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Food and Beverage Vending Company

Food and Beverage Vending Company

EXECUTIVE SUMMARY

MARKET ANALYSIS

FINANCIAL ANALYSIS

OBJECTIVES

MISSION

BUSINESS OVERVIEW

PRODUCTS

COMPETITION

GROWTH ANALYSIS

PACO BELLO VENDING

79 Aspen Dr.
St. Louis, MO 63199

Gerald Rekve

Paco Bello Vending is a start–up business that specializes in placing vending machines and commercial food and beverage equipment. We desire to participate in the $11 billion food and beverage industry by supplying quality innovative equipment with national brand names like Coke, Pepsi, and Hershey's chocolate bars in our vending machines. We will penetrate the vending industry with innovative, first–to–market, high-quality vending machines. We will establish our own vending routes in the Southern and Central St. Louis region.

EXECUTIVE SUMMARY

Paco Bello Vending's mission is to lead the market in selling quality foods from quality vending machines in St. Louis's retail vending market. Placement of the vending machines will be in very specific buildings that meet the high–end demographic traffic we desire. This will allow us earn higher revenues and profits.

Paco Bello Vending is a privately owned corporation and maintains an office and a small warehouse in an area of central St. Louis. We maintain a showroom where we provide customers with product demonstrations; a warehouse where we keep an inventory of machines and supplies; and an administrative area to handle the business functions. Paco Bello Vending imports a variety of innovative products that serve the needs of special segments of the market. These machines all aim to expand existing sales and open new lines of sales for our customers.

All three of the investors in the company have full operational responsibility. Louis Galardi and Tomas Sheffield, the partners, have both entrepreneurial and industry experience. Henry Wilson brings operational management and financial skills to the operation.

Paco Bello Vending will sell most popular soft drinks available in the United States and snack foods like chips, chocolate bars, and other candy items. We will earn profit by selling one item through our vending machine at a time.

We will expand our products over time to include fresh sandwiches, pizza by the slice, milk, and non– food items in retail locations where staff can maintain the supply.

We are also pursuing supplier relationships with large nationally–branded juice and confectionary manufacturers to maximize the variety of products in our machines. This wide variety of products will insure more profit potential for both Paco Bello Vending and the locations where we supply the vending machines.

MARKET ANALYSIS

The total annual revenue from vending sales was $19.2 billion in 2006, an increase of 2 percent over 2007, according to Vending Report in March 2006. Small companies (those with sales of less than $1 million) accounted for 2.1 percent of the market and had projected sales for 2006 of $1.01 billion. About 67 percent of all vending operators are classified in the small category.

All of this indicates a fast–moving, innovative company that can introduce enhanced products to vending machines stand to gain a significant market share.

Paco Bello Vending will market its machines to market segments including: apartment building managers, large volume commercial buildings with office space and other business rental space; and, finally, wherever the machines can be placed in high traffic areas that show potential for good, solid revenue.

Buying Patterns

Both the food/beverage and vending industries are highly competitive. Price, return on investment (ROI), reliability, and customer service affect what products are bought and when.

There are many large name brand companies with vending machines in the market. We will focus on creating a niche market for our innovative machines to compete with larger, more recognizable names. We will need to educate our clients in areas where other machines are present.

Paco Bello Vending will achieve its sales targets through a combination of relationship building and aggressive pricing. Our initial targets will be medium–sized operators and distributors who have the capital to invest in our machines. We will continue to participate in industry trade shows and expand our advertising budget when the funds become available. Along with this strategy, we will establish relationships with larger brand name companies to become a supplier.

Paco Bello Vending's customers will derive immediate and lasting value from our products. Our vending machines will both expand existing markets and create new ones. The ROI exceeds the industry norm of 24–30 months. The quality of the products, as well as the attractive and distinctive design features, will work to satisfy existing customers and to attract new ones.

Paco Bello Vending will enjoy the traditional benefits of first–to–market. We will attempt to leverage this position to establish and solidify our brand in the market. As a small company looking to establish itself, we will be attentive and flexible in meeting our customer's demands.

Paco Bello's marketing strategy will emphasize the strengths of both our company and our products. We will position ourselves as a health food–focused company and an innovative company that supplies the market with new, high–quality products. We will position ourselves in trade shows, within industry publications, and other means to promote this strategy. Our brochures, letterhead, and business correspondence will further reinforce these concepts.

We also recognize that it costs more to attract a customer and almost nothing to retain one. To that end, we will operate under the principle that our best marketing is an exceedingly happy customer. While the industries we operate in are large, reputations play an important part.

TRADE SHOWS

Paco Bello Vending will participate each year in two sponsored trade shows. We will also attend a number of local and regional trade shows and distributor open houses to promote our product lines. During the year we will expand our advertising budget to allow us greater and higher quality exposure on the local newspapers. We are also positioned on the Internet to allow our company greater exposure and easier communication with our customers.

Placement Agreements

Paco Bello Vending will pursue placement agreements with large regional and national building owners and managers. Until these agreements are in place, we will sell directly to the small store or building owners in our market. We are also pursuing relationships with nationally–branded companies to supply them with machines for their locations.

FINANCIAL ANALYSIS

The company has an initial start–up cost of approximately $50,000. $25,000 of this cost will come from a ten–year Small Business Association loan. Short–term borrowing will provide us with an additional $15,000 and the rest will be provided by the owners as investment capital of $10,000.

Our monthly break–even will be roughly 20 vending units placed. The attractiveness of our innovative vending machines will provide us with a sales level far above this break–even point. We expect to generate $19,000 of net profit on $120,000 worth of sales in the first year.

Start–up

Our start–up costs, listed below, have been financed to date by the investment from its owners.

Start-up expenses
Cash purchases$10,000
Utilities$1,500
Repairs & maintenance$5,000
Professional fees$1,500
Insurance$1,000
Rent$1,500
Travel$5,000
Inventory$10,000
Telephone$500
Postage$100
Office equipment/Supplies$1,500
Marketing/Advertising$1,400
Freight$5,000
Other$1,000
Total start-up expenses $ 45,000
Start-up assets needed
Cash balance on starting date$5,000
Start-up Inventory$10,000
Other current assets
Total current assets$15,000
Total requirements$60,000
Funding
          Investment
        Investor 1$20,000
        Investor 2$20,000
        Investor 3$20,000

OBJECTIVES

Paco Bello's primary objective in our first year of operation is to place 40 vending machines. For the following two years our growth objectives are:

  • Grow our vending machine and equipment business by 44% each year.
  • Grow revenues by 27% in our directly operated vending machines.

MISSION

Paco Bello Vending's mission is to form a company that has long–term sustainability based on providing our end users with products and services that meet or exceed their expectations. We will strive to provide easy accessibility to our machines and to keep the vending machines filled with merchandise.

Paco Bello strives to be the company that introduces innovative products to the market. To achieve this, we will search out the latest in food preparation in the vending and equipment business. As first to market, we currently enjoy a technological advantage over the competition.

As we increase our presence in the equipment business, we will continuously search out products to expand our existing line. A key component of this will be the feedback from our customer base.

Keys to Success

  • Quality products
  • Fresh and healthy products
  • Growing our business, one client at a time
  • Keeping our clients happy

BUSINESS OVERVIEW

Paco Bello Vending is a family-owned and operated import company. Located in Central St. Louis, our main investors have full operational responsibility. Paco Bello is a privately-held St. Louis corporation. Paco Bello Vending is owned by three of its key employees; the ownership breakdown is as follows:

PRODUCTS

Our vending products include:

  • Dollar and Dash—This machine stores, in a refrigerated unit, up to 112 pre–packaged products that require refrigeration.
  • Fresh Squeezie Juice—This machine delivers a chilled 9 oz. cup of fresh squeezed orange juice. In a refrigerated unit, the machine stores up to 190 lbs. of juice oranges. This will yield approximately 160 9–ounce cups. When an order is placed, the machine will dispense whole oranges that will be sliced in half; each half will then be pulverized for its juice. The juice will run through a filtering system to keep out the seeds and most of the pulp, to finally provide the customer with a 90 percent all natural cup of juice combined with 10 percent water in approximately 17 seconds.
  • Quick Stop Machine—These versatile, low–cost, easy–to–maintain machines provide the end user with a variety of vending options, from phone cards to disposable cameras. Paco Bello is able to provide customers with machines that have three, four, or six product lines; this will provide flexibility to maximize unit revenue.
  • Easy Expresso and Coffee—This high–quality espresso maker makes cups of delicious gourmet coffee from pre–packaged coffee packs. These pods provide great benefit to the owner by reducing the cost of measuring for each new order, and eliminating the waste associated with the traditional methods. This also allows for winter product sales where they tend to slow down due to the cold weather.

The cost of products in each type of machine is noted in the table below.

MachineCost
Snacks$1–3, each item
Fresh JUICER$2–4, each drink
Multi-line machines$1–$20, each item
Other$2–$5, each item
Espresso maker$4–7, each drink
Juice machine$1–4, each drink

COMPETITION

All of our vending machines will be the best in the market. We will only stock our machines with fresh product, which will allow us to grow our business based on our reputation—our users will know that each and every time they put money in one of our machines, they will get the freshest, best product available.

For juice drinks, the market only offers bottled or canned juices for a customer to purchase. Our Fresh Squeezie Juice machine will literally squeeze a fresh cup each and every vend transaction. The fact that the product is healthy is a huge competitive advantage over other machines.

There are a number of similar multi–line machines on the market today. We will offer the customer a quality product at prices below the existing prices for similar products. Our vending units also have a unique signage that will attract attention as compared to other competitors currently in the market.

GROWTH ANALYSIS

Within the industry, snacks and cold beverages are the largest product segments, representing 23 percent and 24 percent of the industry, respectively. These two segments are the driving force of the industry. The food category grew at a rate of 9 percent last year, according to Vending Reports. Cold storage machines grew at an even more impressive 35 percent in 2006, with this growth coming at the expense of shelf–stable products.

Broader economic and cultural trends are also positively impacting the industry. Food sales away from home have become a larger part of total food sales in the United States and Canada since the 1960s, according to the Department of Agriculture. The Department of Agriculture also reports an increase in demand for takeout meals. This has been proven with the extremely aggressive growth of the fast food restaurant chains like McDonalds, Burger King, etc. Fast food is here to stay for a while. The vending market has only way to go, and that is up.

Consumer preferences about taste, price, nutrition, convenience, and technology are changing. These changes flavor the vending industry, which now has the opportunity to spot these trends and develop their markets.

Sales Forecast

The following table reflects the forecasted sales for Paco Bello. We are forecasting sales growth of 20 percent a year for our vending and equipment sales, and 25 percent for the vending routes that we will establish and manage ourselves.

Unit placementFY 2004FY 2005FY 2006
JUICER machines203050
Snacks203050
Multi-line machines203050
Gums & chips203050
Cappuccino machine203050
Juice squeezer203050
Total unit sales120180300
Unit prices FY 2004FY 2005FY 2006
JUICER machines$10,000 × 12$15,000 × 12$15,000 × 12
Snacks$10,000 × 12$15,000 × 12$15,000 × 12
Multi-line machines$10,000 × 12$15,000 × 12$15,000 × 12
Gum & chips$10,000 × 12$15,000 × 12$15,000 × 12
Cappuccino machine$10,000 × 12$15,000 × 12$15,000 × 12
Juice squeezer$10,000 × 12$15,000 × 12$15,000 × 12
Sales
JUICER machines150,000150,000150,000
Snacks150,000150,000150,000
Multi-line machines150,000150,000150,000
Gum & chips150,000150,000150,000
Cappuccino machine150,000150,000150,000

Strategic Alliances

A leading objective of Paco Bello Vending is the development of key strategic alliances. We will pursue alliances with branded, national snack makers such as Hershey, Coke, Pepsi, and others to create greater market potential. We will also seek out strategic alliances with national juice brands, such as Tropicana, Sunkist, and others to increase the market potential for our Fresh Squeezie Juice machines.

Paco Bello Vending views the relationship between the company and our distributors as a strategic alliance. We will work closely with each distributor to co–market and promote our products and will work, wherever possible, in partnership to achieve desired market penetration.

The following Market Analysis table and chart are broken down by general market segments, versus the specifics listed above.

Potential customersGrowth20052006200720082009CAGR
Cold beverage3%7207668711,2221,3433.98%
Warm food5%1,5301,6651,7841,8781,9805.01%
Hot coffee sales5%78888992955.23%
Juice sales retail4%34676869754.09%

Paco Bello Vending's initial strategy is to offer all of our products to all segments of the market. We will focus on the end user, as the strategy to secure accounts with the great high traffic locationswilltakesometimetobuild.Wewillreach our target market by pursuing personalized relationships with contacts developed at business shows. The principle market need we will be addressing will be revenue. Each of our machines will act to expand existing profit for clients who place our machines, because we pay them either a percentage of sales or a fixed monthly fee. We will try to make sure it is a win–win for both us and the client who is allowing our machine on their site.

Growth rates in both the vending industry and fast food industry remain strong. This growth is fuelled by the changes in the workplace and workforce that are causing workers to consume more of their meals away from home. Away from home food sales are expected to increase by 59 percent, according to industry reports.

As more and more people eat away from home, the demand for higher quality is also growing. Vendors are now offering a full line of packaged frozen meals in their machines. Margins will increase as premium prices are being placed on branded, high–quality products. Demographic trends are affecting the industry. A large group of young adults, who mainly grew up on fast food, have emerged as an economic force.

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