Some operators not ready to upsize
Bill Russell, president of Canteen Service of Steel Valley Inc. in Youngstown, Ohio, is not following the corporate Canteen planogram. The hourly employees in the industrial market he serves have not gotten big enough pay increases to support such prices. He said other Canteen franchises have reported mixed results.
“The higher the price, the less people are going to buy,” said George Yost, owner of Premier Services Inc., a vending and honor box operator in Phoenix, Ariz. He has eliminated Masterfoods products from his honor boxes altogether. In his vending machines, he plans to reduce candy facings from seven to five.
Yost thinks he will end up carrying the top selling items at 85 cents, but his profitability will suffer. “It’s not about what the consumer is prepared to pay (providing it’s under $1.00); it’s about what the other vending company will charge to keep the location,” he said. “You’re better off charging 85 cents and putting them in than charging 75 cents and taking them out,” he said.
When candy companies raised
prices earlier this year, Yost took a novel approach. Instead of offering king-size candy bars, he bought small size Masterfoods bars at Wal-Mart and wrapped four bars together using a shrink wrap machine and priced it at $1.00. Turns dropped 30 percent, he said, but profits were acceptable enough.
He later went back to using the regular vend bar at 80 or 85 cents, depending on the account. When he returned to the regular vend bars, there was less price resistance due to the fact that the previous candy selections were $1.00.
Yost has not had success with the king-size bar at $1.00. “They (consumers) do not want giant candy bars,” he said.
Several operators noted that $1.00 is the ceiling they can charge for candy. For this reason, some say the LSC works, but the king-size doesn’t.
“The dollar seems to be the right price,” said Eric Cardonick, owner of Advanced Services in Bensalem, Pa. “I’d like to see more items in that size.” Cardonick has not found success with large-size bag candy.
Test identifies successful approach
Bachtelle & Associates Inc., the Tustin, Calif.-based vending consulting firm, conducted LSC tests on behalf of Hershey Co. and found that the number of LSC products priced at $1.00 makes a difference in customer acceptance.
When only one LSC item was offered in a machine, sales did poorly. When there was a group of candy bars with price points of $1.00, $1.25 and $1.50, sales did better for all the items. “It’s because of the reduction of the sticker shock,” said Brad Bachtelle, president of the consultancy.
Candy follows salted snacks
Bachtelle observed that LSC is simply following the same pattern of LSS salted snacks; the larger size products fared poorly when they accounted for only one or two facings in the machine.
Bachtelle said turns held steady for all the LSC products. “We consistently see units hold, but the revenue jumps,” he said. “The old procedure of pricing all products in a category the same doesn’t make a lot of sense from the consumers’ standpoint. The value doesn’t align with the products.”
Tommy Elliott Jr., purchasing manager at Tomdra Inc., a 16-route operation in Tucson, Ariz., confirmed Bachtelle’s observation. “The more
that you have in there, the more it’s going to sell,” he noted. When LSC was first introduced with just a few SKUs, response was slow. But when there were more SKUs, the prices didn’t look as out of place.
A way to offer added value
Elliott also noted that LSC provided a way to circumvent a price increase.
“It took a lot of heat off of us,” he said.
Elliott said he hasn’t ventured into the king-size bars, but he is thinking about it.
Griesedieck Vending Services in St. Louis, Mo. also has sustained its turns using LSC and has since increased to four mandatory LSC facings in all machines, noted David Griesedieck, owner. He has two candy shelves.
In the meantime, many operators are removing secondary name brand candy bars in response to higher costs. “I don’t know if it’s a wise move,”
said Greg Sidwell, president of G&J Marketing, the Palm Harbor, Fla.-based product broker.