - please refer to section 2.4 on page 9 and 2.5 on page 10 of the Offer Document.
We have found that the return rates of cups is far greater if the end consumer purchases their own subscription.
The 3-cup subscription is for consumers who want even greater convenience and flexibility. Consumers can purchase additional credits as they require.
The TCX integrated IT system has the capability to closely monitor stock levels across the entire network at each location in real time, and then optimise those stock levels to meet demand - please refer to section 2.8.5 on page 18 of the Offer Document.
TCX has recognised the situation where consumers may have 0 credits left, and provided a convenient solution for consumers to add additional credits directly from their account - please refer to section 2.6.2 on page 13.
TCXs objective is to minimise the resources needed by consumers by maximising resource re-use. Unlimited accounts make no economic or environmental sense - please refer to section 2.5 on page 10 of the Offer Document.
TCX offers total flexibility. For short-term consumer requirements, consumers can purchase additional quick credits as required in 30-day blocks.
The consumer can manage their account and determine if they want their subscription to renew automatically or not.
The TCX Cup numbers are identifiers for easy visual recognition by both consumers and baristas. Whilst each TCX Cup has a unique QR code, there are 2200 alphanumeric cup identifiers. The identifier appears on the baristas terminal and the consumers phone, and works extremely well.
In reference to cafes solely using TCX system - please refer to section 2.2 and 2.3 on page 9 of the Offer Document.
Regards
Marty

Marty R (The Cup Exchange Ltd representative) replied to Matthew T on 12/12/2018

Thanks for the thoughtful respones. Best wishes with the project.
Regards,
Richard

Richard L (OnMarket member) replied to Marty R on 12/12/2018
PwC Trial

Do you have any data on how many coffees are bought in single orders? I would imagine of lot of coffees are bought in multiples for a group of coworkers.

James R (OnMarket member) on 11/12/2018

Hi James
Regarding the PwC Trial (as referenced in the heading), the overwhelming majority of orders are single, with the occasional instance of a person taking a coffee back to the office for a colleague. We observed that even though people arrived in groups, they still ordered individually. Note: PwC have separate catering for meetings and events. Aside from individuals being able to access 2 TCX Cups with the base subscription, and can purchase additional cup credits, we are currently in the process of developing a "Corporate TCX account" which can be accessed by authorised personnel to facilitate larger group orders.
Regards
Marty

Marty R (The Cup Exchange Ltd representative) replied to James R on 12/12/2018

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The Cup Exchange Ltd

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The Cup Exchange Ltd (TCX) is a scalable, technology-enabled subscription service created to provide a convenient and sustainable alternative to single-use cups, benefitting all stakeholders. TCX combines a purpose-designed physical cup with an IT system, providing a solution for the 1.2 billion cups disposed of each year in Australia alone, with 90% ending up in landfill.

 

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