Some retail food manufacturers take new interest in dedicated branded food machines. These merchandisers have the potential to bring more national name brands to vending.
For years, the food business has been viewed as vending's final frontier in winning consumer acceptance. If the consumer could be convinced to view the vending bank as a primary destination for a full meal, the vending machines could charge the same price points as other retail channels.
It's been a long wait.
Hope emerged about a decade ago with the introduction of the frozen food machine. These machines brought the opportunity to offer the same products as the consumer purchased at the supermarket. Many operators waited to see more national name brand entr'es at vending trade shows. It happened only on a limited scale.
Integrated Food Systems Offer Hope
Around the same time came integrated food systems that held food in a frozen state, heated and served it. These systems incorporated new heating technologies. They addressed the food manufacturer's concern about preserving product integrity since the machine controlled the heating process.
The killer here was the machine's price point, plus the fact that these machines held a very limited number of selections.
In 1998, Canteen Vending Services Inc. introduced a handful of quick serve restaurant brands that had never been in vending, on an exclusive basis. These products lent some extra branding muscle to the food machine, but they did not set record sales.
1998: More QSR Brands Debut
Quick serve food manufacturers interviewed about Canteen's QSR program admitted Canteen seemed to have handled quality control well enough. However, the market was not large enough to draw more of these companies to the vending channel.
In 2003, McDonald's Corp. tested a branded, dedicated French fry machine that was originally developed by H.J. Heinz Co. The test has been discontinued, and the company did not wish to comment on it.
In the meantime, the vending customer base experienced serious downsizing, hurting an already challenged return on investment scenario for food machines.
Tony Schroder, vice president of vending at Pierre Foods, said the economics of a branded food machine do not make sense for all parties involved. Because there are not enough machines on location, the food processors cannot commit funds to develop distribution and marketing programs. "What's the value proposition?" he asked.
Is There Incentive For Food Companies?
Should the economics prove successful, Schroder is the first to admit that a big opportunity exists.
"It's a great industry since we're underutilized and we're about convenience," he said.
Food manufacturers have refused to give up hope, however. Traditional retail outlets have long been saturated, and the competition for retail shelf space has put continuous pressure on food companies' profit margins. The vending industry, though problematic for these companies, remains largely untapped.
More Branded Machines Arrive
Signs have emerged in the last year that retail food manufacturers are taking a renewed interest in the vending channel. A handful of national name brand manufacturers has developed products for frozen food machines and is working with machine manufacturers to support branded food machines.
What these food and machine manufacturers have realized is that a new business model is needed for food vending.
The business models some of these companies are using are not unlike those that have long made soda machines ubiquitous in the retail landscape. Some food manufacturers are offering to cover part of the cost of food machines bearing their particular brands.
The most visible examples of new branded merchandisers are the Kraft Foods and Tyson Foods branded hot food machines and the Michelina branded frozen food machine. The most unique aspect of these programs is that the machines carry dramatic graphics of national name brand foods.
Michelina Machine Upgrades
Self Serve Foods Inc. recently made some changes to its Michelina branded machine design. There are two machines, one made by Crane Merchandising Systems and the other by U-Select-It Corp.
Chris Murray, category manager for Self Serve Foods' vending division, said the company will offer a rebate on its Michelina products to operators who buy these machines. Operators are not restricted in what products can go in the machines. Murray said there are already 600 to 700 Michelina branded machines on location.
Machine branding is what got Arnold Vending Co Inc., based in Tiffin, Ohio, to expand into frozen food, noted John Arnold, president. "That (branding) was an incentive," Arnold said. "We are very pleased with it. The Michelina name is very well recognized, and I think it's important to have a brand name on your product."
Arnold has placed the machine in industrial sites next to refrigerated food machines, and there has been no cannibalization.
Branding Makes A Difference
James Vending Inc., based in Uniontown, Pa., has completely opted for frozen machines over refrigerated merchandisers, and sees the branded machine as a great sales tool. "Branding is important," said Jesse Risha, company owner. "It's better than something looking generic. It opens a lot of doors for you." He prices the Michelina entr'es at $1.25 to $2.25.
The Kraft and Tyson branded machines are the latest branded programs of the Hot Choice Diner manufactured by KRh Thermal Systems, Ltd. The machine has been on the market for about a decade now, and there have been a few branded food programs offered. The Kraft and Tyson programs represent the most prestigious national name brand products offered to date.
A vending director for a national foodservice provider claims that the Kraft and Tyson products make a significant difference in the consumer acceptance of the KRh machine. This director, who did not want his company identified, said he has long recognized the machine's use as an alternative to a manual food line. "If it weren't there, we'd be putting in a third shift," the operator noted.
Machines Replace A Feeding Line
The company already operated about 50 generic Hot Choice machines in various industrial cafeterias before the new branded products were introduced, he said, and the new products have made a significant difference.
The operator further noted that a nutritionist in one hospital account was pleasantly surprised by the low-fat content of the new branded products. The products are specially made for the KRh machine, which uses combined microwave and impinged air heating, and are distributed by KRh through regional distribution facilities. The machine does have a unique power requirement: 209 volts.
"The branded products is where they needed to go a long time ago," this operator noted.
PGI Services Inc., a vending operation based in Shaumburg, Ill. serving several states, has operated Kraft Tombstone Pizza and Tyson branded KRh machines at the Salt Lake City, Utah airport since the summer of 2003, and has been happy with the results, noted Mike Brown, Utah district general manager. He said the machine does not cannibalize the sales of other food machines since the products are unique to the KRh machine.
The most popular items are the Tyson French fries, the Tyson chicken strips and the Kraft Tombstone pepperoni pizza. The French fries are priced at $1.75 while the other entr'es range from $2.75 to $3.50. The machine serves most items in 90 seconds.
"They're another piece to a complete vending bank," Brown said.
Brown said that a machine that vends 20 servings a day will pay for itself in three years. Most of the 20 machines he operates are hitting that number. A contributing factor is that the machine has a credit card reader.
Brown was among several operators who noted that the KRh machine has become more reliable in recent years. Operators usually send a service technician to KRh's headquarters for about a week's worth of training.
A Complement To Fresh Food
In some cases, even operators who prefer freshly prepared products over precooked, branded products have found a place for these new branded machines.
Corporate Services Group, a full-line operation based in Tampa, Fla., has long emphasized its fresh products and doesn't even have any frozen food machines. The company has found success with the KRh machine in a variety of white collar locations, noted Billy Hooks, operations manager.
Corporate Services Group operates 40 of these units, mostly in locations with 500 or more employees. "We are using that as a complement to our fresh food program and we're finding that we're picking up incremental sales," he said. "These are branded products that the customer recognizes."
"It (the KRh unit) is no longer a generic piece of equipment," Hooks added. He noted that the Tyson chicken tenders outsell the previous chicken tenders that were generic.
Hooks said the KRh machine has been particularly effective in locations with limited meal options. The most popular offerings are the French fries, the Tyson chicken tenders and the Tombstone pizza.
He also noted the novelty aspect of the new technology. "It's new technology as far as they're concerned," he said.
The branded offerings helped convince Tom Duffy, formerly vice president of operations at America First Services, a Houston, Texas vending operation, to join a KRh dealer as vice president. The company, Crispy Choice, operates 20 machines, mainly as a subcontractor for vending operators in the Houston, Texas area. He tracks the transactions wirelessly, working with Cantaloupe Systems. His best results have been in public locations.
Duffy thinks the company will succeed since both Kraft and Tyson are planning to add more branded products to the current lineup.
In some cases, Duffy said it's important to let customers sample the food for free.
The branded products are what got Jackson Brothers Inc., based in St. Louis, Mo., to expand into frozen food, noted Wendell Jackson, vice president. The company has placed 24 KRh machines. "It's a great alternative for second shift, where you don't have a food line," Jackson said. "We have to look for alternatives for our customers. We can't afford to have two people looking at the walls."
The cooking time is just long enough for a consumer to make his selection, go buy his snacks and drinks from the other machines, and come back and get his entr'e, Jackson said.
Bill Gilbert, operations manager at Diverse Food Systems in Sacramento, Calif., learned the importance of branding while servicing KRh machines for a chain of c-stores on a contract basis.
One of the first branded programs KRh introduced several years ago was A & W Foods. Gilbert noticed a major difference when A & W pizza was in the machine versus the generic pizza.
"Even though A & W isn't known for pizza, the fact that it had an A & W logo on it made people comfortable about purchasing it," he said.
More Proprietary Products Coming
Rodney Northern, director of innovation and new business development at Tyson Foods, said there will be 15 to 20 Tyson products for the KRh program. "We're very happy with the way things are going right now," he said. "The machine allows you to put good quality hot food where the customer is at, and that's a beautiful idea."
Another integrated food system with branding potential is a dedicated hot dog machine from LHD that has been displayed at the last two NAMA National expos. The machine holds hot dogs in a refrigerated state and heats them using both microwave and infrared technology. Product is served in 40 to 60 seconds. Several units are on test at present.
FranCo's Snacks, based in Bellmawr, N.J., has been happy with the LHD machine's performance, noted owner Frank Collepardi. He said it has added 5 to 6 percent incremental sales to some large, captive locations.
Dedicated Hot Dog Vender Debuts
One of the benefits, he said, is the machine has boosted sales of snacks and soda. The two sizes of sandwiches are priced at $1.25 and $2.00.
Lane Jones, director of the services division for the Marine Corp. Community Services at Camp Pendleton, Calif., said he was initially skeptical of these integrated systems that offer a limited product selection, but he is now a big fan of both the KRh machine and the LHD machine. In both cases, he said branding makes a difference.
"We're firm believers in branding," Jones said.
Greg Westnedge, vice president of sales and marketing at LHD, said in locations with 400 employees that are 60 percent male, if the product is priced at $1.90, the LHD machine will pay for itself in two years.
All of these machines will need to increase in number to get more food manufacturers interested in lending their support. Even manufacturers who already market products to the vending trade are not convinced branded food machines will prove successful in the long run.
But Pat Hagerty, vice president of purchasing at Vistar Corp., pointed out that demographic change in the vending customer base could impact opportunities for branded frozen food. In the past, most food machines went in blue collar locations, which have limited meal periods. Because frozen machines require longer microwave heating time, these machines were not as practical as refrigerated machines.
With the market becoming less blue collar dominant, Hagerty noted that there may be more opportunities for frozen food machines. Reheat time is not as big an issue in non-blue-collar accounts.
The Concept Remains Largely Untested
The concept of a dedicated branded machine has only proven successful in the cold drink business. Brand dedicated machines have yet to prove successful in the long run in the ambient snack, hot drink or refrigerated food segments of the vending industry.
This doesn't mean it can't or won't happen. Frozen food machines and integrated systems are both relatively new innovations in full-line vending. They may well offer branded food manufacturers a unique opportunity to expand their market penetration.
Top 15 Selling Frozen Food Products In Vending, Fourth Quarter 2004
- White Castle Cheeseburger
- Pierre Foods Buffalo Style Wings
- Pierre Foods Big AZ Beef Charbroil with Cheese
- Nestl' USA Hot Pockets' Pepperoni Pizza
- Schwan's Food Service Tony's Pepperoni Pizza
- Jimmy Dean Foods Rudy's Farm Sausage & Biscuit Twin
- Pierre Foods Bacon Cheeseburger
- Pierre Foods A-1 Chopped Beefsteak Sandwich
- Nestle USA Hot Pockets' Ham & Cheese Melt
- Pierre Foods Jumbo Cheeseburger
- Pierre Foods Barbecue Wings
- Schwan's Food Service Tony's Supreme Pizza
- Fast Bites Beef Charbroil with Cheese
- Pierre Foods Monterrey Ranch Chicken Sandwich
- Bageltime Bagel Plain with Cream Cheese
Source: Vendchannel.com, Gibbstown, N.J., 800-999-4271
Retail brands remain rare in frozen food offerings, yet the top selling frozen food product is a retail brand.
Fastcorp Debuts Branded Frozen Food Machine
The frozen food machine is one of the fastest growing pieces of equipment, according to the Automatic Merchandiser State of the Industry Report. This fact defies all the other trends that the study has been reporting: declining work site populations, declining food sales and declining overall sales.
What gives?
Large work sites might be declining, but the need for consumers to eat on the run is increasing. Vending operators have found that the frozen food machine allows them to serve food to a customer that can't normally support a refrigerated machine. Frozen food machines have no waste because there is no spoilage, so they don't need to be serviced as frequently.
The economics of serving food could improve even further if the frozen food machines carry more national name brand product and do a better job merchandising and advertising the product in the machine.
These are some of the reasons that Fastcorp recently developed a new frozen food merchandiser named the "Food Court Express." The machine features extra-large display cards showing the food fully cooked rather than displaying a less appetizing frozen package.
Fastcorp is developing a rebate program, whereby food manufacturers will provide operators who buy the machine rebates on food product.
"Food has usually not been treated as an impulse sale," said John Devecka, vice president of sales at Fastcorp. The new graphics on the machine can be seen from 100 feet away. This stands in marked contrast to most food machines.
Devecka noted that the fast food restaurants have long understood the need for strong visual merchandising. This is something Fastcorp hopes to bring to the food vending machine.
The fact that the display cards show the food in its ready-to-eat state is also important. "You see the pizza at its full potential," Devecka said.
In addition, having large beautiful product cards means that the machine always looks full and not "picked through."
"What we're presenting is a food machine with great balance of food selections, as well as the added major benefit of serving profitable ice cream in the same machine. Having a great looking and appetizing food and ice cream solution for accounts of all sizes will really enable progressive operators to offer something new, which helps them gain new accounts from less progressive operators who are not prepared to offer a food or ice cream solution," Devecka said.
For more information, contact:
Crane Merchandising Systems, 800-325-8811
Fastcorp, 888-441-3278
Kraft Vending & OCS, 847-646-5134
KRh Thermal Systems, Ltd., 800-880-VEND
LHD, 443-394-9522
Self Serve Foods Inc., 407-321-7004
Tyson Foods Inc., 479-290-5741
U-Select-It Corp., 515-277-5397
Vistar Corp., 800-288-8851
