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STRATEGY

Case Study Update: On the Rebound

When we wrote about Hettie Herzog in March 2004, the founder of Automated Distribution Technologies, a vending machine start-up based in Exton, Pennsylvania, had just been dumped by McDonald's.
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The Problem Herzog scored a coup in 2001, when McDonald's offered to test her unusual 18- by 9-foot vending machine, the Shop 2000, in Washington, D.C. In 2002, Time magazine named the Shop 2000, which offers some 200 products, one of the coolest inventions of the year. Soon after, however, McDonald's ended the relationship after buying the U.S. rights to a similar machine made by a Belgian firm. Herzog was determined to find a new partner and have 25 of the $80,000 machines up and running by the end of 2004.

What the Experts Said Richard Atnip, founder of Atnip Co., a vending supply outfit in Fullerton, California, advised Herzog to partner with a convenience store chain, grocery store chain, or gasoline company. But Michael Kasavana, a business professor at Michigan State University, warned Herzog not to partner with another large company that didn't have related experience. "Having the right partner is far more important than having a big partner," he said.

What's Happened Since For the past two years, Herzog has been hunting for new partners. In 2005, she began testing the Shop 2000 in Greece, on the factory floor of a potential partner she declines to name. If the company deems the test a success, it has agreed to place the machine on several Greek military bases, particularly those on far-flung islands with a limited number of grocery stores. It has not made a decision yet. Despite a lack of revenue, Herzog has maintained a staff of two engineers. She is ADT's sole investor.

What's Next Herzog plans to focus on Europe, where many convenience stores close early in the evening. She is also negotiating the sale of a Shop 2000 to an American university. ADT's future is largely dependent on closing the U.S. deal, Herzog admits. "This year is make or break," she says.

Last updated: May 1, 2006




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