Final business proposal for a coffee truck venture

Coffee Truck

In addition the market for coffee is also in a state of monopolistic competition. Coffee is widely available from coffee shops like Starbucks, from restaurants, and also people drink coffee made at home. The nature of the competition for our coffee truck will change depending on the location, but there is always a need in monopolistic competition to find ways to distinguish our product/service from the competition, and create a distinctive brand for the truck.

Target Market and Key Economic Concepts

The target market for the coffee truck will change somewhat with each location. A location downtown, for example near the Rail Runner, would have one particular clientele, while a location near UNM would have different characteristics. The underlying factor is that all customers want coffee, related drinks, and snacks. The demographic characteristics might be different depending on location, but the psychographic characteristics will be similar for each market. Even for fair trade coffee, demand is inelastic (Niemi, 2009). The demand for coffee, as noted, is inelastic because coffee is a ritualistic purchase -- coffee drinkers do not skip their morning cups very often. The consumer from a coffee truck is specifically someone who wants their coffee on the go. In that sense, we are competing against the other coffee trucks, and coffee shops that offer coffee to go. There is a greater convenience associated with the coffee truck.

The other economic aspects that need to be understood is the size of the market in any given area. This will be dependent both on the level of traffic in an area, adjusted for ho wmany people are likely to stop. Coffee is a low cost purchase, so income is usually not an important factor, but it could be, as one critical substitute is making coffee at home. The market potential is therefore defined by the people who might buy a coffee out of home. This is a fairly large market, but it is nonetheless an important consideration with respect to locating the truck.

Product Mix

For a coffee truck, the coffee is obviously the most important part of the product mix. The trick with coffee is that it is difficult to differentiate coffee. Consumers will tend to have their stated preferences, sometimes by different roast, sometimes for fair trade or organic, but for the most part the product is not differentiated by very much. However, it has been found that demand for fair trade coffee is inelastic (Niemi, 2009) and fair trade has an appeal with a lot of consumers. Those who are seeking convenience are not going to be swayed by a slight premium paid for a fair trade coffee, so that is one area the truck can differentiate its product somewhat. It is also possible to do speciality drinks, and differentiate within that. This coffee truck should therefore seek to become known for a signature drink, or a rotating series of unique coffee creations.

The other beverages and snacks are a way to differentiate the truck, and can be more differentiated than the coffee itself. A variety of teas and chocolates can be a good source of differentiation -- an authentic Mexican hot chocolate on a crisp New Mexico morning can be a beautiful thing. The pastries and snacks should be of a very high standard, enough to help build the truck's reputation. They will need to be made off site, and there are opportunities to partner with the best bakeries in town in order to ensure that our truck has better snacks than other trucks and shops, no matter where we are located. It is imperative that our premium positioning is backed by the best food, because the nature of competition changes by location -- no matter where we are parked, we want to be the best in the area.

Distribution

With a food truck, the truck is the method of distribution. The truck goes to the customers, rather than having the customers come to the truck (Myrick, 2012). The choice of location is usually chosen by city officials -- a truck cannot park just anywhere. There are designated spaces and the truck will usually have a set of allocated times and places. In Albuquerque. The food trucks are usually in competition with each other for the best times and spaces. We will have to compete with the five existing coffee trucks for prime location/time slots, or find our own locations and apply to the city for the space. The system to this point has actually been free, without restrictions, but there have been propsosals at city hall to create limitations on food trucks, so the business plan has been developed with that in mind. In many other cities, city hall has a strict permitting process and it is expected that this will come to Albuquerque in the very near future (McKay, 2015). There over 100 food trucks to compete with in a regulated market, which could pose a barrier to growth.

Until the rules are enacted, distribution is basically free flowing at the moment. Trucks tend to park in areas where there is significant foot traffic, especially downtown and Nob Hill (McKay, 2015). These areas are probably the most attractive. However, there may be other areas that are attractive for a coffee truck, and attention must therefore be paid to commuter flows. This is an area of the business that will require intenseive research, because the truck needs to be in the areas with the heaviest traffic flow at differnet times of the day. The ability to move is beneficial in this respect but the truck needs to be expert on traffic flows throughout the city, and the more knowledge acquired in this area will result in competitive advantage.

Promotional Plan

There are a lot of competitors for coffee. With only five coffee trucks, there is no much specific competition in our field, but we also will be competing against all of the different coffee shops in the city. Coffee drinkers are quite loyal, and therefore many already have their morning routines established. This means we will have to win their hearts and minds away from their established routines.