Chef Vending is in their first year of operation.  Their products have received strong demand from initial contacts with end users and distributors.  Marketing will be critical to generate significant demand for the products.  The basic market need is for high quality, innovative vending machines as well as restaurant equipment.

Market Summary

Chef has captured  good information about the market and knows a great deal about the common attributes of the target customers.  This information will be leveraged to better understand who is served, their specific needs, and how Chef can best communicate with the customers.

Market Analysis

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Market Needs

Chef Vending is providing its customers with a wide selection of innovative vending machines and restaurant equipment.  Many of the products have first to market features not found on competitors equipment.  Chef seeks to fulfill the following benefits that are important to their customers.

• Innovative features- there are lots of vending and restaurant equipment on the market, customer demand innovation as a competitive edge.
• High quality machines- Equipment is expensive and customers cannot deal well with down time when equipment needs to be repaired.
• High quality food products- Vending machines are not normally synonymous with high quality food products.  Chef Vending is changing this perception.

Market Trends

Growth rates in both the vending industry and the restaurant industry remain strong. This growth is fueled 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 53%, according to NAMA.

As more and more consumers 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. This group's perceptions on fast food, technology, and vending, will have a positive impact in the vending business. Furthermore, overall population growth rates, and immigration trends particularly, will also have a tremendous economic impact on the vending industry. Much of the growth in both of these areas will be in the Southeast, where Chef Vending is poised to capitalize on these trends.

Market Growth

Studies by Automatic Merchandiser reflect an industry growth rate of approximately 4.8% over the last five years, matching the overall growth of the U.S. economy.

Industry Analysis and Distribution

The U.S vending industry is divided into three main segments:

1. Operators- Companies that buy and place vending machines on their routes, sell the product and service the machine, and range from small family businesses to large national companies. 
2. Manufacturers- Companies that manufacture machines for sale to operators. 
3. Distributors- The link between the manufacturer and the operator. Supplies the market with both machines and products for operators.

The food and beverage industry is divided into similar segments:

1. food and beverage Establishments- This segment covers the entire spectrum of bars and restaurants. 
2. Suppliers- Companies that supply the establishments with all of their food, paper, and equipment needs. 
3. Supply Houses- Acting as a distributor, these firms supply an area with their required supply needs.

Distribution in the vending industry typically runs through a distributor. These distributors will carry a brand of machine for sale in a defined geographic region. In some instances, manufacturers sell direct to operators or end users. Another form of distribution is to be a supplier to a nationally branded company. Similar distribution patterns are established in the food and beverage industry.

Market Analysis

Revenue from U.S. vending consumable merchandise was $24.5 billion in 2001, an increase of 4.9% over 2000, according to the Automatic Merchandiser magazine's State of the Vending Industry Report in August 2000. This figure includes both machines and products. Small companies, with sales of less than $1 million, accounted for 5.8% of the market and had projected sales for 2001 of $1.35 billion. Three quarters of all vending operators are classified in the small category.

Within the industry, snacks and cold beverages are the largest product segments, representing 29% and 25% of the industry, respectively. These two segments are the driving force of the industry. The food category grew at a rate of 7% last year, according to the Automatic Merchandiser. Cold storage machines grew at an even more impressive 42% in 2002, 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 U.S. since the 50's, according to the Department of Agriculture. Technomic, a Chicago-based research firm, reports an increase in demand for takeout meals as the percentage of two-parent households declines, along with the decline of the three regular sit down meals per day.

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

According to the National Restaurant Association, revenues from restaurants are expected to reach $321 billion in 2001. This is a large and healthy industry in the economy, and suppliers to this industry are expected to benefit from this growth.

SWOT Analysis

The following SWOT analysis captures the key strengths and weaknesses within the company and details the opportunities and threats that the industry faces.

Strengths

• Strong relationships with manufacturers.
• Excellent product line.
• Seasoned management team.

Weaknesses

• Lack of brand recognition because Chef Vending is a start up organization.
• The need to take on debt to get the business off the ground.
• Chef's new and innovative product do not have a lot of visibility in the U.S. yet.
  

Opportunities

• Participation in a growing market with a significant percentage of the target market still not aware that Chef and their products exist.
• The food market, while somewhat effected by economic downturns is somewhat immune because food in many forms is a basic necessity.
• A strong distributor network.
  

Threats

• Heavy equipment makes more expansive than regional distribution more difficult.
• High capital costs.
• Future/potential competition from a national company.
  

Competition

Both the food and beverage and vending industries are highly competitive. Price, Return On Investment (ROI), reliability, and customer service are the factors most effecting a buying decision.

There are many large name brand companies with vending machines in the market. Chef is focused on creating a niche market for the innovative machines, to compete with larger more recognizable names. By being first to market, Chef has a unique opportunity to brand themselves and their machines.

Buying patterns are fairly consistent across the year.

Product Offering

Chef Vending has three vending machines and three lines of restaurant equipment.

The vending products are:

1. Sandwich Express- This machine stores, in a refrigerated unit, up to 140 pre-packaged sandwiches. When an order is placed, the machine sends a sandwich from the refrigerator to the toaster, toasts the sandwich for a pre-determined time, and at a predetermined temperature. In approximately 60 seconds, a fresh, delicious, hot sandwich is served. 
2. Fresh Orange Juice (OJ) Machine- This machine, as its name implies, delivers a chilled 7 oz. cup of fresh squeezed orange juice. In a refrigerated unit, the machine stores up to 140 lbs. of juice oranges. This will yield approximately 110, 7 oz. cups. When an order is placed, the machine will dispense, from its refrigerated container, whole oranges that will be sliced in half, and then each half is 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 100% all natural cup of OJ in approximately 30 seconds. 
3. Multi-line- These versatile, low-cost, easy-to-maintain machines provide the end user with a variety of vending options, from phone cards to disposable cameras. Chef Vending is able to provide customers with machines that have either two, three, or four product lines; this will provide flexibility to maximize unit revenue.

The restaurant equipment products are:

1. Toasters- Coming with either a single or double toaster, these panini-type toasters provide the commercial establishment with an automatic machine that frees up service personnel for other customer service tasks. These machines will toast sandwiches, pastries, and a variety of other menu items, in a predetermined time and temperature, automatically dispensing the food item when done. 
2. Espresso Maker- This high-quality espresso maker makes single-serve cups of delicious gourmet coffee from pre-packaged coffee pods. 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. 
3. Fresh Juice Squeezer- This commercial grade machine will squeeze fresh, whole-juice oranges to allow the owner to sell a cup of fresh-squeezed orange juice.

To enhance the existing line, Chef is looking at a larger model of Sandwich Express that will offer a greater variety of sandwiches, and a more diverse product line, such as pizza. 

Chef is also pursuing supplier relationships with large nationally-branded juice and sandwich manufacturers, to customize our machines to their products. This would enable Chef Vending to supply machines to national companies and allow them to brand the machines with their product lines.

As Chef increases their presence in the equipment business, they will continuously search out products to expand the existing line. A key component of this will be the feedback from the customer base.

Keys to Success

As a start-up company, new to the industry, and introducing new products, Chef must be focused and work hard to create acceptance for their brand and the products within the marketplace. The keys to success are:

1. Quality support and service, recognizing that Chef Vending's success depends most critically on the relationships it's able to create. 
2. Innovative, quality products that are able to both expand existing markets and create new ones for customers. 
3. Steady, disciplined pattern of growth. 
4. Chef Vending's customers and keeping them happy.

Critical Issues

Chef Vending is still in the speculative as a start up organization.  The critical issues that they face are:

• Pursue controlled growth that dictates that payroll expenses will never exceed sales revenue.
• Constantly monitor customer satisfaction, ensuring that the growth strategy will never compromise service and satisfaction levels.

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