Vending focuses on convenience features to compete
Beverage vending operators
face their biggest competition from the convenience store sector these
days, and are struggling to bring price points and the consumer experience
up to the retail level, say industry experts. In addition, locations that
once were very profitable for vending operators have been disappearing,
thanks to manufacturing plant shut-downs in the United States. As cold
drink vending grows at a pace of a little more than 1 percent a year, the
industry is looking to convenience features and retail-like product
management to provide a boost.
According to Mike Lawlor, vice president of
national accounts sales at USA Technologies, Malvern, Pa., margins on
vended products have not kept up with other retail outlets. “When you
look at the price of a beverage in a vending machine, you can find it 25 to
30 percent less than what a convenience store is selling it for.”
Raising prices to c-store levels will require vending
machines to accept the more consumer-friendly forms of payment that
convenience stores offer such as credit cards, debit cards and higher cash
“Cash and coin payment systems are good for
products that are being sold for 50 cents or a dollar,” Lawlor says.
“But once you start crossing over that dollar threshold, it becomes
less convenient for the consumer ... The growth in the industry is not
with CSDs, it’s really with the non-CSD products — waters,
energy drinks, coffee drinks, sports drinks. Those are products that really
should be priced at $1.50 [to] $2.50. They need to figure out how to
incorporate those new beverages into their brand sets.”
Cashless vending is one way to accommodate
higher-priced purchases, especially in today’s card-driven economy.
Consumers are growing more accustomed to making small-scale purchases using
credit and debit cards. Some payment options don’t even require
consumers to swipe a card anymore. A number of soft drink bottlers,
including Coca-Cola Bottling Co. United, Birmingham, Ala., and Philadelphia
Coca-Cola Bottling Co., have put credit card payment systems on their
machines that incorporate MasterCard’s PayPass contactless payment
system. Swire Coca-Cola USA, Draper, Utah, also is testing cashless vending
in parts of its territory (see page 50 for details).
USA Technologies offers e-Port, a credit card/debit
card reader, which can be installed on existing machines and allows
consumers to use their credit cards, debit cards and contactless cards. In
addition, the company offers the e-Port Connect set of payment services.
“We provide the wireless service that connects
that device in the vending machine back to us so we can process and settle
those transactions for the customer,” Lawlor says. “We also
provide extensive sales data or reporting services for the customers and
then they can remotely track sales from the vending machine. They
don’t have to physically go out and see what’s going on in the
Also offering cashless payment solutions, MEI, West
Chester, Pa., has launched the Series 2000 4-in-1 Validator, which combines
a cash and coin payment system with a credit card swipe reader and
contactless payment option. The company says more payment options result in
fewer lost sales when consumers don’t have cash on-hand. In addition,
wireless technology, or the telemeter within the system, offers a number of
vending management solutions. MEI offers the Easitrax remote data port,
which allows vending operators to track machines sales from remote
“What we're going for in our mind is for the
telemeter to be the center of the universe,” says Chuck Reid,
marketing director, Americas and Southeast Asia, at MEI. “If every
vending machine has the ability to call out or receive a signal, then the
telemeter would enable operational efficiencies. It would allow [soft drink
bottlers] to do a better job of managing their installed base of 3 million
machines and also allow the machines to be easily retrofitted for
Vending machines that can accept — and make
change for — higher bill denominations also are more convenient for
consumers to interact with.
“How do I start taking high-order bills —
$5 bills, $10 dollar bills — and make change in a way the consumer
finds acceptable?” says Craig Lewis, payment solutions product
marketing director at Crane Merchandising Systems, based in Stamford, Conn.
“[The] traditional vending approach has been to dump tons of quarters
into the consumer’s hand ... The big thing we're looking forward to
this year is paying out dollar bills. New state-of-the-art bill validators
recycle dollar bills just like a clerk would in a store. It's much more
acceptable than giving the balance in quarters.”
Lewis says vending presents a bit of a
“fragile” sales proposition — if consumers don’t
have the right change at the time of purchase, they are unlikely to return
when they do. “If you’re able to take the payment the first
time, you’ve got it; if not, you don’t,” he says.
The more flexible a machine is in accepting money and
giving change in a preferred method, the more likely that vending machine
is to get the sale. To help further ensure vending machines are able to
give change in a preferred method, Crane’s new bill changers have
three times the capacity of older bill recyclers. And Lewis points out, a
bonus for route drivers is they don’t have to carry thick bundles of
cash because the machines handle larger bills.
A new look
Competing with convenience and foodservice retailers
also means offering a larger variety of products in vending machines, in a
format that lets consumers “shop” the machine and see what they
New glassfront vending machines allow operators to
stock many different sizes and varieties of beverages in a single machine,
and are slowly making their way into the market. According to Automatic Merchandiser, nearly
119,000 glassfront vending machines were used in the beverage industry by
the end of 2006. That compares to 1.8 million closed front can machines and
1.2 million closed front bottle machines. The rollout of these new machines
is slow but could account for 2006’s 1.2 percent increase in cold
drink vending sales — the magazine indicates glassfront machines
generate 20 to 50 percent higher sales.
Crane’s Dixie Narco division offers the BevMax 3
glassfront vending machine, which allows products such as soft drinks,
juice, bottled water, and even milk, to be vending from the same machine,
all in multiple bottle shapes and sizes. The glassfront machines have more
capacity than traditional vending machines, allowing for additional product
facings, Lewis says.
Seaga Manufacturing Inc., Freeport, Ill., also offers
glassfront vending machines such as the Premium Collection, which includes
LED lighting for more vivid displays and energy savings. The line also
features safety systems that protect the quality of perishable products.
A concept that comes from the retail industry and
stands to benefit from the addition of glassfront machines is the idea of
category management for vending. “Consumers are willing to pay a
premium for beverages that cater to their preferences, so beverage
companies and vending operators should have a good grasp of what the
demands of the consumer are,” says Steven Chesney, president at Seaga
Manufacturing. “Vending machine menus should be tailored to location
demographics and demand.”
MEI’s Reid agrees with that idea, but says it is
more of a concept than a reality these days. “For the most part,
category management, spiral-level management of product, is a nice idea
that hasn't been executed at the vending operator level,” he says.
Integrating the information provided by remote
monitoring systems is one way to track sales through specific vending
machines and find out what’s selling in certain locations. Using
location-level information potentially allows vending operators to
merchandise vending machines like any other retail account.
To get a leg up in vending, Reid says, “become
experts at merchandising.”
Saving energy is on
everyone’s minds these days, and vending equipment manufacturers are
offering ways to make their machines more efficient. USA Technologies,
Malvern, Pa., offers the VendingMiser system that can reduce the power
consumption of a cold drink vending machine by as much as 46 percent, the
company says. In addition, the VM2iQ is an “intelligent” system
that controls the cooling environment and allows the controller electronics
to stay on while the machine is in energy-savings mode.
“We have several hundred thousand of these out in
the market, working with clients such as Wal-Mart and Kroger, where
they’ve been implemented in the beverage machines because they have
seen a savings on the energy associated with their vending machines,”
says Mike Lawlor, vice president of national accounts sales at USA
In addition, Seaga Manufacturing Inc., Freeport, Ill.,
says its Premium Collection vending machines with LED lighting run cooler
than traditional vending machines and use less energy.
Coffee vending is about to
get energized with the introduction of Starbucks hot vending machines.
Nicknamed the “Hot Boss” by the Starbucks/PepsiCo North
American Coffee Partnership, the vending program uses proprietary vending
machines built by PepsiCo that will vend packaged hot coffee in hospitals,
universities and other vending locations. The companies placed machines in
test market last fall, and will launch more broadly this year.
NACP executives say the move is a natural extension,
especially since the Pepsi bottlers that distribute the partnership’s
drinks already are vending experts.
The line of six coffees will include Italian Roast
Coffee with milk and sugar, Caffe Latte, Caffe Mocha, Caffe Mocha Light,
Caramel Latte and Hot Cocoa. The vending machines will heat product on
demand — to 140 degrees F in 47 seconds — and the products are
packaged in 9-ounce steel cans with an insulated wrap and a lid on the top
and bottom of the can to protect consumers’ hands from the heat.
The “Hot Boss” products will take
advantage of the higher price points sought by today’s vending
operators, and will sell for $2 for the Italian Roast variety and $2.50 for
the specialty coffees and cocoa.
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Beverage Industry’s December issue highlights five beverages brands that are “shooting for the moon” in terms of innovation. Also in this issue, we spotlight the premiumization of the private-label beverage market, the latest trends impacting the use of tea ingredients in beverages, the growth of beverage sales in the eCommerce platform, and much more!