The food segment itself did not experience the cost inflation that operators suffered in other categories in 2006.
According to the National Restaurant Association, wholesale food costs rose 0.6 percent in 2006. This brought relief following higher increases in each of the prior three years. Wholesale food prices increased 1.8 points in 2005, 5.6 points in 2005 and 5.5 points in 2003.
Fiscal 2006 marked the third straight year that frozen food as a percent of sales did not increase. This occurred despite the fact that more frozen food machines were added in 2006.
The gain in frozen food machines didn’t benefit frozen food sales as much as it might have because these machines were also used to vend ice cream.
Frozen food machines offered some operators a way to continue to provide food economically in locations that suffered population losses. Frozen food machines do not need to be serviced as frequently as refrigerated food machines since frozen product does not spoil.
For accounts too small to support a full-size refrigerated machine that insisted on fresh food, operators also had the option of using dual temperature machines that have both ambient and refrigerated areas. These machines, however, do not offer the advantage of reduced service frequency due to the requirements of refrigerated food.
Operators serving accounts large enough to support refrigerated machines usually found locations preferred having both fresh and frozen-prepared food in the machine rather than only frozen-prepared food. Many customers preferred freshly-prepared food because they think it tastes better. Many also find it more convenient since it heats faster.
Integrated food systems also increased in 2006. These systems that keep food in a frozen state and heat it at the point of sale are expensive and service intensive, but they meet the needs of consumers eating on the run in high traffic locations.
Manual foodservice maintains its share
Manual foodservice maintained its share of business in 2006 but, as in 2005, this segment did not grow as much as it had in prior years. The NAMA Operating Ratio Report found that manual foodservice actually declined as a percent of vending sales in each of the last two years.
The stabilization of manual foodservice within the vending industry largely reflected the condition of the extra large operations that dominated this segment.
Extra large operations have not been able to expand sales by adding customers since the availability of large work sites has decreased. Nor were they able to grow by adding additional services because they already added as many new services as deemed possible.
As with smaller size operators, extra large operators had to rely on raising prices to grow in 2006.
The manual foodservice segment did allow more options for raising prices than vending since main entrees are prepared from scratch.
Manual foodservice operations can respond to new consumer trends with new products faster than vending operators. Many offered more ethnic items such as Mexican and Asian entrees, along with deli style, vegetarian and gourmet offerings.
Milk holds its own
Milk remained a healthy segment in 2006, capitalizing on a recovering market. Milk continued to benefit from rising consumer perception as a healthy product. The dairy industry continued its aggressive marketing of milk in 2006. The national media campaign in 2006 emphasized milk’s benefit as an alternative to soda.
Milk sales in all retail channels increased every year since 2002, according to the Beverage Marketing Corp. In 2006, milk consumption rose for the first time since 2002.
This indicates consumer appreciation for milk has improved, most likely as a result of health concerns and aggressive marketing by the dairy industry.
Milk sales through vending machines did not post as much growth in 2006 as in the previous two years, but the segment held the gains it made since 2002. Milk vending posted a comeback since 2002, driven largely by the introduction of plastic bottles, extended shelf and better packaging graphics.
Sales through dedicated milk machines lose share