2. Group A-14 Distribution Channels ANTONIO’S BIG NIGHT IN TOKYO Presented by Antonio Patron Boenheim Antonio Patron Boenheim Thierry Zedda Thierry Zedda Katsuya Nakamura Katsuya Nakamura Renata Peregrino de Brito Renata Peregrino de Brito Simi Gambhir Simi Gambhir March 29, 2004

3. Group A-14 12 Hours of Agony

4. Group A-14 First Day: Tokyo Sightseeing A Castle!!! The Bullet Train!!!

5. Group A-14 At a Sumo Match Tower of Tokyo!!! First Day: More Sightseeing

6. Group A-14 Second Day: “ The Interview” Where the @$%/ is that hotel? At my cheap hotel room At the Interview Trying to find my hotel

7. Group A-14 Front Desk Second Day: Night out FlowersAlcohol Food & Coffee Smokes & Condoms Forgotten or unavailable Items You can find everything “around the Corner”

8. Group A-14 Just around the corner… BeerFlowersUnderwearT. paper Food Cigarettes

9. Group A-14 Ubiquitous Vending

10. Group A-14 Marketing Context Example of nonstore selling (direct selling, direct marketing, buying service) CONVENIENT! 24 hours, 7 days a week Low service cost Can serve a captive audience What is AUTOMATIC VENDING?

11. Group A-14 Manufacturer 0-level2-level1-level Consumer Retailer Wholesaler Manufacturer Marketing Channels

12. Group A-14 Sales and Breakdown by Vending Machine (2002) Financial Data # of Vending Machine in JP 5.6m Persons per Machine 23 GNP $71b: Philippines $66b: Chile $57b: Czech $56b: Pakistan $54b: Peru $51b: New Zealand $66.7b Sales from Vending Machines in Japan Sales 6.8% 24.0% 28.2% 40.0% Beverage Alcoholic beverage Other Tickets, etc Cigarette 1.5%: Foods (Source: Japan Vending Machine Association) (Source: International Financial Statistics Yearbook 2002) $22.6b $13.8b $1.5b France Germany U.S. Japan

13. Group A-14 41%20%25%14% Beverage Market in Japan 52%15%23%10% Coca-Cola Grp 20%35%30%15% Ito-en 88%11% 1% Dydo Vending Machine Convenience Shop SupermarketOther (Source: Weekly Diamond Japan) Preferred Channels (Sales share% by channel) Preferred Channels by Selected Brands

14. Group A-14 Preferred Channels A Brand that Uses Vending as a PRIMARY Channel FABO is a local Japanese producer of canned coffee

15. Group A-14 60 14.4 27.6 60 12 6 24 18 Product Cost Marketing Logistics Other Location Fee Profit 18 Retailer’s Margin Discount by Retailer Product Cost Marketing Logistics Lease or Depreciation Other Vending machine ChannelSupermarket Channel Retail Price (Yen) (Source:Japan Vending Machine Association) Financial Data Profit 120 (Yen) 108 (Yen) 120 (Yen) Vending vs. Supermarket Channels

16. Group A-14 Net (500) 154 144 135 125 117 110 0 1 2 3 4 5 Vending Machine Setting Cost Cash-out Flow Cash-in Flow NPV: 785 (K Yen) (Year) Discounted Payback: 2.5years IRR: 34.3% (Source: Weekly Diamond Japan) Financial Data.. Annual Revenue per Machine in Average: 1.1million Yen ($10,000) Durable years: 5 years No terminal value Discount rate: 7% A Good Investment!

17. Group A-14 Geographic Economic Socio-cultural Technology Are these factors applicable to other countries? Critical Factors for Success Why does this work?

18. Group A-14 Geographic Constraints Population Density (per km 2 ) + only 30% of land can be utilized Source: Food and Agricultural Organization of The UN High cost of land Low stock kept at the home Frequent buying Convenient channels V.M. utilize small spaces efficiently & profitably What impact does this have?

19. Group A-14 Economics 2075.9 66.0 (%) Changes in Consumer Prices Brazil Netherlands Columbia U.S. France Japan ~~~~ ~~~~ (Source: IMF International Financial Statistics) High inflation rates can lead to: High stocking Continuous price changes Currency change

20. Group A-14 Socio-cultural Crime: Robberies per Capita (2000) Source:http://www.nationmaster.com/cat/cri Low vandalism and respect for public property leads to…. Machines not confined to private spaces Further potential for expansion

21. Group A-14 Socio-cultural “A Shared Refrigerator Between Neighbors” - Katsuya Nakamura

22. Group A-14 Technology Helping sustain Japan’s vending culture PRODUCT REPLENISHMENT REQUIRED Wireless communication between machine and owner Monitor sales activity Inventory control and refill scheduling

23. Group A-14 SMART PAYMENT Mobile phones and smartcards increase convenience and purchase of expensive items Technology SMART MACHINES ID checking for underage consumption News and weather information Up next? Digital kiosks (ATM, Internet)

24. Group A-14 So what happened? Magazine! Lots of BeerFortune Sad & LonelyA Familiar Place

25. Group A-14 JOB – don’t give up but start thinking of a title for your research project HEALTH – stop eating at Maria’s Cantina LOVE – you won’t get lucky if you take a girl to a vending machine Fortune YOU DIDN’T GET LUCKY IN JAPAN!

26. Group A-14 QUESTIONS?