AMDP Investment Proposal Final - FreeWater

TO: Clark Hansen, CEO, AMDP

FROM: Florence Harting, R&D Analyst, AMDP

DATE: October 17, 2022

SUBJECT: Investment Proposal

_____________________________________________________________________________

At AMDP, we are committed to social responsibility, environmental sustainability, and profitability. In this week’s search for a potential investment, I am pleased to present FreeWater—a company that perfectly aligns with these company goals and presents an excellent opportunity to fund a social entrepreneur addressing one of society’s most prevalent needs. I highly recommend FreeWater and will support my statement in this memo by:

·       Reviewing AMDP’s Investment Standards

·       Explaining how the company started, how the business model works, and why it is successful

·       Providing an overview of its business growth

·       Outlining their commitment to sustainability

·       Presenting two claims to support the investment value

·       Stating and supporting my recommendation

 

AMDP Investment Standards

Triple Bottom Line: A framework established by John Elkington in the mid-1990s, the triple bottom line goes “beyond the traditional measures of profits, return on investment, and shareholder value to include environmental and social dimensions” (Slaper). The three P’s of the triple bottom line are: 

1.     Profit: financial performance or profit the company generates for shareholders (Miller)

2.    People: creating value for all stakeholders—including customers, employees, and community members—not just shareholders in the company (Miller)

3.    Planet: making a positive impact on the planet by considering the environmental effects of its practices (Miller)

Corporate Social Responsibility: “the idea that a business a responsibility to the society that exists around it” by considering the environment, ethics, philanthropy, and economic impact in its business practices (Stobierski).

Social Enterprise: “businesses whose primary purpose is addressing a social or environmental challenge rather than creating profit for owners or shareholders” by delivering a positive social impact to the public sector (British Council).

Carbon Footprint: a company’s carbon footprint is “the total amount of greenhouse gas emissions that are directly or indirectly caused by [its] activities” and serves as a good measure for how sustainable a company’s practices are (One Trust). Firms should aim for a neutral carbon footprint in order to slow climate change and the degradation of the planet (Selin). 

About FreeWater

FreeWater: Launched in early 2021, FreeWater is the world’s first free beverage company (Yahoo News). Founder and CEO, Josh Cliffords, came up with the idea after seeing the severity of water scarcity while volunteering with refugees in Europe in 2015 (PR Newswire). From that point, Cliffords was determined to provide a resource for free, clean water for everyone. 

 

How It Works: The FreeWater business model relies on two factors— the fact that everyone drinks water and how out-of-home (OOH) advertising is currently the most effective offline medium in driving online activity (Nielsen). These factors allow FreeWater to distribute a free product that is paid for by advertising. To break it down in steps: 

 

1.      Partner with companies to sell ad space on the product packaging, “cover[ing] the cost of the product’s manufacturing, distribution, the salesperson’s commission, donation to charity, and our profit” – Josh Cliffords (Williams).

2.     Distribute the product for free.

3.     Donate 10 cents from every bottle to ‘Well Aware’, a non-profit that helps provide clean water for communities in East Africa by building water wells.

 

Overall, the sum of money FreeWater makes from partnering with companies allows them to provide a source of free water while also donating to help solve the global water crisis. It may seem too good to be true, but let’s uncover the reasons why the FreeWater business model works.

 

Why It Works: One of the main reasons why companies are eager to partner with FreeWater is because of the unique advertising opportunities it offers. Josh Cliffords shared, “FreeWater’s packaging is a literal blank canvas” and advertisers can use QR codes “to connect anything that is on the web which includes websites, videos, shopping, news, downloads, social media, Augmented Reality, coupons, contests, donation sites, education materials, and much more” (Orca Sound). In addition to its unique ‘blank canvas’, a Nielsen study showed that OOH advertising delivers four times more online activity per dollar spent than TV, radio, and print (Nielsen). As a result, FreeWater provides a valuable marketing investment for companies, by giving them excellent exposure.

 

Another reason for the success of the FreeWater business model is people’s desire to engage in social responsibility. The Global Sustainability Study 2021 conducted by Simon-Kucher & Partners showed 85 percent of people globally indicating a shift in purchase behaviour towards being more sustainable in the past five years (Business Wire). This not only means that people are more interested in supporting a product like FreeWater, but that companies need to increase their sustainability efforts to appeal to consumers, therefore making it the perfect advertising platform.

 

Combining these factors with the fact that people like free stuff, FreeWater is benefitting everyone involved: the consumers, the companies, and the communities in need of clean water. 

 

Business Growth: Given the infancy of FreeWater, there is no public information regarding the company’s financial track record. However, there are other sources of information that can help showcase FreeWater’s financial status and potential for the future. Firstly, FreeWater stated they managed to distribute more than 32,000 beverages in 2021, and forecasted a quarter of a million beverages in 2022 (Orca Sound). This displays a rapid 681% increase in projected distributions, a figure showing the success of FreeWater in its first two years of business. FreeWater is also currently conducting a crowdfunding campaign to create their first vending machine and open a manufacturing facility, which will allow the company to produce up to 250 million FreeWaters a year, (FreeWater) showing its large potential for growth. 

 

In addition to their increase in product distribution, FreeWater shared the success of their first two water projects in Kenya via a post on LinkedIn on October 13 2022, showing how they are accomplishing their goals with ‘Well Aware’ (FreeWater). Therefore, not only does the growing business model alone present a good investment for AMDP, but its philanthropic success also makes it a great candidate for financial backing. 

Commitment to Sustainability

At AMDP, we prioritise social responsibility and environmental sustainability, making FreeWater the perfect addition to our company portfolio.  The FreeWater company website states: 

“FreeWater is an innovative advertising platform that utilises premium spring water as a new type of advertising medium while prioritising philanthropy and sustainability. Ten cents from each beverage is donated to charity to build water wells for people in need. We only need 10% of Americans to choose FreeWater so we can solve the global water crisis permanently”.

FreeWater is a completely sustainable product with the physical packaging consisting of paper cartons or aluminium bottles (PR Newswire). The containers are also BPA free, and the water is sourced from natural springs across the U.S. (Beverage Industry). As well as the eco-friendly packaging, the company aims to be net positive by 2030 by “cultivating, manufacturing, filling, distributing, and recycling all beverages in 100% hemp cartons from the same location” (FreeWater). FreeWater’s mission prioritizes sustainability and accounts for people, a profit, and the planet, showing its consideration for the triple bottom line. 

 

FreeWater aligns with our CSR goals and would also give AMDP the opportunity to provide funding to a social entrepreneur tackling one of society’s most pressing needs, an ambition that we prioritise at our company.

 

Claims and Validity

Marketability: FreeWater has skyrocketed in social media popularity over the past year; the company currently has 520.3k followers and 11.5m likes on TikTok, as well as almost 80k followers on Instagram. A Yahoo News article supports the online success of FreeWater stating how “the ground-breaking start-up has quickly become an international phenomenon” with its viral TikTok and Instagram accounts playing a key role (Yahoo News). 

 

The article also shared how FreeWater “reached 100 million organic impressions within a year” (Yahoo News), highlighting how people around the world are engaging with their content. Moreover, their social media presence alone has opened doors to free office space and access to influencers provided by ‘Capital Factory’ (Orca Sound). People are fascinated by the business model of FreeWater and eager to support the business, showing how there is a promising consumer base for the expansion of the company. 

 

FreeWater has also been picked up in the media as one of the ‘Start-ups to Watch in 2022’ from Austin Inno (Wistrom) and praised for its “intelligent use of ad space” by Forbes (Forbes). FreeWater is shifting the consumer economy and people are noticing. Therefore, the online virality of the company and marketability of the business model gives it a lot of potential for growth. 

 

The Future of FreeWater: Another claim of FreeWater that makes it a valuable prospect for investment is the future plans for the company. In a Texas Innovators article, Cole Carpenter explains how FreeWater is only the beginning for founder Josh Cliffords. He shares the plan to roll out “Amazon 2.0, “The Free Amazon”, allowing for a plethora of products and mediums for advertisers to leverage” (Carpenter). This claim is supported by a Yahoo News article which states FreeWater is “just the first product of their future free supermarkets” (Yahoo News). While comparing themselves to Amazon at this stage is ambitious, Cliffords clearly recognises the power of advertising, and it is working.

My Recommendation

After considerate review, I believe FreeWater is an excellent candidate for AMDP investment for the following reasons:

·       People: FreeWater provides an accessible source to clean water, pioneering a solution to the global water crisis.

·       Planet: By using eco-friendly, BPA free packaging the product is sustainable and its goal to become net positive by 2030 is realistic, especially with the financial support of AMDP.

·       Profit: FreeWater is ahead of the market by harnessing the power of advertising—if Anima Mundi invests now and taps into the already strong consumer base, the growth opportunities for FreeWater are endless.

 

Thank you for your consideration of this proposal and I look forward to your decision.

Works Cited

 

Beverage Industry. “FreeWater Inc. releases eco-friendly, BPA-free water”, 9 July 2021, https://www.bevindustry.com/articles/94270-freewater-inc-releases-eco-friendly-bpa-free-water.

Business Wire. “Recent Study Reveals More Than a Third of Global Consumers Are Willing to Pay More for Sustainability as Demand Grows for Environmentally-Friendly Alternatives”, 14 October 2021, https://www.businesswire.com/news/home/20211014005090/en/Recent-Study-Reveals-More-Than-a-Third-of-Global-Consumers-Are-Willing-to-Pay-More-for-Sustainability-as-Demand-Grows-for-Environmentally-Friendly-Alternatives.

Carpenter, Cole. “Austin’s FreeWater Is Creating The World’s First Free Supermarket”, Texas Innovators, 22 July 2022, https://www.txinnovators.com/post/texas-innovators-presents-freewater-the-worlds-first-free-supermarket.

 

Cravatts, Sara. “The Unconventional Entrepreneur Trying to Make Essential Products Free”, The Hustle, 15 April 2022,  https://blog.hubspot.com/the-hustle/entrepreneur-trying-to-make-essential-products-free.

 

FreeWater. 2022, https://www.freewater.io/.

FreeWater. “Making History in Atot, Kenya”, LinkedIn, 13 October 2022, https://www.linkedin.com/feed/update/urn:li:activity:6986439994164867072/.

 

Miller, Kelsey. “The Triple Bottom Line: What It Is & Why It’s Important”. Harvard Business School Online, 8 December 2020, https://online.hbs.edu/blog/post/what-is-the-triple-bottom-line.

 

Nielsen. “OOH Most Effective in Driving Online Activity”, 1 May 2017, https://specialreports.oaaa.org/wp-content/uploads/2017/05/Nielsen_042417.pdf.

 

Orca Sound. “Groundbreaking Startup and the World’s First Free Beverage Company, FreeWater, Announces Activations for SXSW 2022”, 9 March 2022,  https://www.orcasound.com/2022/03/09/groundbreaking-startup-and-the-worlds-first-free-beverage-company-freewater-announces-activations-for-sxsw-2022/.

 

PR Newswire. “FreeWater, The World’s First Free Beverage Company, Launches with a Foundation and Focus in Philanthropy”, 10 May 2021, https://www.prnewswire.com/news-releases/freewater-the-worlds-first-free-beverage-company-launches-with-a-foundation-and-focus-in-philanthropy-301287677.html.

 

Selin, Noelle Eckley. “Carbon Footprint”, Britannica, 14 September 2022, https://www.britannica.com/science/carbon-footprint.

 

Slaper, Timothy F. “The Triple Bottom Line: What Is It And How Does It Work?”, Indiana Business Review, Spring 2011, https://www.ibrc.indiana.edu/ibr/2011/spring/article2.html.

 

Stobierski, Tim. “Types of Corporate Social Responsibility To Be Aware Of”, Harvard Business School Online, 8 April 2021, https://online.hbs.edu/blog/post/types-of-corporate-social-responsibility.

 

Williams, Emma. “Meet FreeWater: The Austin-Based Water Company Tackling Global Issues”. Austin Monthly, 22 March 2022, https://www.austinmonthly.com/meet-freewater-the-austin-based-water-company-tackling-global-issues/.

 

Wistrom, Brent. “Startups To Watch”, Austin Inno, 4 February 2022, https://www.bizjournals.com/austin/inno/stories/awards/2022/02/04/startups-to-watch-2022.html.

 

Yahoo News. “World’s First Free Beverage Company Says Free Vending Machines Are Next”, 5 October 2022, https://news.yahoo.com/worlds-first-free-beverage-company-153900684.html.