Technology Puts Small Vendor on Texas Map

The vending industry has always been slow to adopt new technology. But in recent years, a number of forward-thinking operators have investigated the benefits of remote machine monitoring, cashless transaction capability and other new benefits and have begun offering them to customers.

One such pioneer is Golden Brew Beverage, based in Odessa, Texas, a third generation owned and operated vending and OCS company. Under the management of the 23-year-old Kevin Searcy, the 3-route company has made a name for itself using remote machine monitoring and cashless vending in the past two years, and it is riding a growth curve despite the recession.

This past year, Golden Brew Beverage used technology to help win the largest vending account in their market, a 300-bed hospital. The company has proven that a vending operation does not have to be large to utilize state-of-the-art technology.

While the company has taken a leadership role in using technology, its employees still don’t have formal titles. Family members share most management tasks.

HUMBLE BEGINNINGS

Bob and Shirley Swanson started a coffee business in 1978 in Odessa, a city of about 100,000 in West Texas oil country. In 1983, they bought an RC Cola distribution franchise, which included distributing cold beverages to businesses.

The beverage distribution business first expanded into OCS, then into vending, paper goods and cleaning supplies, all operating from one warehouse. The Swansons discontinued the RC Cola distributorship a year and a half later after realizing they needed more beverage variety to meet customer demands.

The Swanson’s daughter, Sherri, and her husband, Robert Searcy, joined the company and eventually assumed management roles. Robert Searcy was committed to personal service, and this commitment helped build the company to one of the largest local refreshment service providers.

In 2007, Robert and Sherri Searcy purchased the business from Sherri’s parents.

The Searcy’s son, Kevin, began working in the warehouse part-time as a youngster. He was mechanically inclined, and as a youngster he was able to fix and install bill validators. He was always interested in technology, and as a teenager in the mid 1990s, he began noticing the evolving technology in vending machines. At the time, glassfront beverage machines were being introduced, along with DEX and MDB technology.

A TECHNOLOGY PIONEER

Cognizant of the benefits of DEX and MDB, Kevin began ordering retrofit kits and fitting older machines with DEX reporting capability, even though it would be a few years before the DEX was put to use. He retrofits many machines with InOne Technology’s audit boxes and vending machine controllers.

Where some vending operators were interested in DEX reporting in order to match meter readings with cash collected, Kevin was more interested in it to better manage inventory. “Cash accountability is nice, but there are other ways to do that,” he said. “There’s not another way to do pre-kitting.”

As he became more active in the family business, Kevin began identifying accounts that would be good locations for beverage bottle machines. Some of the bottled water companies were offering generous product rebates in exchange for using branded vending machine fronts.

In 2006, he came across a remote machine monitoring system at a Spring trade show in Las Vegas. He purchased five cellular modems and installed them at a car dealership. The units worked well, so he purchased three more for another location.

He was able to check the machines’ inventory from his office computer. This allowed him to pre-kit for these two locations, thereby reducing the amount of inventory the driver had to carry on the truck.

One day, an ice cream machine at one of these accounts had a meltdown and failed to send him a malfunction alert. Kevin had not been advised that the remote data device needed a backup battery to continue functioning if the electricity failed. It was a costly mistake, so he began examining other remote monitoring systems.

The ice cream meltdown alerted him to the fact that by expanding into new technology, he had to be careful about who he partnered with. Some of the technology providers have limited track records.

CHANGING REMOTE MONITORING SYSTEM PROVIDERS

Kevin eventually decided to use Cantaloupe’s Seed remote monitoring system. The Seed boxes contain a backup battery in case of a power failure.

One account had two dedicated bottled water machines on free vend. The company had opted to use bottled water due to concerns about water contamination from 5-gallon bottles. By installing Cantaloupe Seed boxes in these machines, Kevin was able to service them at the right time, minimizing his service labor.

He also began to learn about cashless readers. “There were accounts we had that we knew people didn’t carry cash,” he said.

Kevin married Crystyna two years ago, at which time Crystyna came on board as receptionist and money room manager. She eventually began running routes and moving equipment, overseeing the OCS deliveries and making sales calls.

The OCS route was always separate from the two vending routes. The OCS truck also delivers paper goods and cleaning supplies.

Winning a major account

This past December, Crystyna took their one-year-old daughter to the hospital for a seizure. The child was hospitalized for 10 days, during which time Crystyna noticed the vending machines at the hospital were nearly empty. “We decided that we could give them better service,” she said.

The Searcys made an appointment with the director of the hospital’s volunteer services, who oversaw the vending service. The director said she was very disappointed in the existing vending service; namely, the company’s inability to keep the machines well stocked.

The Searcys had some aces up their sleeves. They were up to speed about Cantaloupe Systems’ remote machine monitoring system and MEI’s cashless card reader, and they presented these benefits to the hospital decision maker. They also offered to use LED lights on the machines, which reduce energy consumption. The woman was impressed, and told them she would recommend they get the account.

Pat Garcia, the director of volunteer services at Medical Center Hospital, said the hospital had used the same vending provider for more than six years and was looking for a change. She was impressed with both the remote monitoring and the cashless options that the Searcys offered. She noted that the vending service provides an important source of revenue for scholarships and other activities.

“I really like the monitoring devices,” Garcia said. She said the remote monitoring brings a new level of transparency to the sales reporting. “Any time there is a business that can offer such transparency, we’re going to look at it,” she said.

The cashless readers brought a new level of user friendliness to the machines. “It’s just imperative that we make it as user friendly for the patients and their families as possible,” Garcia said. She said it took a while for the patients and visitors to use the credit card readers, but she is pleased with the current level of use.

The hospital, which has 1,700 employees and hundreds of patients and visitors per day, has 15 vending machines, including hot beverages, snacks, refrigerated food and frozen food. It was the Searcys’ first account to have more than one cashless reader. They retrofitted eight of the 15 machines at the hospital with card readers.

SEPARATE DATA PORTS

Machines that have both the remote monitoring and cashless reporting have separate data ports for the two functions. The cashless data transfer costs $9.95 per month while the remote monitoring costs $6 per month.

The Searcys use two separate systems for the two functions — remote machine monitoring and cashless vending — hence, the need for separate data ports. They believe that they will eventually be able to use one system for both functions after Cantaloupe introduces its cashless vending package.

The Searcys use yet a third technology provider, USA Technologies Inc., for credit settlement. They noted there were several settlement services to choose from and felt USA Technologies was the most economical.

The card readers didn’t get used much at first, but after a few months people got used to them. About 5 percent of the sales currently are credit purchases in the machines that offer it. Kevin said each transaction is authorized in real time in about five seconds.

One card reader also accepts contactless credit cards, Kevin noted, but there have not been a lot of contactless purchases.

In addition to the data transfer fee, the cashless function charges a transaction fee for every purchase; 5 cents for under $1.00 and 5 percent if $1.00 and more.

Kevin said the cashless sales more than offset the transfer and transaction fees.

The remote machine monitoring, by reducing the amount of inventory on the truck, has saved fuel, he noted.

The company targeted the 78 highest volume machines for remote monitoring and has one route dedicated to these machines. Hence, his two vending routes are not arranged based on the proximity of the stops, but on their volumes.

PRE-KITTING REDUCES INVENTORY

The remote monitoring allows all the stops for the one route to be pre-kitted. Kevin checks the machine inventories daily from his computer. Hence, this route requires less moving inventory than the other vending route, which is serviced by a driver using a paper route ticket.

Kevin periodically checks the meter readings on the traditional route.

The company uses an Equipment Innovators Omnivan for the traditional route and a smaller vehicle, a Dodge Sprinter van, for the pre-kitted route. Both vending routes include beverages, dry goods, cold food and frozen food.

The Cantaloupe sales reports are helpful for justifying product changes to customers, Kevin noted. “We tend to listen to the customer first rather than the software, no matter what,” he said.

Kevin noted that the Cantaloupe system also provides management information, such as top selling items. He believes that the system offers much of the same type of data that the older vending management software systems provide.

Kevin has also developed and installed a video screen on one of the machines. He has displayed his company logo along with some product logos on this screen. He programmed the screen to change the visual displays regularly.

Kevin believes he will eventually be able to program the video screen to provide customized information for the account.

RECESSION BRINGS CHALLENGES

The recession has taken its toll on the company. Same store sales have declined by 20 to 29 percent in many locations due to layoffs, the Searcys said. Technology has proven a useful sales tool in winning new accounts to offset the losses.

Much of the school business has been impacted by stricter state nutrition rules. Snack machines have been eliminated completely from elementary and middle schools, except for teacher lounges.

The Searcys operate a fairly traditional OCS service. They claim to be the only OCS operation that switches glass pots with every delivery, and the only one that does not charge for filters and stirrers.

The company still has a lot of wholesale accounts in addition to the vending and OCS side.

In the past year, Kevin redesigned the company logo to include vending machines. “It’s been hard making people understand Golden Brew does vending,” Kevin said. He also redesigned the Website, http://goldenbrewbeverage.com.

The Searcys plan to build a larger warehouse in the near future. They hope to expand the business to five vending routes and three OCS routes.

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