Progress Cited in Preloaded Shelf Vending Systems

With profit margins being squeezed harder than ever, vending operators have no choice but to consider alternative market segments. One business opportunity that remains largely unfulfilled is the small location, usually defined as having 10 to 50 consumers.

For many years, vending operators and suppliers alike have brainstormed ways to serve small locations profitably, but have mostly come up empty-handed. As machine technology evolves, it creates new possibilities for operating more efficiently, but invariably, it also adds overhead.

Success in the small location remains a puzzle. The pieces to this puzzle include: equipment cost, labor cost, product selection, machine capacity and revenue. A successful combination seems to have always evaded the vending industry.

As a result, the small location opportunity remains the domain of the very small operators who have limited overhead and are content to remain small, and the honor box industry, which can tolerate 30 percent product shrinkage.

In other words, the challenge remains largely unmet. Industry observers estimate well over a million work sites in the U.S. have no refreshment service provider since small vendors and honor box operators only serve a fraction of work sites with 10 to 50 people.

In April of 2004, Automatic Merchandiser reported some signs of progress, thanks to the introduction of electronic machines that make use of preloaded shelves. The key advantage these systems offer is reduced service time. The systems were formally introduced in 2001 and have since undergone several revisions.

Five years later, field tests indicate that operators and manufacturers are gaining a better understanding of the service model that is needed to allow locations to be served profitably with these systems. The three preloaded shelf systems currently in use are the Vista Vend, the Multi-max® Distributed Vending® Systems and the Revolution.

Product suppliers follow progress

Major product suppliers have been following the evolution of the preloaded shelf systems closely and have sponsored some tests in different markets to learn more about the nuances of these new systems.

PepsiCo Foodservice, monitoring the progress of the preloaded cartridge systems closely, believes they offer a solution to meet the need of providing snacks and refreshments to work sites. The company has recently been looking at the nuances of the new system.

Maurice Herod, senior manager for vending strategy at PepsiCo Foodservice, said the company sees the shift to people working in smaller population work sites as an opportunity to develop new ways to meet workplace snacking needs.

Herod said he is aware that the honor box industry has been consolidating and facing challenges of its own in recent years. This, he said, is not due to any lack of demand for the service from the consumer. Instead, the honor box operations have faced scale, image and capitalization challenges. In December 2004, PepsiCo Foodservice held a summit for honor box operators to better understand this segment.

"We want to understand more about that small workplace opportunity," Herod said. "We know there is unmet demand out there and want to ensure we consider all go-to-market strategies to satisfy the consumer."

"The consumer trend tells us there is opportunity in the workplace that has fewer than 100 employees; the challenge becomes how does the operator serve the smaller workplace profitably," he said.

Product suppliers estimate that there are between 2 million and 3 million work sites that have no snack or refreshment options because they fall in the 10- to 50-person range that most traditional vending companies are not interested in.

"We believe that these smaller vending sites represent a tremendous opportunity to get Masterfoods USA products next to the coffee pot and are eager to help our operators grow and build their business," said James English, vice president, vending, Masterfoods USA.

Large vending operators also recognize the opportunity.