Consumers are “trading down” to save money, and vending operators should be benefiting since they offer an economic alternative to going out for meals. Unfortunately, customer response has been mixed and vending operators are finding they need to economize in their own operations to protect profit margins.
The fifth annual Automatic Merchandiser purchase intents survey, an online operator survey fielded in August, found that most operators have not witnessed more consumers eating at work in the last six months despite news reports of increased brown bagging.
Automatic Merchandiser sent an email survey to 3,800 operators in August, asking for specific purchase plans. Close to 300 completed questionnaires were returned within a week.
This year’s survey included questions about customer behavior due to widely reported changes in consumer needs caused by food and fuel inflation. The survey attempted to determine what impact new consumer behavior is having on vending sales.
Consumer studies have found that people are eating out less and when they do, they tend to spend more on lower priced items.
A study by Information Resources Inc. found a reversing of decades-long trends, shunning convenience and healthier foods in search of bargains. The study found 53 percent of consumers reported cooking from scratch more than they were six months earlier, about 59 percent were buying fewer single-serving products, and 55 percent said they were buying fewer prepared meals.
Within the commercial foodservice industry, fast food chains have been a beneficiary of people’s reluctance to part with their cash since they offer food at lower prices than most casual dining and family dining restaurants. Many fast-food chains also routinely offer special deals with even lower prices.
Vending operators, despite offering more competitive prices than most other retail outlets, have reported widespread resistance to price increases, according to numerous news reports.
More than 80 percent of vending operators raised prices in 2007, according to the Automatic Merchandiser State of the Vending Industry Report in August, the most ever reported in a 1-year period. Most operators also raised prices in 2008 in response to continued manufacturer price increases.
Operator spending follows consumer trends
The purchase intentions survey found that operators are planning to spend less on equipment than they were at this time last year. Last year’s purchasing intents survey found operators had less aggressive buying intentions than the prior two years.
Vending operators are responding to the current climate in other ways as well, as indicated in chart 5. They are reducing service frequency, pulling equipment, reducing staff, cutting employee benefits, and cutting location commissions, all in addition to raising prices where they can. A minority of operators are investing in technology, expanding into new services, charging customers for fuel or selling off some of their business.
While most operators do not believe consumers are eating more at work, close to a quarter (24 percent) said they have recognized more at-work consumption. While this is a minority, it is not a small minority.
Operator perceptions not uniform
Also noteworthy is the fact that among the majority who do not believe consumers are eating more at work, almost half said they are unsure about this. Less than half (39 percent) were certain that consumers aren’t eating more at work, as shown in chart 1.
Among those who believe consumers are eating more at work, most (59 percent) said that vending sales have increased as a result, as shown in chart 3.
Most (68 percent) also said that in cases were consumers are spending less on vending, it is due to brown bagging.
The majority of operators (66 percent) also believe that some product categories are “holding up,” as shown in chart 6.
The categories most commonly cited as holding up are the largest volume producers: cold beverages (45 percent) and candy/snacks (30 percent).
Vending operators overwhelmingly believe that price is the top factor in a consumer’s buying decision, as indicated in chart 8. This observation makes sense, given the fact that there have been more price increases in the last year than in the last several years.
Price increases affect vending purchases
Historically, consumers reduce their purchases for a period of up to two months following a price increase.
The fact that price has been recognized as the prime factor in buying decisions does not mean that it will remain so in the long run.
Given the general mood of consumers to economize, price has become more important for all purchase decisions in the last few months.
Vending operators reported less aggressive purchasing intentions in all types of equipment compared to last year. This year, only 12.5 percent planned to spend more than $100,000 on new equipment, compared to 20 percent last year.
Only 5.8 percent of the operators plan to add a new service in the next 12 months.
Among those looking to add a new service, more expressed interest in adding manual foodservice, school vending, and amusement and juke box machines.
The survey found a higher number of operators involved in bulk vending this year than last year, but there was not a gain in the number looking to expand into it this year.