Why Shark Tank Passed on Investing in Mama O’s Premium Kimchi
Why Shark Tank Passed on Investing in Mama O’s Premium Kimchi The decision by the Sharks to pass on Mama O’s Premium Kimchi highlights the complex factors involved in venture capital investment. Concerns about market scalability, production costs, distribution, and valuation played significant roles in their decision. In Season 14 of “Shark Tank,” Mama O’s…
Why Shark Tank Passed on Investing in Mama O’s Premium Kimchi
The decision by the Sharks to pass on Mama O’s Premium Kimchi highlights the complex factors involved in venture capital investment. Concerns about market scalability, production costs, distribution, and valuation played significant roles in their decision.
In Season 14 of “Shark Tank,” Mama O’s Premium Kimchi, a kimchi brand from Brooklyn, New York, sought to secure a $250,000 investment in exchange for a 10% equity stake. Despite the company’s unique offering and promising business metrics, none of the Sharks chose to invest. Here’s a closer look at the reasons behind their decision.
The Mama O’s Premium Kimchi Pitch
Kheedim Oh, the founder of Mama O’s Premium Kimchi, along with his mother Myung Oh, entered the tank with enthusiasm and a clear vision for their company. They presented four types of kimchi: original, vegan, super spicy, and a few other varieties, all of which were natural, probiotic, and vegan.
Their pitch highlighted the product’s artisanal quality and the fact that it was made using traditional recipes and natural ingredients.
The company’s financials were impressive at a glance. Mama O’s had generated approximately $800,000 in gross revenue for 2021 and was on track to reach $1 million in 2022. With a net profit margin of 25%, the business seemed to be on a solid footing.
The Sharks’ Concerns Why Shark Tank Passed on Investing in Mama O’s Premium Kimchi
Despite these promising figures, the Sharks had several concerns that led them to pass on investing.
- Niche Market and Scalability: Kimchi, while popular in Korean cuisine and increasingly recognized in Western markets, is still considered a niche product. The Sharks were concerned about the scalability of Mama O’s Premium Kimchi. The market for kimchi, though growing, is relatively small compared to other food categories. The Sharks questioned whether the company could achieve significant growth beyond its current niche audience.
- High Production Costs: The production costs for Mama O’s kimchi were another red flag. The bags of kimchi cost around $2.67 to produce but were sold for $8.99. The kimchi kits, which allow customers to make their own kimchi, had a production cost of $8.25 and were sold wholesale for $20. While the margins seemed decent, the high production costs and pricing might limit the company’s ability to scale effectively, especially in a competitive market with many low-cost alternatives.
- Distribution and Market Penetration: At the time of the pitch, Mama O’s Premium Kimchi had limited distribution channels, primarily focusing on Whole Foods and farmer’s markets. Although they were considering expanding, the Sharks were wary of investing in a company with limited distribution and an unclear path to broader market penetration. The company had not yet established a significant online presence, which is crucial for modern retail success.
- Investment Risks: Each Shark assessed the risk associated with the investment. Kevin O’Leary, Mark Cuban, Lori Greiner, and guest Shark Kendra Scott all expressed reservations. O’Leary and Cuban were not convinced that the product had the potential to deliver a substantial return on investment. Greiner felt that the risk was too high given the product’s niche status and the potential for market saturation. Scott, while interested, did not see the potential for high returns in the kimchi market.
- Valuation Concerns: The valuation of $2.5 million for Mama O’s Premium Kimchi might have seemed high relative to the company’s current revenue and growth trajectory. The Sharks likely felt that the equity stake being offered did not adequately compensate for the perceived risks and the company’s valuation.
Post-Shark Tank Developments
Despite not securing a deal on Shark Tank, Mama O’s Premium Kimchi continued to grow. The company leveraged its appearance on the show to increase brand awareness and expand its market presence.
By 2023, Mama O’s products were available in major retailers such as Target, Walmart, and Costco. The company also participated in industry trade shows and secured placements in prominent grocery chains.
Kheedim Oh’s persistence paid off, demonstrating that even without Shark Tank backing, a well-managed business with a unique product and strong market potential can still thrive.
