business ideas: Coffee Vending Business Plan

* The calculations use the average data for the World 444 000 ₽

Starting investments

112 000 ₽

Revenue

20 000 ₽

Net profit (with 2 machines)

14 months

Payback period

Coffee vending is one of the most popular types of vending business. In this business plan, we presented profitability calculations using two coffee machines with a standard assortment as an example.

1. SUMMARY OF THE PROJECT

This project considers the organization of a vending business in Bataisk. The goal of the project is to satisfy the local population's demand for hot drinks and profit. For the implementation of the project, two retail outlets with high pedestrian traffic and the presence of a potential audience (a shopping center and a train station), where vending machines are installed, are rented.

The main advantages of a coffee vending business are:

does not require large investments;
ease of maintenance;
lack of staffing requirements, the ability to service the business directly by an individual entrepreneur;
high level of profitability;
low price in comparison with other providers of similar services, which is provided at the expense of low costs;
the possibility of a round-the-clock work schedule.

The initial investment is 444, 000 rubles. Investment costs are directed to the purchase of equipment, ingredients, an advertising campaign, business registration and working capital formation, which will cover the losses of the initial periods. The bulk of the required investment is equipment and accounts for 90%. Own funds will be used to implement the project.

Financial calculations cover the five-year period of operation of the project. Forecasts on revenue and net profit were made based on a sales plan of 2, 500 units and an average check of 45 rubles. In accordance with the calculations, the initial investment will pay off for 14 months of work. The return on sales in the first year of operation will be 28%. Integrated performance indicators are shown in table 1.

Table 1. Key performance indicators of the project

Payback period (PP), months	14
Discount payback period (DPP), months	14
Net present value (NPV), rub.	118 101
Return on Investment (ARR), %	8.1
Internal rate of return (IRR), %	7.67

2. DESCRIPTION OF THE INDUSTRY

In recent years, Russia has been actively developing a new type of trade - vending. This is a business based on the use of specialized vending machines for FMCG products. This category includes consumer goods with a quick turnaround time: hot and cold drinks for bottling, food, etc.

Today, the domestic vending market is estimated at 3-4 billion rubles and is growing annually by an average of 20%. According to the National Association of Automated Trading, in Russia there are about 60 thousand vending machines, of which 15 thousand are located in Moscow. However, the statistics of vending machines sales in 2016 indicates the development of vending trade not only in the capital, but also in the regions. More than 75% of Russian vending is concentrated in cities with a population of over one million, and regional markets are still almost free.

The vending share in Russian trade is 1%, while in Europe the average is 5%. The density of coverage with vending machines in Russia is 625 people per one machine, which in comparison with other countries indicates a great potential for vending trade. For example, in Japan, one automatic machine accounts for 23 people, in the USA - for 35, and in Western Europe - for 110 people. From this it follows that in the coming years we can expect a five-fold increase in the vending market in Russia. According to experts, the domestic vending market is only 10% full.

Despite the positive forecasts for the vending, this industry is currently in a crisis period. In 2015, the vending market decreased by 23.5% in monetary terms, and in 2016 the market growth slowed significantly. These trends are associated with changes in the Federal law on the use of KKT No. 54 of May 22, 2003, which obliged vendors to supply all devices with a new KKT system. This entailed an increase in costs and even the departure of entrepreneurs from the market. Owners of used automatic machines that do not provide for the introduction of KKT also suffered. The second reason for the negative trends was the growth of the dollar, which led to a significant increase in the cost of imported equipment. However, this contributed to import substitution in the vending machine market: domestic manufacturers offer equipment that, while maintaining quality, is 30% cheaper than its foreign counterparts. Therefore, experts positively assess the prospects of the vending market in Russia and predict high growth rates, despite the rather difficult market conditions.

The prospects of the vending market are evaluated not only in terms of its real and potential volume, but also in terms of its structure. At the moment, vending trade in Russia is not diverse: 60-65% of the market is occupied by coffee machines, 20-25% by devices with snacks, and the remaining 10% is accounted for by vending machines for selling cold drinks, hot meals, etc. Thus, the greatest competition is observed in the coffee segment. Such popularity of coffee machines is determined by three parameters: firstly, coffee is a suitable product for sale in vending machines, as it is consumed on the go; secondly, coffee from a vending machine is cheaper than drinks offered in catering establishments; thirdly, coffee machines, due to their compactness, can be placed where a cafe cannot. The main advantages of coffee machines that affect consumer choice are speed, affordability, low price.

For entrepreneurs, the key advantages of vending as a business are:

low entry threshold;
installation area less than 1 m2;
high profitability;
markup on goods about 300%;
ease of maintenance;
a vending business can be combined with other business options, as servicing vending machines takes several hours a week;

However, when planning a business should also take into account its shortcomings. A significant problem in organizing a vending trade is the selection of a suitable location for installing the machine. It is a favorable location that provides the level of sales. To find such a place, the entrepreneur is forced to carefully analyze each potential point for installing the machine, or be prepared to pay a significant amount for the rental. Most of the profitable points in large cities are already occupied - train stations, shopping centers, airports, etc. In this case, you need to rely not only on the location of the machine, but also on the quality characteristics of the products: the use of unusual varieties of coffee, the original recipe, the variety of assortments.

3. DESCRIPTION OF GOODS AND SERVICES

At the first stage of work, it is planned to purchase and install two coffee machines at different points. The range is determined based on the characteristics and technical capabilities of the device. Since the competition in the coffee vending segment is quite large, it is necessary to choose devices that will provide competitive advantages. In this case, preference should be given to the model that provides for brewing coffee from ground beans in order to take into account market trends.

For this, vending machines of the manufacturer Jofemar, model Coffeemar G250, worth 202, 500 rubles, will be purchased. The main characteristics of the device:

screw dispenser eliminates the error when adding the ingredient;
The built-in program is designed for 15 different drinks;
The front part of the device is illuminated by LEDs, which saves energy consumption;
self-cleaning function facilitates machine maintenance;
payment options: banknotes, banknotes, bank cards;
bulk containers for ingredients;
function "own mug";
the ability to control and control the device through a mobile network.

Competitive advantages of the company: grain coffee, wide assortment, low price.

Table 2 presents the range of products, costing and estimated cost of the drink.

Table 2. Assortment of coffee machines and costing

Type of drink	Glass with a spoon, rub.	Drink, rub.	Milk, rub.	Sugar, rub.	Yield, ml (g)	Total s / s	Price, rub
Espresso	0.3	7.5	-	0.4	60 ml	8.2	thirty
Americano	0.3	7.5	0.62	0.8	150 ml	9.22	35
Cappuccino	0.3	7.5	0.5	0.8	180 ml	9.1	35
Latte	0.3	7.5	0.75	0.8	180 ml	9.35	40
Mocachino	0.3	15	0.5	0.8	180 ml	16.6	60
Hot chocolate	0.3	15	-	0.8	180 ml	16.1	55
Cocoa	0.3	ten	five	-	180 ml	15.3	35
Coffee glide	0.3	12.5	0.5	0.4	180 ml	13.7	50
Milkshake	0.3	-	5, 6	0.8	180 ml	6.7	25
Tea	0.3	4, 5	-	0.8	180 ml	5, 6	20
Additives:
Milk	-	-	-	-	20 ml	0.25	five
Sugar	-	-	-	-	5 g	0.4	3
Lemon	-	-	-	-	5 g	0.75	five
Vanilla syrup	-	-	-	-	10 ml	1, 5	15
Hazelnut Syrup	-	-	-	-	10 ml	1, 5	15
Strawberry Syrup	-	-	-	-	10 ml	1, 5	15

4. SALES AND MARKETING

The target audience of vending vending machines with coffee are residents of the city who need to drink coffee for a small fee, while reducing the preparation time of the drink: students, office workers, tourists, passers-by. Depending on the location of the vending machines, the target audience also varies:

Universities - students, young people aged 18-25;
Stations - middle-income men and women;
Shopping centers - middle-income families;
Cinemas - young people, students, people aged 16-50;
Business centers - office employees.

The main tool for advertising vending machines is their location. The most successful points are: stations, markets, educational institutions, shopping centers, car washes, stadiums, public transport stops. The selection of outlets is recommended to be carried out according to the results of a geomarketing study, taking into account pedestrian traffic of at least 1, 500 people per hour during daylight hours.

Marketing in the vending market is quite specific, as is the form of trading, so each advertising tool must be adapted. For example, the use of outdoor advertising for vending is expensive and inefficient, and “event marketing”, which involves various promotions, is quite difficult to implement in this segment. As an attraction to consumers, you can use this action: mark several glasses for drinks and place information on the action on the machine. A client who gets a marked cup receives a guaranteed prize. For convenience, this can be a recharge on your phone. To get your prize, the client just needs to call the contact number, and the organizer of the action - replenish the account for a symbolic amount (100 rubles). In practice, this action, which takes place during the week, allows you to increase sales of the coffee machine by 20 glasses a day, or by 140 glasses a week. Additional revenue will average 5600 rubles with advertising costs of about 500 rubles.

The most effective advertising for vending machines is outdoor advertising, aimed at visually highlighting the outlet. To do this, use: pillars, extensions, signs, aromarketing. You can focus on the coffee machine and increase customer loyalty by arranging a zone next to the machine. If the terms of the contract with the landlord and the place allow, you can make a place for relaxation next to the coffee machine - put a table, bench or sofa.

Another way to attract attention is to brand your machine. An additional plus of this tool is an increase in the recognition of the coffee machine. Branding can be done by ordering a sticker film from the printing house or painting the surface with original, bright graffiti. Designing a layout and printing a vinyl sticker will cost about 1, 500 rubles.

For advertising food products is very relevant aromatic marketing - attracting customers by smell. The fragrance is directly related to the product and can cause quick, clear associations. This is especially true for vending, since the goods located in the machine cannot be seen or tried. For a coffee machine, the most suitable odors are the aroma of coffee or chocolate. In addition, it has been proven that these smells evoke appetite. Practice shows that 80% of buyers unknowingly focus on smell. Thanks to air aromatization, you can increase sales by 15%. Aromatization is especially relevant in places of impulsive demand. The aroma is felt in a radius of 1-5 meters and can attract people who do not pay attention to the vending machine itself. To flavor the coffee machine, an aroma device is installed on the outside - it is preferable to place it near the bill acceptor. In this case, the most uniform distribution of aroma is achieved, and the products themselves do not come into contact with the device. The technology of flavoring based on gel cartridges will cost about 1, 500 rubles per month with the cost of equipment 3, 000 rubles.

The marketing strategy of this project includes: conducting an action with labeled glasses, branding a vending machine with a vinyl sticker and flavoring the street space. Thus, the cost of starting advertising will amount to 7, 000 rubles.

The planned sales volume is 1250 cups per month from each vending machine. The planned revenue is 112500 rubles per month. Additional income is planned to be received for advertising on the sides and the front panel of the machine. The cost of advertising on the side is 4, 000 rubles / month, on the front panel is 750 rubles / month. During the year, it is planned to conclude annual advertising contracts. Thus, the amount of additional income will be 9500 rubles per month.

5. PRODUCTION PLAN

To implement the project, it is planned to rent two outlets with an area of 1 m2 each. One of the machines is planned to be installed in the building of the station, and the second in the premises of the shopping center. The cost of renting two points will be on average 7, 000 rubles, since both points are characterized by high pedestrian traffic.

It is recommended to specify all conditions of cooperation in the lease agreement: the amount of the rent, guarantees, obligations of the parties, the degree of responsibility of the lessor, payment of other expenses. It is also worth considering the option of including electricity costs in the rent. The cost of electricity consumed by grain coffee machines averages 1, 000 rubles per month. In this project, electricity costs are not included in the rent and are accounted for separately in the amount of 2000 rubles per month.

Having decided on the place, it is necessary to install coffee machines. The installation process takes a little time and is carried out by a company that sells this equipment. The presence of an outlet is the only technical condition for installing a coffee machine.

Maintenance of the machine often comes down to changing the ingredients and utensils, as well as withdrawing money (in case of full filling, the machine will simply stop accepting money). It is recommended to check the machine once every 2-3 days to make sure that the equipment is safe and in good condition, and the availability of ingredients. When 2-5 machines are running with current maintenance, the business owner can quite cope on his own. When expanding the network of vending machines, you should hire an employee who will be engaged in the maintenance of equipment.

An important stage in organizing a vending trade is the purchase of ingredients, disposable tableware and bottled water. Today, a variety of suppliers of products for coffee machines are presented on the market. Make a choice in favor of a particular manufacturer should self-tasting product. The main criterion is the maximum naturalness of the product. The water used in coffee machines must be bottled and of the same company, since the machine may fail when the water hardness level changes. All products must have appropriate quality certificates. The monthly cost of ingredients will be 33, 000 rubles based on the planned sales volume of 1250 cups per month from each machine.

6. ORGANIZATIONAL PLAN

The initial stage of vending trading is the registration of business in government bodies. For the implementation of the project, an IP is registered with a simplified tax system for UTII (the tax is calculated based on the number of vending machines and the coefficient k2 in the city of Bataisk). The choice of a taxation system depends on the location of the vending machines: a fixed rate is preferable if the vending machines are located in places of high demand (shopping centers, train stations). If the outlet has a pronounced seasonality of demand or the average level of pedestrian traffic, then it is more appropriate to choose a taxation method that depends on profit. Type of activity according to OKVED-2: 08/18/2019 Activities for the implementation of trade through automatic machines.

Schedule of coffee machines: station - around the clock; SEC - from 10:00 to 22:00. This project does not provide for staff, as the work of coffee machines will be provided directly by an individual entrepreneur, who will also keep accounting records. If the project requires the services of an accountant, it is recommended to use outsourcing.

7. FINANCIAL PLAN

The financial plan takes into account all the income and expenses of the project. To start the project, it is necessary to calculate the amount of initial investment. To do this, you need to determine the costs of acquiring equipment, ingredients, an advertising campaign, registering a business and generating working capital, which will cover the losses of the initial periods. The bulk of the required investment is equipment and accounts for 90%.

Table 3. Investment costs

	Name	Amount, rub.
Equipment
one	Equipment	405, 000

Intangible assets
2	Starting advertising campaign	7, 000
3	Business Registration	2, 000
Current assets
3	Raw material purchase	15, 000
four	Current assets	15, 000
	Total:	444, 000

Variable costs consist of the costs of the ingredients that are used to make the drinks, and the energy expended. To simplify financial calculations, variable costs are calculated based on the average cost of a drink and a fixed margin of 330%.

Fixed costs consist of rent, utility bills, advertising costs, taxes and depreciation. The amount of depreciation is determined by the linear method, based on the useful life of fixed assets of 5 years.

Table 4. Fixed costs

	Name	Amount in months, rub.
one	Rent	7, 000
2	Advertising	2, 000
3	Communal payments	2, 000
four	Depreciation	6 750
five	Ingredient Costs	33, 000
6	UTII tax	1, 406
	Total:	59, 074

Thus, fixed monthly expenses of 59074 rubles were determined. The volume of planned revenue is 122, 000 rubles per month with sales of 1250 glasses from each machine and advertising revenue on the surface of the machines. Of the revenue structure, 74% came from sales revenue and 26% from advertising revenue.

8. EVALUATION OF EFFICIENCY

The project payback period for initial investments of 444, 000 rubles is 13-14 months. The net present value is positive and equal to 118101 rubles, the internal rate of return (IRR) is higher than the discount rate. Reaching the planned sales volume is planned for the fourth month of work. At the same time, the net monthly profit of the project will be 37, 900 rubles. The return on sales in the first year of operation will be 28%. These indicators testify to the investment attractiveness of the project.

9. POSSIBLE RISKS

To assess the risk component of the project, it is necessary to analyze the external and internal factors. For a vending business, the following types of risk are distinguished:

high level of competition in the market. A well-thought-out marketing strategy, branding of vending machines, high quality ingredients and a competent arrangement of vending machines will reduce the risk effect;
loss of location due to termination of the lease. It is possible to reduce this risk when concluding a long-term lease agreement and a competent choice of lessors;
seasonality, falling demand in hot weather. This risk can be reduced by including cold drinks (for example, iced tea or a milkshake) and an active marketing policy in a period of falling demand;
vandalism. It is possible to reduce this risk when installing machines in guarded premises, supplying machines with strong locks and modern means of protection, concluding an agreement with the lessor on material liability and property protection;
technical breakdowns, simple equipment. This risk is most likely and can entail serious losses. It is possible to minimize the risk with constant monitoring of equipment, regular maintenance of machines, the purchase of equipment from quality, trusted manufacturers;
absenteeism on planned sales. The degree of probability is high. Due to the fact that the profitability of vending machines depends on their location, it is recommended to start a vending business from several points, which allows you to redistribute the risks. It is also possible to reduce the likelihood of a risk occurring if you think through a pricing policy and provide for additional revenue from advertising on the surface of machines.

Evgenia Yurkina