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In search of the 21st Century: brewer.

The existing American foodservice brewing technologies make good coffee, are low in required maintenance, and have many interchangeable components (i.e. Tomlinson faucets). They deliver a range of brew options from 60-oz in 3 minutes, to 750-oz in 6 minutes. Fresh beverage holding time ranges from 45 minutes (bowl on warmer) to 4 hours (Thermalo carafe). With the exception of Wittenborg (1991) and Curtis Gemini (c. 1985), the existing coffee brewing technologies have been available for over 25 years.

The existing technologies have name and model recognition. The top of the line manufacturers have substantial advertising and promotional budgets and significant sales representation throughout the country to support their efforts. Each manufacturer has authorized service representatives in most markets.

Most manufacturers offer 90-day to 1-year warrantee service. In some cases, the warrantee does not start running until the equipment's on-line placement date. Others offer a delayed billing program where the coffee distributor does not pay the equipment invoice until on-line placement of the machinery. One manufacturer's incentive program rebates 1% of equipment orders at year end.

There are significant questions that need be addressed by any serious venturer into the field of out-of-home coffee brewing device manufacture and distribution. Research needs to be conducted to ascertain the size of the out-of-home brewer market. This research should be aimed at learning as much as possible about the major players, their corporate structure, financial strength, key markets, models, price structures, market shares, key executives, and the remuneration packages of the key personnel.

In the coffee beverage business, it is the coffee distributor who places and maintains on-line brewing equipment in the foodservice environment. Placement of a new generation of technology with coffee distributors will be difficult unless substantial homework has been done to offset the distributors natural bent toward playing it safe.

Coffee distributors are pre-committed to existing technologies. With the entrance of a new brew system, these other technologies may now be obsolete for many applications.

Commitment to the new technology means that the distributor is relegating his current equipment inventory to diminimus value while still being required to maintain those units of the old technology that remain in the field. He is making a significant investment in a new technology that is more costly than continuing with the accepted industry standard. He does this with no hope of being able to raise the price of his coffee.

The new equipment may require distributors to carry a significant parts inventory that is not compatible with other technologies. Maintenance personnel will require training on the new equipment.

The cost of equipment placed on line must be recovered in the cost of coffee within months. The financing costs of the equipment creates a "Load" on the price of coffee. During this initial time period, the coffee distributor does not make a profit on his sales, as the first dollars out of the account pay for the equipment.

Upon loss of an account, the on-line equipment is put back into inventory. Placing previously used equipment on-line again helps the coffee distributor to control initial account set up costs. There is no equipment "Load" on the account. He uses his existing equipment inventory to reduce the cost of opening new accounts.

Equipment inventory "shrinks" in the field. The average life of surviving field equipment is about seven years. Purchases of brand new equipment are made only when used equipment inventories are low or when an account of importance demands new equipment.

Since the equipment placed, old and new, is essentially the same make and model number and all maintenance is provided by the coffee distributor to the foodservice operator at no cost, the thrust for brand new equipment by an account can often be parried by the distributor.

As a practical matter, only existing accounts of substantial importance, and like potential accounts have the leverage to require brand new equipment from the distributor. The distributor is much more likely to counter the demand for new technology equipment by offering a shiny brand new piece of standard issue equipment in its place. It is substantially cheaper to invest in a new piece of old technology than to finance a new machine that is alien to the distributor's economic well being.

In the event a distributor places a new technology brewer on line and the customer becomes disenchanted with the equipment or should the distributor's relationship with the foodservice operator end, the distributor will have a used "odd-ball" machine on his hands.

The strengths of existing technologies and the substantial commitment of assets sustaining that commitment diminishes the distributor's ardor to initiate placement of new technology for as long as possible.

The megacoffee distributor may be willing to bet on a new technology as leverage to obtain new business by offering something his financially weaker competition can't afford. The mega-distributor may want concessions ranging from a cost advantage to his logo on the machine nameplate in return for placing an order for X number of units. He may also want a market exclusivity should he be willing to gamble on the new technology. If the machine is successful, the mega-distributor has reaped substantial benefits. If the effort fails, they chalk the loss off to research and development.

The chef and the foodservice operator are the hidden customer. They are the end user of the technology. If the equipment makes good coffee time after time, is not overly large, uses standard electric and water hook-ups, is relatively maintenance-free, and is "intelligent," they will love it. Especially since it is brand new and available at the same great price as their existing equipment; FREE.
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No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Title Annotation:part 2
Author:Schoenholt, Donald N.
Publication:Tea & Coffee Trade Journal
Date:May 1, 1993
Previous Article:A tour through Eichholtz's coffee handling operation.
Next Article:Profile: two volume movers in supermarket distribution.

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