Recent innovations in the packaging of milk have created new opportunities for vending operators, particularly the availability of shelf stable products. This and other developments - such as the increased variety of national name brand milk products - support what many see as the rising importance of milk as a nutritional product in vending.
The vending operator community has begun to recognize the need to offer more nutritional products in recent years as the public has increasingly scrutinized product offerings from all foodservice channels. While milk has not historically been a big seller in vending, many operators recognize its importance as a healthy offering.
A recent survey conducted by the Milk Processor Education Program (MilkPEP) found concerns that prevented operators from vending milk in the past are declining. (See chart 2.)
While most of the concerns that have been raised in the past have become less critical, operators do remain concerned about cost issues associated with milk. Cost in any category is an issue in today's profit-challenged business environment.
Operators agree that milk offers a growth opportunity, given the ongoing need for variety, not just in the cold food machine - the largest format for vended milk - but in the changing cold drink business. The most significant development for milk as a player in the cold beverage machine has been the involvement of the major cold drink bottling companies.
BOTTLING ORGANIZATIONS RECOGNIZE THE OPPORTUNITY
Both the Coca-Cola Co. and Pepsi-Cola Co. bottling organizations have introduced branded, 14-ounce, shelf stable, flavored milk in the last year.
Coca-Cola Enterprises Inc., the nation's largest Coke bottler, recently acquired a majority stake in Bravo Foods International Corp., which manufactures the Slammers® line, which features several Masterfoods candy brands. Meanwhile, PepsiCo Inc. has rolled outs its Quaker Milk Chillers in two flavors, chocolate and strawberry, for vending.
Most vending operators surveyed do not believe that either of the cold beverage giants are going to become driving forces in the milk business since milk turns are the weakest cold drink alternatives. Many operators expressed the view that the cold drink giants know they need milk to satisfy school accounts, and have responded accordingly.
But whatever role the bottlers play in the milk business, findings from the Automatic Merchandiser State of the Vending Industry Report confirmed that milk is playing a bigger role in cold drink machines. Cold drink machines represented about a third of all milk sales in 2005, posting a steady increase in the past four years.
Milk sales overall rose close to 10 percentage points in 2005, the State of the Vending Industry Report noted. Vend product distributors interviewed by Automatic Merchandiser confirmed that milk sales increased in 2005 for fresh, extended shelf life and shelf stable milk.
MILKPEP CONFIRMS RISING OPERATOR INTEREST
The MilkPEP vending operator survey, conducted by The Beverage Marketing Corp., the New York City-based beverage consultancy, found a rising interest in milk vending this past year. The survey found 7.7 percent of the operators who did not vend milk in 2005 were considering it for the next year, compared to 4.6 percent who said this in 2004.
When asked why they do not vend milk, the survey found that all of the reasons mentioned in previous years were less important in 2005, except for pricing and profitability. (See chart 2.) Shelf life, consumer demand, equipment issues and product issues were all less important to operators than in the previous year.
When asked about the level of concern about a larger number of problems (nine problems), the survey found that operators have less concern about all the problems than they did in the previous year. (See chart 3.)
Another reason that some operators aren't more enthusiastic about milk is that it is still being overshadowed by other beverage categories, such as bottled water, sports drinks and energy drinks.