Some companies make their profits by capitalizing on the ingrained habits of customers. These companies understand that some habits are a matter of reflex, and that a customer will actually buy their product while in a complete daze. The trick to making profit in this vein is getting the product in front of the customer so that they simply walk up and push a button based on habit. If an investor can find a company that has cracked this market, they, too, can make a profit, even while in a similar daze.
Javo Beverage Company Inc., a hot/cold beverage machine and hot/cold drink flavoring-packet company, offers equipment and end-product materials to the food service industry. From a practical point of view, when pushing the button for a cup of coffee (or cold, coffee-type drink) at a convenience store/hospital/cafeteria operation, Javo is one of the companies that put the machine and product there. The company uses its own proprietary flavoring packets aimed at the customer who wants a robust “boutique” coffee/tea taste.
By all accounts, the company has hit upon a flavor and dispensing formula that works for many outlets. Its number of outlets is increasing rapidly, and is on track to reach an estimated 8,800 by mid-2008. To see how this applies to the company’s balance sheet, each new outlet is estimated to add between $3,000 and $6,000 of product sales annually. As the number of outlets increases, there is a corresponding increase in sales and marketing expense. How the company will deal with these increases is unknown, but it does recognize the issue and is aware that it needs to be proactive.
One area that will likely help this issue is the company’s association with leading outlets. It can count 7-11, ExxonMobile, Veterans Affairs and Med Assist supply chains among some of its best regional customers. As the company continues to work on its national presence, the issue of sales/marketing expense will be a focus for some time, but can be addressed through a positive business model, which the company has. Growing too quickly is a problem that most companies would love to have. Javo is quickly addressing its issues in this regard, and will likely find itself a consistent player in a consistent market quickly.
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