Food and Beverage Vending Company
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.
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FOOD AND BEVERAGE VENDING COMPANY
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.
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FOOD AND BEVERAGE VENDING COMPANY
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 requirements
Start-up expenses
Cash purchases
Utilities
Repairs & maintenance
Professional fees
Insurance
Rent
Travel
Inventory
Telephone
Postage
Office equipment/Supplies
Marketing/Advertising
Freight
Other
$10,000
$ 1,500
$ 5,000
$ 1,500
$ 1,000
$ 1,500
$ 5,000
$10,000
$ 500
$ 100
$ 1,500
$ 1,400
$ 5,000
$ 1,000
Total start-up expenses
$45,000
Start-up assets needed
Cash balance on starting date
Start-up Inventory
$ 5,000
$10,000
Other current assets
Total current assets
Total requirements
$15,000
$60,000
Funding
Investment
Investor 1
Investor 2
Investor 3
$20,000
$20,000
$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.
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FOOD AND BEVERAGE VENDING COMPANY
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:
•
Louis Galardi—33%
•
Tomas Sheffield—33%
•
Henry Wilson—34%
PRODUCTS
Our vending products include:
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•
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.
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FOOD AND BEVERAGE VENDING COMPANY
•
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.
Machine
Snacks
Fresh JUICER
Multi-line machines
Other
Espresso maker
Juice machine
Cost
$1–3, each item
$2–4, each drink
$1–$20, each item
$2–$5, each item
$4–7, each drink
$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.
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FOOD AND BEVERAGE VENDING COMPANY
Unit placement—Sales forecast
Unit placement
JUICER machines
Snacks
Multi-line machines
Gums & chips
Cappuccino machine
Juice squeezer
Total unit sales
Unit prices
JUICER machines
Snacks
Multi-line machines
Gum & chips
Cappuccino machine
Juice squeezer
FY 2004
FY 2005
20
20
20
20
20
20
120
FY 2004
FY 2006
30
30
30
30
30
30
180
50
50
50
50
50
50
300
FY 2005
$10,000 12
$10,000 12
$10,000 12
$10,000 12
$10,000 12
$10,000 12
$15,000 12
$15,000 12
$15,000 12
$15,000 12
$15,000 12
$15,000 12
150,000
150,000
150,000
150,000
150,000
150,000
150,000
150,000
150,000
150,000
FY 2006
$15,000 12
$15,000 12
$15,000 12
$15,000 12
$15,000 12
$15,000 12
Sales
JUICER machines
Snacks
Multi-line machines
Gum & chips
Cappuccino machine
150,000
150,000
150,000
150,000
150,000
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.
Market analysis
Potential customers
Cold beverage
Warm food
Hot coffee sales
Juice sales retail
Growth
2005
2006
2007
2008
2009
CAGR
3%
5%
5%
4%
720
1,530
78
34
766
1,665
88
67
871
1,784
89
68
1,222
1,878
92
69
1,343
1,980
95
75
3.98%
5.01%
5.23%
4.09%
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
locations will take some time to build. We will reach 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.
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FOOD AND BEVERAGE VENDING COMPANY
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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