VendingMarketWatch Blog

These past two weeks, VendingMarketWatch.com has presented a series of podcasts on the State of the Vending Industry Report. Six podcasts have already been posted, and if you haven’t had a chance to listen them, go to http://www.vendingmarketwatch.com/podcast/.
The podcasts offer a more intimate experience for our readers. They allow readers to hear operators, suppliers and consultants address the key issues they face.
There are a lot of individuals out there who want to succeed in today’s business environment. The audio podcasts let you hear them explain in their own words how they are doing this.
The operators interviewed in these podcasts are all serious minded individuals who love the vending industry and want to be successful. They offer different strategies, such as hiring outside consultants, diversifying into new services, investing in some new positions, and investing in new technology.
What strikes me about these podcasts is the honesty with which operators express their concerns about the vending market. There is no sugar coating the difficult challenges.
Some operators address the type of software they use in managing costs. Part of the discussion specifically addresses managing food costs, which is one of the most challenging areas.
Operators, when interviewed for an article, try to be positive when questioned about meeting challenges. In the podcast interviews, they pull no punches.
Managing costs has become the major initiative among operators in this economy.
The “no nonsense” approach that come across in these podcasts is what operators need to hear.

We Ohioans have a long history with our burgers. It is an area in which we fancy ourselves as leaders. Before we had the Big Mac, there was the White Castle Slider, whose fame quickly expanded beyond the Buckeye state. Then came Wendy’s square burger. Dave Thomas generously shared it beyond our borders. Then came Pierre’s Big AZ burger, which, while born in Ohio, was always intended for nationwide consumption.

But none of them have anything on the “Big Yaz,” burger, which remains an Ohio phenomenon.The “Big Yaz” burger is a concoction of Firelands Food Systems in Sandusky, Ohio. Six ounces of barbecued hamburger covered with bacon strips and pepper cheese. It has been a favorite among the company’s customers for six years.

Company owner Steve Hall, Sr. has always worked hard to distinguish his food program among his heavily industrial customers. In search of a new and better burger, he tapped his associates – colleagues, employees and suppliers – for suggestions. One person whose opinion he knew he could trust in matters of taste was Bobby Yasinow of Vendors Exchange International Inc.

When Yasinow told him what makes a good burger, Hall knew he had a winner. Thus was born the “Big Yaz BBQ Bacon Burger.”

This creativity on Hall’s part is one of the reasons he has succeeded over the years. He continues to grow in a region that has been hammered by the recession. He has been a leader on the technology front from the very beginning. He was one of the first operators in the country to use glassfront beverage machines, and he has been a pioneer in cashless vending.

But one of his most important attributes is in recognizing the importance food plays in vending. As I’ve stated before, technology offers our industry a lot of promise, but if we cannot restore the food portion to its former prominence, we will continue to lose relevance in the consumer’s eyes.

As for future plans, Hall is playing it close to the vest with the “Big Yaz Burger.” Only Firelands Food Systems’ customers can get it. Marketing the product beyond his existing customer base might make Hall wealthier, but it would compromise the privilege of being a Firelands’ customer, and that’s the last thing Hall wants to do. Which is all fine and good. But I, for one, think the packaging doesn’t give the burger its due. I think most customers would agree that to do justice to the epicurean experience of “Big Yaz,” the packaging could be a little more exciting. Considering what personalities can do for a brand, I suggested a picture of Bobby Yasinow, with full smile. Hall remains unconvinced.What say the rest of you?
Steve Hall, Sr., left, of Firelands Food Systems in Sandusky, Ohio, serves a “Big Yaz BBQ Bacon Burger” to Bobby Yasinow of Vendors Exchange International Inc

As the record summer heat sizzles on, consider what that cold bottle of water on your desk means to you. Look deep inside that invigorating bottle opening and envision the full depth of opportunities.
This past holiday weekend, those of us who attended outdoor gatherings plowed through the ice bucket in search of bottled water. At my gathering, the host found he was running low on water within the first hour. All the soda, beer, and juice became an annoyance as we reached for those precious bottles of water. Water won any imaginable taste test hands down!
Summer’s not over. Now’s the time to state your position, loud and clear.
State your case. The anti-bottled water forces don’t stand a chance. Those academic arguments against bottled water sound drier than the Sahara Desert. We humans are creatures in search of relief from nature’s cruel elements.
Since the beginning of time, our species has been on a perpetual quest to refine its environment. In 2010, we can shelter ourselves from our primordial need for basic sustenance (and maybe listen to those academic statements about bottled water) for most days of the year. But that sheltered existence only lasts so long, then poof! Summer arrives. Mother Nature strikes again! I’m thirsty, give me water!
Your moment has arrived. Grab your digital camera. Take a picture of someone in the pool or in the lake and email it to your customers. Take pictures of your kids throwing water balloons at each other. Then follow it up with a picture of someone emptying a bottle of the precious nutrient over someone else’s head. Courtesy of your company.
Believe in your mission. As a bottled water provider, you are a hero! There is nothing anyone can say or do to change that fact!

In working on our upcoming State of the Vending Industry Report, it has become clear that good things are happening in today’s highly challenging business environment.

There is no doubt that new technology is creating a lot of excitement, even in a recession. And while I’m a big supporter of technology, I don’t believe that technology in and of itself will return vending to the relevant role it once played in consumers’ lives.

Coffee service, by contrast, has held its own during the recession. Why? Because today’s office coffee presentations are relevant to the consumer. Today’s brew-on-demand systems excite the consumer and beat the pants off of alternative retail options when it comes to overall value.

We as an industry must think long and hard about what this means to vending’s future.

Convenience has always been vending’s leading equity. But it has never been enough in and of itself to win the sale.

Once upon a time, vending banks offered lots of food selections. As economics have changed, the food machines have been removed, relegating vending to snacks and beverages. This isn’t enough to restore vending to its former glory.

Vending has a unique equity in the convenience it offers consumers. It needs to find a way to better leverage that equity, and the food business holds a big part of that puzzle.

Recently I heard from a reader who took an exception to a comment I made in one of my “editor’s notes” on 06-13-10 concerning what I thought to be a high commission in a vending contract for a public account.

The reader took exception to my implication that the successful bidder did not give a fair and accurate accounting of themselves. He raises a valid point.

More importantly, he has caused me to consider what the proper course of action our industry should be taking with regard to vending contracts that appear questionable.

The commission in question struck me as excessive. And since there are now auditing tools to ensure honest sales reporting, I suggested that the newspaper that reported the story ask the customer how they audit the sales.

The reader took exception to my statement because it called into question the bidder’s honesty.

He has a valid point: I do not know all the facts. While I did not specifically call the bid dishonest, I suggested the newspaper ask the contract holder to explain how the sales are accounted for. Which in essence questions the honesty of the bidder.

Which leaves us with a question. Should the industry encourage customers to use new auditing tools that improve sales reporting? I believe making customers aware of these tools will improve the industry’s reputation.

Dishonest sales reporting is not rampant throughout the industry, but it does exist.

To the extent that it exists, much of the problem rests not with the vending industry, but with customers who don’t have a way to make sure sales are reported accurately.

Some customers assume the collections are accurate, or that there is no way to ensure that they are.

Auditing tools exist to improve the accuracy and transparency of sales reporting.

Is it not in the industry’s interest to make customers aware of this?

The most advanced technological solutions take time to find an application. I’m pleased to say that the Starbucks “E-Cup,” a Starbucks interactive brewer with cashless capability, has found a niche, and that niche is going to become more prevalent in the future.

Automatic Merchandiser reported on the “E-Cup,” in a feature article in March 2009. The “E-Cup” has a USA Technologies’ ePort card reader that accepts both magnetic stripe and contactless cards.

I recently came across the first “E-Cup” in Cleveland, Ohio at a biomedical facility that houses a several research and development companies. The “E-Cup” was a perfect solution for this account.

This is a new building. The building wants to attract biomedical companies from all over the world to this modern medical facility.

The building, which is in the process of finding tenants, is not in a position to have a manned cafeteria. Hence, the owners realized that vending would be necessary.

The owners also understand the importance of high quality coffee for the clientele they are trying to attract. One of the decision makers was intent on having Starbucks coffee available.

They also needed a system that would allow the tenants to pay for their own coffee. Hence, the “E-Cup” was the best solution, noted Chris Terrell, general manager for Aramark Refreshment Services in Northern Ohio, which services the account.

This biomedical building represents the future for Cleveland, a one-time heavy manufacturing region that has lost most of its traditional industrial manufacturing. In its place, health care and new technology companies have gradually become dominant industries.

The employees in these types of accounts are well educated people who work irregular hours and often have a taste for the best meals and refreshments.

The owner of this account has made every effort to make the amenities attractive to the professionals they want to attract. The Starbucks “E-Cup” was part of this initiative.

The technology that our industry is developing is all going to serve its future.

We are living in challenging times, and the refreshment services industry has been specifically singled out for discriminatory taxes to help local and state governments meet budget shortfalls. Government officials have proposed taxes on soda and other refreshments, claiming to seek funds to battle obesity but in reality are looking for badly-needed revenue.

Opposing these proposals is tricky, since the industry is easily vilified as holding undue influence when it opposes discriminatory taxes.

Nowhere was this more apparent than in the city of Philadelphia, where the mayor recently sought to saddle consumers with a soda tax.

The Philadelphia Inquirer opposed the soda tax for many of the same reasons that the industry did, but it made sure to criticize the industry for its lobbying. The newspaper didn’t want its readers to think it doesn’t share their disdain for “big business” using its influence to affect policy decisions.

One of the more troubling developments in this skirmish was the revelation that the beverage industry offered to shell out $10 million to support  health and recreation programs.

The Inquirer reported Harold Honickman, owner of the Canada Dry Delaware Valley Bottling Co., said the industry is willing to donate $10 million to pay for city health and recreation programs. In a May 20 editorial, the paper noted, “Instead of pay to play, it’s pay to go away. If Council raises real estate taxes while backing away from the soda tax, it will be showing its disregard for everyday Philadelphians. Bending over for deep-pocketed constituents is no way to run a city.”

Three days later, after council shelved the soda tax and jacked up property taxes, Inquirer columnist Karen Heller commented that “Maybe we could get more of his (Honickman’s) ilk to show up – Comcast’s Brian Roberts or Urban Outfitters’ Richard Hayne – though, apparently, a tax is what it takes.”

The danger here is that government entities will see taxes as a way to solicit industry contributions. Donations of this sort set bad precedent. They not only invite new tax proposals. They also portray the industry as well-funded at a time when profits are hurting for most industry members.

The beverage and refreshment services industries need to strategize their opposition to discriminatory taxes. There are good reasons against these taxes, and the industry should base its opposition on them.

The beverage and refreshment service industries have responded

It’s a cliché to say that an industry, any industry, is at a crossroad. But I’ll risk using this cliché, because this describes where the vending industry is at.

The recession has caused more vending operators to consider making serious investments in their businesses than at any time in recent history.

The best news operators have had to report recently is that the loss in sales has stopped and begun to recover slightly. Some locations have begun rehiring. Consumers in general are not freaking out about losing their jobs if they haven’t already, and have begun spending a little more freely.

During the recession, operators realized the only way to remain profitable was to operate more efficiently. In many cases, this involved reducing payroll.

The National Automatic Merchandising Association (NAMA) 2010 profit report, which summarizes 2009 financial performance, indicates that operators posted a stronger bottom line in 2009 than the previous year even though sales declined even more in 2009 than 2008. This was mainly due to the fact that operators took action in 2008 to improve profitability.

The NAMA report further notes that operators’ return on assets, which it identifies as the most important financial indicator, was acceptable in light of the economy in 2009. It notes that firms were able to gain control of their operations in a way not solely dependent on sales growth.

Most operators realize that sales probably aren’t going to recover in a big way any time soon. Many also realized the only way to improve profitability is to use technology.

Our magazine’s research indicates more operators are installing DEX handhelds. More are also investing in remote machine monitoring.

DEX has been around for years, and line item tracking gives operators a way to make service schedules more efficient. It also gives them a way to better track individual product sales.

“Open” cashless vending has also been around for a while, and more operators are showing interest in it more than ever. The hardware has improved, and the providers have more field experience to use in assisting operators with “open” cashless. This is happening at a fortuitous time, since retail commerce in general is moving to cashless.

It sounds like a cliché to say the future belongs to the leaders. But at the present time, the cliché applies to the vending industry.

This is an exciting time to be in vending.

It’s old news now, but the recession has brought the food wars back, and the restaurant chains are doing backward summersaults to get people in their doors. Most chains are offering discounts to get value conscious consumers inside.

Pizza Hut began the year offering any size pizza with toppings for $10. Taco Bell has a $2 menu featuring four different combo meals. Denny’s has $2, $4 and $6 and $8 value meals.

Burger King recently made a bid for the casual dining audience with its $8.99 ribs. It only shows how anxious they are to grab market share wherever they can.

Convenience stores recognize the opportunity to win more food sales, and they are also offering more value meals.

The vending industry has as much to gain and lose as any class of trade in this economy. While the vend food sector has taken a big hit in this recession, vending operators cannot afford to throw in the towel. The food sale is up for grabs, and operators need to think creatively how they can win that sale. It’s not just the sandwich sale that’s at stake here; it’s also the beverage and snack sale.

The range of food products for vending is broader today than ever before, with plenty of high quality, name brand products. Vend food offers the best values available to consumers.

Besides the traditional cold food machine, there are products that can go in ambient snack machines.

Many excellent food products were displayed at recent National Automatic Merchandising OneShow in Chicago.

Despite the beating that the food segment has taken in recent years, the product manufacturers have continued to offer high quality sandwiches and entrees.

Vending operators also need to upgrade their marketing to let customers know the excellent values they offer. One technique that has worked is to compare the offerings in the vending machine with those in competing fast food restaurants and convenience stores. In captive audiences, this can be done fairly easily using email and social media.

Are you getting hungry?