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Medium Market Sizing Merger & Acquisition

Single Cup of Coffee

#Consumer Goods #Beverage Service
ProHub Comment

This case requires candidates to build a bottom-up market sizing model starting from U.S. population demographics, narrowing to office workers, then estimating coffee consumption patterns. The case tests mathematical accuracy, logical framework building, and ability to make reasonable assumptions about consumer behavior in a B2B context.

Estimated Time 26 minutes
Difficulty Medium
Source ROSS
10 / 100
Our client is a PE firm who is considering making an investment in a coffee equipment company that services office buildings. The company makes machines that use single cups (same thing as K-Cups) and sells the pods needed to make coffee. What is the market opportunity for this investment?

Clarifying Information

  1. The company looks to service all office buildings nationally (U.S. only)
  2. The target market are white collar professionals
  3. The PE shop has experience working in the beverage service market
  4. Price of each single pod is $0.75 a pod
  5. Price of a coffee machine is $100
  6. The company currently offers a machine that can only make coffee. There is a variety of coffee flavors
Mock Interview
Interviewer

Our client is a PE firm who is considering making an investment in a coffee equipment company that services office buildings. The company makes machines that use single cups (same thing as K-Cups) and sells the pods needed to make coffee. What is the market opportunity for this investment?

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
Practicing...
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Practice this case with AI Mock Interview

A PE firm evaluates the market opportunity for investing in a single-serve coffee equipment company targeting office buildings. The analysis sizes the market for both coffee pods and machines, considering peak usage patterns, and identifies ~$1.34B in combined revenue potential.

Key Insights:

  1. Market sizing requires starting with broad population data and systematically filtering to the relevant customer segment (office workers who drink coffee)
  2. Peak demand periods (morning 8am-10am with 65% of daily consumption) drive machine requirements more than average daily consumption
  3. The business model has dual revenue streams: high-margin recurring pod sales ($1.3B annually) and machine sales ($40M), with additional upside from servicing and licensing opportunities
  4. Key risks include unvalidated assumptions about consumption patterns, competitive threats from alternative suppliers, and lack of clarity on production/logistics costs