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Coffee Distribution Business Plan  4.0 Market Analysis Summary  5.0 Sales and Marketing  6.0 Management Summary  7.0 Financial Plan  Appendix Executive Summary The Coffee Warehouse

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Coffee Distribution Business Plan

 4.0 Market Analysis Summary

 5.0 Sales and Marketing

 6.0 Management Summary

 7.0 Financial Plan

 Appendix

Executive Summary

The Coffee Warehouse is a new business providing high-quality, full

service distribution of coffee, specialty beverages and beverage-related supplies to coffee houses and espresso stands throughout the Spokane and Northern Idaho market

The principal owners are Steve and Jennifer Smith, whose combined

experience brings office management, high levels of customer service, and over 20 years in distribution and sales management At this time we are seeking additional equity capital to compliment our own investment and areseeking to arrange a bank line for inventory and receivables financing We have firm commitments to distribute several high-quality new age beverageproducts, and have verbal commitments from independent retailers

throughout the Spokane and Northern Idaho market to carry our product

We plan to distribute our first products within 30-60 days of finalizing

profit is projected at approximately $283,000 the first year, increasing to

$406,000 by the end of the third year of operation

Distinguishing characteristics of our business will be the combination of management experience, sales and distribution experience, high-quality, innovative products and exceptional customer service In particular, what really sets up apart is that we are the ONLY full service distribution

company servicing the coffee and specialty beverage industry in the

Spokane/Northern Idaho market In addition, The Coffee Warehouse has

an exclusive contract to distribute a new, groundbreaking product that would enable us to gain immediate access to a majority of the potential customer base

1.1 Objectives

 To open and operate a successful coffee and new age beverage distributorship in the Spokane/Northern Idaho market, employing three to five employees the first year

 To obtain a minimum of 100 regular customers in the Spokane/North Idaho market the first year of operation

 Achieve first year sales of $2,000,000

 Maintain an average gross margin of 25 percent

 To produce a net profit of at least $400,000 by the end of the third year of operation

1.2 Mission

The Coffee Warehouse intends to become a recognized distributor of

specialty beverages and beverage-related supplies and services to coffee houses and espresso stands throughout Spokane and Northern Idaho

The Coffee Warehouse plans to develop strong relationships with key customers so we will be viewed as indispensable partners, rather than just another supplier We will work closely with each customer to recommend product assortment unique for their retail base, appropriate stocking levels, pricing and display assortments, as well as promotional ideas and material

to increase sales The Coffee Warehouse will seek out and work with the manufacturers we represent to deliver the most innovative and exciting products possible to the customers we serve We are not only selling

product, we are selling service

1.3 Keys to Success

 Innovative quality products

 Individualized customer service - providing our customers with what they want, when and how they want it

 Only full service distribution company in the Spokane/Northern Idaho market

 Fully integrated programs to help customers increase sales through menu development, creative promotions, advertising, and custom marketing material

 Exclusive distribution rights to ground-breaking products not currentlyavailable in our market

 The combined experience of the principal owners bring upper office management skills, high levels of customer service, and over 20 years in distribution and sales management

Company Summary

The Coffee Warehouse, Inc is a new S-corporation business located in Spokane, Washington, and will be established based on the details of the following plan

2.1 Company Location & Facilities

The Coffee Warehouse will be located in the Spokane Valley within the Spokane Industrial Business Park This is a prime location to service both the Spokane and Northern Idaho market The facilities will include

approximately 5,000 square feet of warehouse space, with an additional 1,400 square feet built out for office/retail space We are currently

negotiating lease terms on the several available properties, and plan to have a lease signed by July 31

2.3 Start-up Summary

Start-up expenses for the Coffee Warehouse total $16,450, and include expenses such as legal, marketing, lease deposit, computer systems, etc Start-up assets include $9,800 in initial cash requirements, $18,750 in shortterm assets (office furniture, refrigeration equipment), and $75,000 in

starting inventory These start-up costs will be financed through

investments and small-business loans The details of the start-up summaryare included in the following table

Start-up Requirements

Start-up Expenses

Legal Business Formation $220

Warehouse Lease Deposit $2,800

Insurance (first month) $500

Utilities (first month) $350

Research & Development $1,200

Total Start-up Expenses $16,450

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Start-up Funding

Start-up Expenses to Fund $16,450

Start-up Assets to Fund $103,550

Total Funding Required $120,000

Assets

Non-cash Assets from Start-up $93,750

Cash Requirements from Start-up $9,800

Additional Cash Raised $0

Cash Balance on Starting Date $9,800

Liabilities and Capital

Liabilities

Accounts Payable (Outstanding Bills) $0

Other Current Liabilities (interest-free) $0

Additional Investment Requirement $0

Total Planned Investment $25,000

Loss at Start-up (Start-up Expenses) ($16,450)

custom-designed marketing material, informative monthly newsletters,

training and product demonstrations, as well as information on the latest market trends in the coffee/specialty beverage industry.

3.1 Product & Service Description

PRODUCT DESCRIPTION

The Coffee Warehouse will carry a variety of quality products that will

enable us to provide full service delivery to espresso stands and coffee houses Our underlying philosophy in selecting products is to choose lines that will bring consistent quality, competitive prices, and product

satisfaction to our customers We have personally researched and sampledeach of the following products that we offer to ensure the quality we

guarantee

 Lowery's Gourmet Whole Bean and Wired Willey's White Coffee

 Assorted Gourmet Syrups & Coffee Toppings

 Chocolate, White Chocolate and Caramel Syrups/Sauces

 Oregon Chai Concentrate

 Jet Cafe and Jet Tea Fruit n' Tea Freeze

 Cappuccina line of product

 Big Train line of product

 Red Bull Energy Drinks

 Good Cow Concentrated Milk with Custom Dispensing Equipment

 Fresh Baked Goods

 Assortment of White, Pre-printed Paper, and Clear Beverage Cups Systems - as well as an assortment of other paper supplies

At this time, the majority of these products are only available to customers through wholesale vendors such as Cash and Carry retail outlets -

therefore it is the customer's responsibility to acquire these products by their own means The Coffee Warehouse will make these same products available through our high quality, full service delivery - bringing these products directly to their doorstep at a competitive price

 Ideas to help our customers increase sales through menu

development, creative promotions, co-op advertising, and much more

 Custom designed marketing material such as printed banners,

promotional posters, punch cards, pre-purchased beverage cards, reader boards, etc

 Distribute a monthly newsletter featuring the latest coffee trends, newindustry equipment, breaking trade news, promotional ideas, new creative recipes, and upcoming events

 Samples of the latest product releases - with eye-catching sale to advertise new items to the end consumer

point-of- Routine equipment maintenance and training

3.2 Competitive Edge

KEY COMPETITIVE STRENGTHS

No other wholesaler in the market offers full service delivery with the variety

of product we feature We are better positioned than our main competitors

to take advantage of the increasing demands of coffee and specialty

beverage supplies because we focus exclusively on high-quality distributionand customer service In addition to the variety of products we feature, The Coffee Warehouse has exclusive distribution rights to Good Cow's

concentrated milk/dispensing system This product is not currently available

in our market by any other suppliers

KEY COMPETITIVE WEAKNESSES

Our primary weakness is that we are a new business competing largely against established suppliers To significantly build sales, we must not just find new customers - we must take customers away from existing suppliers.However by offering a superior selection of supplies, new groundbreaking products to the market, and focusing on high-quality service and full servicedelivery, we feel will can quickly establish accounts and build strong

relationships Co-founder Jennifer Smith has had many discussions with owners of coffee and espresso businesses that confirm this opinion

3.3 Sales Literature

Sales literature to be distributed to both current and potential customers willinclude brochures, fliers, newsletters, as well as other print media such as print advertisements Jennifer Smith is highly skilled in graphic design and

desktop publishing, and has quality design and printing equipment to

publish professional pieces at a low cost

3.4 Sourcing

The Coffee Warehouse will purchase product directly from manufacturers,

as well as master distributors Because this eliminates the broker or

"middle man," this allows us to operate on a 25-30% profit margin, while providing our customers with competitive prices

To further reduce costs, The Coffee Warehouse plans to share product shipments out of California with distributors operating in Portland, Oregon and Tri-Cities, Washington Other product not being shipped directly to Spokane will be purchased and picked up in Seattle, Washington The Coffee Warehouse plans to send a truck to Seattle on a bi-weekly basis to pick up product, thus cutting costs by an average of 5%

3.5 Technology

To streamline the efficiency of our distribution methods, The Coffee

Warehouse plans to use the latest in cutting edge technology - not only in the warehouse - but also in the trade

All of our drivers/sales representatives will be equiped with Thinque MSP handhelds and software Thinque MSP applications will reduce field

expenses, decrease day's sales outstanding, and increase worker

efficiency Features can be used in or out of the warehouse and include managing returns and collections; adjusting item price, profit or margin; applying promotional items to an account; streamlining orders; tracking inventory; reducing out-of-stocks; and providing sales history reports All information recorded in the handheld is available in real time to be viewed

by management in the office

3.6 Future Products and Services

Within the first year of business, The Coffee Warehouse intends to open a retail/wholesale store and high-quality showroom Products will be

available for purchase by both our wholesale customers who may need product between delivery days, as well as retail consumers interested in purchasing product for their home use We will also offer a showroom that

will feature equipment, supplies, trade resources, and information on

marketing services with examples of marketing and promotional material available to customers

With the addition of the product showroom, The Coffee Warehouse will offer customers quarterly product and training demonstrations that will be presented by trained beverage experts from the industry

The Coffee Warehouse also plans to hold semi-annual trade shows for current or potential customers These trade shows will allow customers the opportunity to sample products, talk to manufacturers, learn about new industry trends, review marketing material, and network with other businessowners in their market

Market Analysis Summary

Coffee is the second largest commodity market next to oil, and growth is expected to continue at a strong pace for the foreseeable future The

specialty beverage industry is growing at an equally strong pace, with salesgrowth in some categories projected to grow at rates of 40% per year

This growth offers excellent opportunities for new companies to enter this market, and we are excited about the possibilities of what The Coffee

Warehouse can accomplish in the Spokane and Northern Idaho market

As illustrated in the chart below, within the market surrounding Spokane, Rathdrum, Post Falls and Coeur d'Alene, there are currently 250 drive-thru espresso stands, 18 coffee/tea houses, 52 independent inner-retail

espresso stands, and approximately 10 stands in locations such as sports venues, university campuses, and etc These figures are not including the number of restaurants, bars and cafes that also feature these beverages

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universities, etc)

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4.2 Target Market Segment Strategy

While the market is already sizeable, this industry continues to grow New espresso stands open their doors to the public on a monthly basis in our market, and it isn't uncommon to see numerous espresso stands within a one or two mile radius The article below, published by a national coffee retail magazine, discusses our market's unique drive-thru espresso

industry The sales potential in this market is unlimited

The Coffee Warehouse initially plans to target these drive-thru espresso stands, as well as all inner-retail espresso stands within our designated market It is this segment that is most in need of the services we are

planning to offer Essential needs include: quality products at competitive prices, first class service, and strong sales support It is most often these small owner-operated businesses that are neglected by larger suppliers and are forced to service themselves It is also these smaller businesses who could most greatly benefit from marketing services, sales support, and full service product delivery Providing the same high-quality service, within the first six months of operation, The Coffee Warehouse plans to expand our target into formal coffee houses and cafes, and as business grows and stabilizes, eventually evaluate the needs of potential customers in the

restaurants and bar industry

4.3 Market Growth

Coffee has been a growing industry for the past several years In the gourmet/specialty coffee industry alone, the figures show an impressive rate of growth in the United States

The new age beverage industry is growing at an equally strong pace Sales growth in the chai tea category alone is estimated to be 50% historically, with projected growth rates of 40% per year Energy drinks, including brands such as Red Bull - and trends such as Jet Tea - are driving the new age beverage growth, and have increased 50-fold in the past three years

Bubble Tea has been a rapidly growing market in Asia, though it is

relatively new to the United States Introduced to trend setting marketings such as San Francisco and Seattle, sales have been exploding - and the craze of the "Tapioca Pearl" is expected to spread throughout America

In an open industry growing at such a strong rate, The Coffee Warehouse

is in position to capitalize on the customer's need for quality product,

exceptional service, and an effective partner to success

4.5 Industry Participants

With the rate of growth in the gourmet coffee market, in addition to the recent trends in Jet Teas and other specialty beverages, the industry is comprised of many small participants, each focusing on only a few specific items or brands at a time As the markets evolve, we expect the industry to

consolidate with larger distributors representing more of a vast selection of products in each market.

Currently in our segment of the industry, there are no large national chains with market control There are also few products that are offered with exclusive rights to one market While this is the case with many products, The Coffee Warehouse is working with manufacturers to change that

practice, and not only represent a larger variety of product than others in our industry, but also acquire exclusive rights to many of the products in our portfolio

4.6 Distribution Patterns

The following flow chart illustrates the overall industry surrounding the distribution patterns of coffee and specialty beverages (The Coffee

Warehouse falls into the level highlighted in yellow)

Several manufacturers are represented by master distributors and/or

brokers who in turn provide the product to direct distributors and other wholesale suppliers Other manufacturers allow distributors and suppliers

to purchase product direct - depending on the quantity of product being purchased Product is then distributed or sold through cash and carry wholesale stores to retail businesses as illustrated below

4.7 Competition & Buying Patterns

While there are a handful of coffee and specialty beverage suppliers

providing product in our market, there is still a great deal of room for new

business Most importantly, there is room for new business that

understands the need for high-quality service and sales support - in

addition to product at competitive prices

In this industry, customers choose their suppliers based on available

product, price, and service - though most often, it is the service that suffers most While one supplier may offer the product at the right price, they do not provide the level of service that the customer demands The next

supplier may offer the right level of service, though their prices are too high.This results with the customer purchasing most of their supplies through a cash and carry style wholesale store - leaving the customer with no service

or support

By positioning ourselves in the market with in-demand, quality product at competitive prices, with a consistent high level of customer service - we areconfident that we will see customers and their business continue to

increase

Sales and Marketing

The unique aspects of our business include individual product selection, quality assurance, and high-quality full service distribution Our strategy is

to focus 100% of our efforts on the market for espresso supplies in the Spokane and Northern Idaho area By focusing all of our effort and energy

on this particular area, we expect to quickly develop and maintain a

leadership position The Coffee Warehouse's key personnel will stay in contact with our customers, and will be able to respond to changes in this market much faster than our competitors

The Coffee Warehouse will offer the best, most highly personalized service

in the marketplace Being a small, owner-operated company, we intend to use this to our advantage to be absolutely certain that every one of our customers receive excellent service We will go out of our way to make sure that our customers know that they truly matter to us Sales reps and in-house personnel who deal with customers will be carefully trained and given wide latitude for insuring that customers are always satisfied

5.1 Marketing Strategy

Our basic marketing strategy is to work with customers on a one-to-one basis to ensure their supply needs are being met and help develop unique marketing programs for each of them We intend to prioritize customer service and make it a key component of our marketing programs We believe that providing our customers with what they want, when and how they want it, is the key to repeat business and positive word-of-mouth advertising Because we want to develop close working relationships with our customers, we want to establish accounts in as personable a way as possible It is for this reason that we will overwhelmingly emphasize in-person sales calls to build accounts

We will closely integrate all of our marketing and sales efforts to project a consistent image of our company and a consistent positioning of our

products and services We will build this image around our name "The Coffee Warehouse, Inc." and emphasize to customers the high-quality service that is behind this name

To support our marketing initiatives and product knowledge, we will attend

as many area conventions and trade shows as possible to ensure we are offering the most up-to-date market trend information

5.2 Promotion Strategy

Relationships are the key to success in the distribution business Personal selling will remain our most important means of promotion Both Steve and Jennifer Smith will lead this effort - Steve, with his skill and experience in sales and distribution, and Jennifer in customer service and relations In addition to personal selling, The Coffee Warehouse has identified several other means of advertising and publicity

The Coffee Warehouse will send news releases to local media and press,

as well as trade magazines to try to get product and company feature coverage in front of the eyes of our customers - as well as the end

consumer We will also produce a few generic press releases about the products we are distributing for our customers to use toward publicity

coverage for their businesses in local publications such as the Spokesman,The Inlander and Local Planet

Third, we shall have a monthly newsletter for current of potential

customers This newsletter will highlight new and current trends in the industry, upcoming conventions and trade shows, offer promotions and special deals, as well as provide new recipes, fun tips and other informationthat can be used in their business We will also highlight not just our

products, but also display ideas and success stories of other business in the industry As a more straight forward advertising effort, The Coffee Warehouse will feature an advertisement in the Yellow Pages, frequent ads

in the Spokesman Review, the Inlander, and the Local Planet, as well as participation in networking, local trade shows, and personal word-of-mouth advertising

increase, the need for additional delivery trucks will continue to be

evaluated With each additional delivery truck, routes will be restructured tomaintain maximum efficiency

5.4 Sales Strategy

Distribution sales are dependent on repeat business, therefore the sales strategy for The Coffee Warehouse is based on personal, consistent sales contact, with a high emphasis on customer service and relations Because

we are a new distributor, we understand that we will have to prove our worth to our customers in order to earn their respect and business Both of the owners, Steve and Jennifer, will make personal calls on potential

customers to review our product line and services, give general information

on our company, and discuss how we feel we can help them succeed in their business

The Coffee Warehouse will begin operations with two full-time

delivery/sales representatives, who will be responsible for providing full service and delivery to current customers, but also make sales calls for potential new business This delivery/sales representatives will receive a

base salary, with commission on qualified sales, as well as bonuses for new acquired business Customers will be scheduled for a pre-arranged delivery day once or twice a week, depending on the quantity and timeline

of product needed Product orders can be placed in a number of ways to help facilitate the process:

 Phoned Orders: Customers can easily phone orders into our office,

up until 2:30 p.m of the afternoon prior to their scheduled delivery day

 Faxed Orders: Customers can fax in a completed product order sheet, with the same deadline as phoned orders

 Tel-Sell: Customers may choose to have a representative from the office call them the day prior to their scheduled delivery to check product quantities and assist them in placing their order

We understand the hectic schedule of a small business, so if a customer fails to call or fax their weekly order, they will receive a courtesy call from our office to verify that an order is not needed

5.5 Sales Forecast

As indicated in the table, our sales are forecasted to increase rapidly, with

an annual growth rate of approximately 30%

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Specialty Beverage Mixes $176,660 $203,158 $233,632

Chocolate & Caramel Sauces $244,798 $276,622 $312,583

Specialty Beverage Mixes $134,440 $154,606 $177,797

Energy Drinks $36,542 $42,023 $48,327

Concentrated Milk $97,919 $112,607 $129,498

Paper Supplies $888,964 $1,022,308 $1,175,655

Subtotal Direct Cost of Sales $1,754,550 $2,012,837 $2,309,230

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5.6 Milestones

The following table and chart are the important milestones for The Coffee Warehouse

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5/15/2003

6/15/200

SDS /JLS Marketing

$20,00

0

SDS /JLS

Departmen

t

Press Releases/Advertising 7/1/2003 8/1/2003 $250 JLSDepartmen

tOrganize Grand Opening

Management Summary

The Coffee Warehouse will be owned and operated by its founders, initially working with a small employee base that will cover sales and delivery Management and personnel plans are covered in more detail in the topics

to follow

6.1 Organizational Structure

The Coffee Warehouse will be managed by the two founding partners, whose individual areas of expertise cover many of the functional aspects ofthe business

The organizational structure is very simple Steve Smith will be responsible for the routing, distribution management and delivery systems Jennifer Smith will be responsible for customer service, accounting, shipping and the general administration of the business Together they will be

responsible for product selection and sales and marketing

The support staff at the office and warehouse, as well as the delivery

personnel will report to Jennifer Because Steve will be spending a

majority of his time in the trade, Jennifer will be able to support any day needs that the personnel may have However even when Steve is out

day-to-of the day-to-office, he will be in constant contact via computer or phone

The goal of The Coffee Warehouse is to have a team of committed

associates who empower each other so that the customer's expectations can be exceeded Our goal is to offer career opportunities, advancement opportunities and a level of income and benefits that is competitive within the region and job classification It is our long-term goal to be the

preferred employer within our niche of the beverage distribution industry

6.2 Management Team

Steven D Smith

Steve has a long history of experience in sales and distribution

management, specifically in the beverage industry As the sales and

distribution manager for the largest beverage distributorship in the state, hecurrently manages ten sales representatives and twenty four

merchandisers During this time as sales manager, he has helped increasemarket share from 25 to 40%.

Over the last twenty years, Steve has successfully built and maintained rapport with buyers in the city's largest key accounts, and has strategically routed sales, merchandising and truck routes throughout the city

Steve has many industry contacts and an in-depth knowledge of the

market

Jennifer L Smith

Jennifer recently operated as general manager for a local business and directed a staff of thirteen, overseeing the accounting practices, human resource issues, and day-to-day operations of the company Prior to this position, Jennifer has held a variety of other inside business management and operations positions

Jennifer's strengths and skills include strong management, excellent public relations, high levels of organization, extensive computer knowledge - including desktop publishing and graphic layout - and extensive

presentation and reporting skills

Not only will we train our employees to deliver excellent service, we will give them the flexibility to respond creatively to client requests In addition,

we will continually monitor our clients' level of satisfaction with our service through surveys and other convenient feedback opportunities

To ensure our personnel are meeting our expectations, we will hold a

minimum of quarterly meetings with all employees so that results can be reviewed and future plans can be discussed At least twice a year, a

refresher course will be required on product knowledge and how to exceed our customer's expectations

SALES AND DELIVERY

In order to deliver high quality, personalized service we will carefully select all employees - with extra attention given to sales reps and delivery

personnel who will deal directly with customers We will carefully review references not just from past employers or manufacturers, but also from retailers whom these sales reps have served We will also make sure that each employee understands our way of delivering quality service to each customer We will have immediate back-up support available by phone from our office for more difficult service issues We will also give employeesenough latitude so that they can respond immediately to almost any

customer request or complaint - which in this industry usually means

granting immediate credit for damaged merchandise, and adding additionalmerchandise to an order

Current Interest Rate 8.00% 8.00% 8.00%

Long-term Interest Rate 8.00% 8.00% 8.00%

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7.2 Break-even Analysis

The following table and chart illustrate our break-even analysis With our fixed costs estimate of approximately $15,000 per month, operating on average at a 25% profit margin, we will need to sell 67,666 units to break-even in a month Fixed costs include our warehouse lease, vehicle leases, utilities, insurance, payroll, and an estimation of other running costs