The major snack manufacturers announced healthier product initiatives in 2004 in response to public concerns about obesity. These initiatives included new products that emphasized nutrition in various ways, and package labeling that drew attention to these benefits.
Some operators complained that allocating facings to "healthier" products that did not sell fast required more frequent servicing since it caused the other products to sell faster.
Most, however, found it a non-issue since there were always slow selling products that could be replaced with "healthy" options.
The nationals and most of the large regional vending operations used special labeling programs to meet customers' nutrition concerns. These operators noted that such programs were most useful as selling and customer relations tools and did not result in increased consumption.
Operators continued to give more snack selection authority to management and less to route drivers in 2004. More operators also used planograms, a tool that gives management more control over product selection, in snack machines. The larger companies had more management resources to assume more of the decision-making tasks.
Operators continued to realize the benefit of mandating placement of top-selling products and of rotating the mix regularly, practices which both minimized inventory costs and maximized sales.
Hot beverages struggle again
Vendors continued to fight an uphill battle in the hot beverage arena in 2004 as industrial accounts, the main customer base for hot beverage venders, continued to lose population. Hot beverage machines have declined in number every year since 2000.
The rate of decline was less in 2004 than 2003, as indicated in chart 8a, reflecting the ebbing of account downsizing.
The economics of hot beverage vending has prevented vending operators from capitalizing on the growing demand for specialty coffee, which has revived coffee sales at retail and even in the OCS sector. Vending machines designed to meet this demand with more product selections carried higher costs. Operators faced having to invest more money in locations with fewer employees in hopes that a better product selection would improve sales.
Operators did raise regular coffee prices for the fifth consecutive year in 2004, but the 4.35 point increase in 2004 did not come close to the 14 point gain reported for major retail coffee prices.
The lone exception was for fresh-brew specialty coffee, which posted a 16 point price hike in 2004, but this segment only accounted for 12.1 percent of hot beverage sales.
Vending operators were hesitant to raise coffee prices when consumers increasingly purchased coffee at other retail venues in 2004. Operators faced more aggressive competition from specialty coffee stores, convenience stores and QSRs in 2004, most of which marketed specialty coffee.
Vending slow to upgrade coffee
A gain in fresh-brewed specialty coffee sales reported in last year's survey did not sustain itself in 2004. Last year's survey reported a 10.5 point increase in fresh-brewed specialty coffee as a percentage of all hot beverages sold. This marked the first sign that the vending industry was cashing in on specialty coffee, the report noted.
But in 2004, the share of specialty coffee declined 4.5 points, indicating the progress reported in 2003 did not continue as operators sought to minimize investment in the category.
Freeze-dried posts a gain
The biggest share improvement in 2004 was the 7.7 point gain in freeze-dried regular coffee sold, indicating operators focused more on reducing costs than in meeting new customer expectations in 2004.
Some operators argued that the vend coffee consumer is different from other coffee consumers, which supported a "back to basics" approach. As evidence, regular coffee increased its share of sales for the second consecutive year in 2004, as indicated in chart 8b.
Operators argued that the blue collar consumer, the dominant vend coffee consumer, cares less about specialty coffee than other consumers. Some further argued that many older, blue collar consumers prefer freeze-dried coffee to fresh-brew.
Operators also argued that certain roasters have improved the taste of freeze-dried coffee and that the market for this coffee is growing among all consumers.