While most operators have cited bottled water as a strong seller in recent years, in 2009 operators gave mixed views about what impact newer consumer preferences were having on their sales.
According to the New York City-based Beverage Marketing Corp., the rapid growth in bottled water sales of the last decade began to reverse in 2008 and 2009. Vending operators gave mixed views on this trend.
Some vending operators noted that customers have asked them to remove bottled water due to concerns about the bottles’ impact on the environment. These operators were in the minority.
Operators also gave mixed reports on the success of energy drinks, which according to Beverage Marketing Corp. (BMC), is one of the fastest growing beverages at retail. Some operators say these products sell well in locations catering to young people. One concern is they do not vend in every type of machine.
In some cases, beverage suppliers required vendors to carry energy drinks as a condition of providing free machines.
Some accounts asked operators to remove energy drinks, worrying they are being mixed with alcohol; some energy drink bottles resemble products that come mixed with alcohol.
Energy drinks were among the highest priced beverages that vending operators offered, commanding price points in excess of $2.00. However, the high price point is believed to have contributed to the segment’s slowdown in the current recession due to consumer price resistance.
Candy, snack and confection prices rise
The candy, snack and confection segment fared better than other segments in 2009 due to continued aggressive operator price increases. Operators were spared the manufacturer price increases that characterized the previous three years. Hence, in 2009, operators were able to recover some of the profit margin that this category lost in the three prior years.
Data provided by Management Science Associates (MSA), which tracks line item revenue and unit sales in this segment, indicated that dollar sales outperformed unit sales for most candy, snack and confection products. This demonstrates that operators were able to compensate for declining unit sales to some degree with higher prices.
Operators raised prices on their better selling items more in 2009 than in 2008, as indicated in chart 14D.
Candy, which lost market share to snacks in the previous three years, did not lose as much market share in 2009 as it did in 2008 and 2007. This indicates that the candy category, which has long been the most profitable portion of the candy/snack/confection segment, is making a recovery from the loss it suffered in recent years.
Beginning in 2006, candy manufacturers began raising prices faster than operators could pass them on to customers. Consumers resisted the price increases and sales suffered. The decline caused operators to reduce their candy facings, further hurting candy sales.
Industry observers noted that because candy products generate faster turns than snacks, the move to snacks undermined the overall candy/snack/confection segment.
Snack manufacturers responded to this opportunity by introducing snacks that fit in candy spirals, beginning in 2007.
The decline in candy sales was partially offset in 2007 by the introduction of large size candy bars with higher price points. However, when candy manufacturers raised prices for the large size candy bars, operators found customers were not willing to pay more than $1.00, which most felt they needed to charge to make a reasonable profit.
Hence, large size candy bar placements took a hit in 2009 following gains in 2007 and 2008.
Operators did find some success with large bag candy in the higher-priced pastry row.
Where none of the top 15 placement gainers in the candy/snack/confection segment were candy products in 2008, two candy items made the list in 2009: Masterfoods USA’s 1.63-ounce M&M’s Peanut and Boyer’s 1.6-ounce Boyer Mallo Cup.
Another noteworthy development was the market share gain in gum and mints in 2009. The vending industry has lagged other retail channels in capitalizing on the popularity of newer gum and mint packages in recent years. One gum product, Cadbury Adams Dentyne 1.41-ounce Cinnamon Gum, was among the top 15 distribution gainers in 2009.