Z0Cal

Early Stage

Ultra-Low Calorie Frozen Desserts

Analytics

Raised to Date: Raised: $0

Aggregate Commitments $

Platform

StartEngine

Start Date

09/30/2020

Close Date

11/28/2020

Min. Goal

$10,000

Max. Goal

$1,070,000

Min. Investment

$300

Security Type

Equity - Common

Funding Type

RegCF

Series

Pre-Seed

Pre-Money Valuation

$4,110,000

Rolling Commitments $

Status
Not Funded
Reporting Date

11/29/2020

Days Remaining
Not Funded
% of Min. Goal

0%

% of Max. Goal

0%

Likelihood of Max
Not Funded
Avg. Daily Raise

$0

Momentum
Not Funded
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Location

Huntington Beach, California

Industry

Food, Beverage, & Restaurants

Tech Sector

Non-Tech

Distribution Model

B2B2C

Margin

Low

Capital Intensity

High

Business Type

Growth

Z0Cal, with a pre-money valuation of $4.11 million, is raising crowdfunding on StartEngine. The company makes keto-friendly ultra-low calorie frozen desserts, free of sugar, fat, and net carb. The ice creams of Z0Cal have full taste, can be eaten anytime without any worry or guilt, and are made of natural ingredients. Dr. Jareer M. Abu-Ali founded Z0Cal in 2019. The current round of crowdfunding has a minimum target of $9,999.99 and a maximum target of $1,069,999.56, and the proceeds will be used to expand to all health-conscious food and new global markets. Z0Cal is currently selling 20 different flavors of ice creams, sorbets, and fruit bars. The company has been featured as a new healthy frozen dessert brand at various events.

Summary Profit and Loss Statement

Most Recent Year Prior Year

Revenue

$0

$0

COGS

$0

$0

Tax

$0

$0

 

 

Net Income

$0

$0

Summary Balance Sheet

Most Recent Year Prior Year

Cash

$0

$0

Accounts Receivable

$0

$0

Total Assets

$0

$0

Short-Term Debt

$0

$0

Long-Term Debt

$0

$0

Total Liabilities

$0

$0

Financials as of: 09/30/2020
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Ratings

Analyst Report

Synopsis

Obesity is a rising concern in the US and health-consciousness is starting to become more mainstream. From 1999 to 2018, the share of the population that is obese rose from 30.5% to 42.4%. And the share of those who are severely obese rose from 4.7% to 9.2%. Amidst this crisis, people have come to focus more on their health — especially the younger generations. In one survey, researchers found that 41% of Generation Z participants were willing to spend more money on healthier products. This figure compared to 32% of Millennials, 26% of Generation X members, and 21% of Baby Boomers.

One company founded on the very principle of catering to this paradigm shift is Z0Cal. Through years of research, the company developed a line of products that they claim are tasty yet meet or exceed the health expectations of most consumers. In particular, the business is engaged in the production and sale of ice cream, sorbet, frozen yogurt, and other related products. Management claims to rely on premium products to guarantee quality and good taste, but that’s not all the business is doing. 

Z0Cal created its offerings using a proprietary production process that utilizes little-to-no dairy. They combined this process with a key ingredient called allulose. This is a rare sugar fruit naturally found in dried fruits like jackfruit, figs, and raisins. The structure of the sugar molecule is such that it passes through the body without converting into calories. Multiple sources, including here, here, and here discuss the nature and safety of allulose. Allulose is not just a healthy alternative to sugar, it carries a desirable sugary taste as well. Many of Z0Cal’s offerings have between 0 and 60 calories in them. They are also low in sugar, fat, and net carbs. Their products are classified as being keto-friendly as well. 

The products made by Z0Cal have been featured in places like Yahoo Finance, Food Business News, and on the Donna Drake Show on CBS. Offerings vary quite a bit. But examples include double chocolate ice cream, waffle cone caramel, and a plant-based, creamy coffee ice cream. Sorbet examples include pineapple and mango passion fruit. Management creates and packages these desserts in-house. All products are available in stores across the US and direct-to-consumer through Z0Cal’s website. Suggested retail pricing, according to the company’s filing documents, is $5.99 for a jar of 5 sorbet bars, and $6.49 per pint of ice cream. The ice cream’s pricing also applies to their boxes of popsicles. There may be some disparity here, though, because on their website they have all products listed at $9.49. 

The current StartEngine raise has been rated a Neutral Deal by the KingsCrowd investment team.

Price

In order to participate in this round of funding, investors must contribute at least $299.88 apiece to the firm’s crowd raise. In exchange for cash, investors will receive common shares in the business, valuing the firm on a pre-money basis at $4.11 million. This is actually quite low, all things considered. It is because of this low valuation that Z0Cal rated highly on its Price score.

 

Market

The market for ice cream and other related deserts is not exactly great. In a space where the majority of players are 50 years of age or older, it’s difficult to grab a slice of the pie. In the US alone, one source pegs the market opportunity at about $13.7 billion. But that same source also believes there will be little to no growth in the 1.4 billion gallons of the product consumed annually between now and 2024. A different source thinks the market is a bit smaller at $11 billion. Globally, the space is quite a bit larger. One source puts the size at about $64.5 billion. This says a lot about the American market. It is responsible for 21.2% of the world’s ice cream and frozen dessert consumption by dollars spent, but accounts for only 4.5% of the world’s population. That same source believes that the market should grow at a rate of about 4.1% annually until reaching $78.8 billion in 2025. Though this market is sizable, the growth rate is not particularly fast. The presence of well-established players in the space combined with how competitive the food industry is in general resulted in a middling Market rating for Z0Cal.  

 

Team

The mastermind behind Z0Cal is Jareer Abu-Ali. He is the founder of the business as well as its CEO. At present, he is also the CEO of New Direction Foods, which is involved in the food and beverage research space. Its main foray recently has been the production of gelato, but it also has a relationship with Z0Cal. Earlier this year, New Direction Foods handled the distribution of (and in turn collected all of the revenue associated with) Z0Cal. That relationship has since ended, and the business now only acts as a co-packing partner of the startup. Abu-Ali also has other valuable experiences in this space. He is also the Director at Naresuan University’s ASEAN-American Industrial Food Consulting Center. That organization provides consulting services to companies in the food market. These services are centered around new product development, cost reduction, and market research. Before that, Abu-Ali was a Director of Product Development at Pinnacle Food Corp. He also served at one point as the Head of Global Gum Innovation at Cadbury-Kraft Foods. Another prior experience for him was a stint at Pepsi as a Senior Research Scientist. 

The other key member at Z0Cal is Dr. Puntarika Ratanatriwong. She presently serves as Director of R&D. Since 1995, she has worked as an Assistant Professor at Naresuan University. At one point during that period she was employed by Nestle as a Researcher. Ratanatriwong also earned a PhD in Food Science and Technology from Ohio State University. 

In all, the experiences of these top two members of the Z0Cal team are impressive. Both core members are well-educated on this topic, and the CEO in particular has a variety of valuable experiences to back his education up. This resulted in the Team score being one of Z0Cal’s higher across the five metrics.

Differentiators

Ice cream and other frozen desert consumers have — for a long time — had to choose between good taste and good health. Good taste has often won historically, but now a middle road seems to be opening up. If management can gain sufficient traction with its product lines, it will provide a truly healthy option at a quality taste for frozen food lovers. Of course, ‘good taste’ is subjective, but the key determinant of success will be the amount of control the business can wrest from its competitors. The company’s focus on allulose and its proprietary production process are clear differentiators. But it would be a mistake to assume that Z0Cal is the only player to capitalize on this opportunity. One competitor, for instance, is Sweetie. It has dozens of locations spread across at least four states. It also operates a direct-to-consumer sales strategy like Z0Cal does. Z0Cal’s proprietary process, however, could be a material differentiator for the firm. While the product itself is interesting and different from a lot of other products out there, it really is hard to be truly differentiated. It would not take much for a competitor to at least mimic the use of allulose and, in fact, we have already seen other players do it. This has resulted in a lower rating for Z0Cal’s Differentiators score.  

Performance

At this time, financial information about Z0Cal is more or less non-existent. The company launched its brands earlier this year and for 2019 it recorded nothing in the way of revenue and no costs. This is odd for a company with products under development, but there are reasons why this may be accurate. For instance, products developed may not have been done under the umbrella of the existing business.  In particular, if the products were created prior to the start of the enterprise or if they were initially created under a different entity.  Management boasts bi-coastal sales and a growing direct-to-consumer business. This means that some revenue and expense should exist for 2020, but nothing has been made known publicly at this time. That does go a long way toward explaining the low valuation on the business. Similarly, it serves as justification for Z0Cal’s extremely low Performance score.  

Bearish Outlook

While investors like to cheer for the little guy, the fact of the matter is that management has chosen a tough market. While sales are growing globally, the frozen dessert market in the US is stagnant. Slow growth or no growth at all makes it difficult to expand, especially in a market dominated by players more than half a century old. At this time, Z0Cal’s low valuation is reflective of its traction. But investors should push to see financials to get a better idea of where the business is fundamentally. Throw in uncertainties caused by the COVID-19 pandemic and there’s a lot to be bearish about.

Bullish Outlook

On the bullish side, there’s a lot for investors to be grateful for. Z0Cal is aiming for a targeted, underserved niche in this space. Its valuation is also lower than most startups. This could provide more upside for earlier investors, all other things remaining the same. The health-conscious trend in the US should help to bring customers in, but price and taste will be the largest determinants of Z0Cal’s success. Its bi-coastal exposure and healthy characteristics should be a net positive in the eyes of investors and customers alike.

Executive Summary

Z0Cal is a fascinating concept. Though the market the company works in is saturated and growing at a slow rate, the niche the firm hopes to fill should be in demand. This is especially true when you consider the shift toward healthy eating. Some uncertainties do exist, primarily centered around the firm’s traction since launching. But with a low pre-money valuation, the risk isn’t as much as if the firm were priced higher. In all, though, until we can see that traction and see just how well the business can grow in the years to come, it’s difficult to grant it anything north of a Neutral rating. 

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com

Analysis written by Daniel Jones.

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Z0Cal on StartEngine
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Platform: StartEngine
Security Type: Equity - Common
Valuation: $4,110,000

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