Operators Plan to Increase Purchases in Most Equipment Categories in 2005

The economy remains challenging, but vending operators aren’t taking a defeatist attitude. To the extent that attitudes can influence results, vending operators are giving themselves the benefit of any doubts they have about the next 12-month period, and have aggressive purchasing intentions.

The third annual Automatic Merchandiser Purchase Intentions Report, fielded in August, resulted in the most ambitious purchase plans to date. Operators expressed more aggressive equipment purchasing plans every year for each of the last three years.

Location downsizing ebbs
While locations are not adding a lot of employees, the downsizing that began in 2000 and 2001 subsided in 2004, as reported in The Automatic Merchandiser State of the Vending Industry Report in August. As a result, vending operators want to take advantage of the improved business climate by offering state-of-the-art equipment.

Projected expenditures on equipment for the next 12 months are estimated to total $250 million.

Newer equipment helps sales
Veteran operators have learned from experience that newer and better equipment traditionally results in higher sales.

Automatic Merchandiser sent an e-mail survey to 3,800 operators in August, asking for specific purchase plans in every major equipment category. Close to 300 completed questionnaires were returned within one week.

The survey does not indicate to what extent operators will follow through on their purchase intentions. Operators typically set goals but wait until their sales figures justify following through on purchase intentions.

Sales must justify investment
The previous two purchase intentions surveys in 2003 and 2004 indicated that operators do not always follow through on their stated purchase intentions. Feedback from equipment suppliers indicated that vending operators did not purchase as much as the survey results forecasted. This indicates that business conditions did not improve enough for operators to follow through on their purchasing intentions.

The most obvious example in which last year’s purchase intentions were not followed was in the case of handheld computers. Last year, more than 25 percent of the operators interviewed planned to purchase new handheld computers.

The State of the Vending Industry Report later revealed only marginal change in the percentage of operators using handheld computers in 2004.

Nevertheless, the fact that operators indicated more aggressive intentions in 2005 than 2004 reveals higher expectations for the year. This could be attributed to the fact that the nation’s employment rate continued to improve slowly in 2005, which is consistent with the observation that account downsizing has leveled off.

Plans more aggressive in all segments
Purchase intentions were more aggressive in almost every equipment category in 2005 than the prior year.

Intentions are most optimistic in the candy/snack machine segment, the machine that operators traditionally spend the most on. Purchase intentions were higher for both new and used candy/snack machines in 2005.

Intentions were noticeably more aggressive in the cold drink business in 2005. This year’s exceptionally hot summer could be a contributing factor. Many operators noted exceptionally strong cold drink sales in August.

Intentions were also more aggressive this year for hot beverage machines, cold food machines, frozen food machines and combination machines.

Combination machines were the one segment in which operators planned to buy more used than new equipment.

The one sector where purchase plans were less aggressive was integrated food systems, machines that hold food in a frozen state and heat it. The number of operators owning this type of machine was very small to begin with. Such machines are used for limited applications, and they are often used mainly as selling tools.

Allocations include more brewers
Operators also expressed more aggressive intentions in coffee brewer purchases, both for traditional plumbed-in brewers and single-cup systems.
Purchase intentions were more aggressive for other types of equipment besides vending and coffee service machines.

Allocations include other equipment
Operators expressed more ambitious plans this year for food packaging equipment, refrigerated and frozen storage equipment, microwave ovens, materials handling products, computer equipment, wireless data systems and route vehicles.

Whether or not vending operators follow through on their purchasing intentions this year will depend on how much the business climate improves
Most economic forecasts indicate a stronger economy this year than in the previous two years. Most economists maintained a positive outlook despite the higher gasoline costs caused by Hurricane Katrina.

Click here to view PDF version of the Purchase Intentions Report.