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Monday, 3 July 2017

(The Star) A different kind of coffee chain

There is potential for partnerships to roll out vending machines across Klang Valley

Coffee culture is on the rise in Malaysia and VendPays Sdn Bhd chief executive officer Raymond Woo is eyeing a slice of the growing pie.

But Woo is not planning to build trendy hipster cafes or operate established coffee franchises. He fancies capturing the market with his new coffee bean-to-cup vending machines, aptly named vBarista.

“V for value, vending and virtual,” he says.

The vending machine, sourced from an Italian manufacturer, grinds coffee beans and immediately brews the customer a fresh cup of coffee at RM3-RM6 per cup.

The advantages of operating a vending machine over running a brick-and-mortar coffee business, he says, is the lower initial capital and operating cost.

Setting up a food and beverage outlet would typically cost about RM200,000 and Woo notes that a high percentage of these outlets fold within the first year. A vBarista machine, on the other hand, costs about RM39,000 and can be moved to another location if foot traffic is not satisfactory.

Additionally, vBarista uses a QR code to complete a transaction. Customers can create an account on its website with prepaid amounts and generate QR codes on their mobile phones, which are scanned by the vending machine, when they want to make a purchase.

This cashless payment system reduces the risk of handling cash and of fake money being fed into the machines.

“We are trying to innovate the vending industry while creating a product that consumers want. Demand for coffee bean-to-cup is growing. And we have a maturing coffee culture here so I believe there is potential for vBarista to grow,” says Woo.

VendPays was incorporated in 2016.

After founding the company, Woo and his partners scoured for coffee bean, vending machine and milk suppliers.

They partnered with Italian coffee bean supplier Caffe Vergnano to ensure their vending machines produced good coffee drinks.

“We took about a year to put everything in order and we will be officially launching vBarista on July 13,” he says.

VendPays is looking for business partners to roll out its vending machines across Klang Valley. Woo explains that the company is looking at a franchise concept to grow its business, whereby those interested in starting a small business can put in an initial capital of RM39,000 for a vending machine.

“They will, of course, need to look for their own strategic locations for the vending machines. But we will handle the maintenance of the machines for them, including topping up the items in the vending machines. We will also deal with the customer service and all the branding and marketing effort,” he says.

Woo hopes to deploy 100 vending machines around Kuala Lumpur and Petaling Jaya by the end of the year. And by late 2018, he is looking at some 1,000 machines within the Klang Valley.

“The vending business will become more and more relevant in Malaysia as cost of location increases,” notes Woo.

VendPays will be one of the exhibitors at the upcoming Malaysia International Retail and Franchise Exhibition (MIRF).

The exhibition, organised by the Malaysia Retail Chain Association, will be held on July 13-16 at Mid Valley Exhibition Centre. The fair will gather local and overseas retailers and franchises across 10 countries including Singapore, South Korea, Taiwan and China to tap into networking opportunities and to educate and create awareness on the prospects available in the industry.

“What better platform to market our product? There will be 15,000 to 20,000 captive audience at the exhibition and these are people who are already looking for business opportunities,” adds Woo.

Last year, MIRF drew in some 15,000 visitors to 230 booths and generated about RM50mil in transacted revenue.

Nonetheless, VendPays co-founder and chief marketing officer Eldrick Koh notes that one of the challenges for the company is to educate consumers on the use of mobile wallets.

“It is convenient and this form of payment is widely used in advanced markets like China. It is a little slow here. People still think about putting money into vending machines.

“But once this picks up, the potential for this business will be bigger,” says Koh.