Recession Drives Profit Protection Initiatives
Automatic merchandising or Vending has often been described as a bellwether industry for the U.S. economy.
Milk has in recent years created a new business opportunity for vending operators in many school accounts since milk is not included in most school beverage vending contracts. However, milk is not as profitable as most other beverages and students are price sensitive, restricting the prices operators can charge.
The Milk Processor Education Program, an industry group that tracks milk vending in schools, reported a dip in milk availability in vending machines in secondary schools, from 24 percent in 2007 to 16 percent in 2008.
ICE CREAM SUFFERS
Ice cream, one of the smallest product segments in terms of sales volume, took the biggest hit of all categories measured in 2008. It was the only segment to post a double digit sales drop. The loss was largely driven by the reduction in frozen food machines, the first year this occurred since frozen food machines were introduced in the mid 1990s.
Much of the reduction in frozen food machines was driven by schools that banned ice cream due to nutrition rules.
Market research organizations have reported that the recession did not adversely affect overall ice cream consumption since it is considered a “comfort” food.
According to the International Dairy Foods Association Ice Cream Market Research Report, retail dollars sales of ice cream were flat in 2008, as compared to 2007, but were up for the other three categories of frozen desserts: frozen novelties, frozen yogurt and sherbet/sorbet/water ice. Frozen yogurt, which analysts have claimed has benefited from its health association, has not been available in vending distribution.
2009 CHALLENGES THE INDUSTRY MORE
While 2008 was one of the weaker years for automatic merchandising, 2009 does not promise any improvement, given the continuing increase in account downsizing and decrease in consumer confidence. National unemployment reached 9.5 percent in July of 2009, the highest rate since the 1980s. The employment situation is not expected to improve significantly in the near future.
