2009 State of the Vending Industry Report

Reducing service frequency was the third most common measure in 2009, whereas in 2008, reducing unprofitable accounts was number three.

In 2009, culling unprofitable accounts ranked fifth.

One explanation is that operators identified most of their unprofitable accounts in 2008.

An analysis of survey data revealed that while sales declined more in 2009 than 2008, the number of accounts served on average was level with the prior year.

Payrolls cut, but in different areas

Staffing cuts continued in 2009 at a similar level as 2008. Layoffs of delivery personnel were less common in 2009 as in 2008. Operators reduced routes more in 2008, and in 2009 they sought other areas to cut. More cut sales, warehouse and repair positions in 2009.

Medium-size vendors hurt the most

The medium-size operators, those with $1 million to $5 million in annual sales, continued to lose sales to small (under $1 million) and large ($5 million to $10 million) competitors in 2009, as indicated in chart 2. Where medium-size operators once did more aggregate sales than large operators, the overhead for a medium-size operation has increased to the point that more sales are necessary to cover the overhead.

Rising unemployment fed vending startups in 2009, driving up the number of small operators. Small operators enjoy the advantage of lower overhead.

In 2009, pricing pressure from small operators who could offer lower prices (if not the best service) was as fierce as ever.

The extra large companies, while having more capital resources to invest in salaries, equipment and technology, suffered from the fallout in manual feeding more than other companies in 2009.

Manual feeding took the biggest hit of all product segments in 2009, declining 17.8 points, as indicated in chart 10. This explains the loss of market share of the extra large companies, which do most vending-related manual feeding.

Technomic, a foodservice research firm, also reported a double digit percent drop (10 percent) in business and industry foodservice sales in 2009.

Following is a summary of the main product segments.

Cold drinks: the market changes

Vending operators raised cold beverage prices more aggressively in 2009, driven by supplier price increases. However, unit sales declined due to fewer machines and consumer resistance to price increases. Operators began pulling machines in 2008 in response to declining population counts. This trend continued in 2009.

Operators also continued to face a consumer that resists paying the same price for a product from a vending machine as at a retail store.

Consumer price resistance once again drove more vending operators to switch from 20-ounce bottles to cans, continuing a trend that began in 2007. Operators hold mixed views about offering cans instead of bottles. Many operators believed that cans offer a better perceived value to a more cost conscious customer.

Some further noted that government agencies levied deposit fees on 20-ounce bottles that did not apply to cans.

The majority of operators did not make the switch to cans, however. Many noted that while the profit margin was better with cans on a percentage basis, the dollar margin was lower.

Glassfronts increase more slowly

Mitigating the decline in cold beverage sales once again in 2009 was the continued expansion of glassfront beverage machines, which typically offer more variety and better merchandising. However, the glassfront expansion in 2009 lost momentum compared to prior years since cold drink bottlers, which provide most glassfronts to vending operators, cut back on their equipment expenditures.

Glassfronts allow vending operators to capitalize on the more diverse consumer preferences that the beverage industry has developed in recent years. However, in order to determine the best product selection, operators must be able to track line item sales. This requires a higher level of sophistication than is required for machines with limited product selection.

Many of the new beverage preferences are driven by perceived health and functional benefits, the most obvious example being bottled water.