Is Large-Size Candy the Next Upsizing Trend? Only If the Price Is Right

On recent years, it has been difficult to find the next big opportunity in vending. At my company, the management team reviews our financial statements on a monthly basis. We are constantly analyzing our key revenue and expense accounts to look for ways where we can improve our organization.

Expense items such as health insurance, product costs, commissions and vehicle expenses, gas in particular, are growing at accelerated rates.

Exacerbating the problem is that we are seeing our bread-and-butter accounts, blue-collar manufacturing, head overseas. What's a vending operator to do?

There are various growth opportunities to consider. One of the simplest has always been to raise prices. In order to do this without jeopardizing unit sales, however, it is usually necessary to provide different products to justify higher price points.

Large-size candy?

Enter the candy companies. The major candy manufacturers are pitching to the vending operator what they say is the best revenue opportunity since large-size snacks and 20-ounce beverages. Their pitch with their large-size candy is very similar to what we heard previously from the bottlers and salty snack manufacturers when they upsized.

I first heard the bottler's presentation when I was a district manager for Canteen in 1997. Coke shared with me a "win-win-win" scenario that would improve my bottom line. The proposition was this:

1) "Win" number one went to the customer. He would receive 20 ounces of Coke's product at a lower per ounce cost than if he had bought a 12-ounce version of the same product.
2) "Win" number two went to the operator. We would hurt on gross margin, but gross dollars "to the bank" would increase.
3) "Win" number three was to the bottler. Margins improved as they sold the 20-ounce products instead of the 12-ounce counterparts.

View Chart A: Turn requirements, traditional versus large-size candy

LSS snacks follows suit

I next encountered the size trade-up proposition as a territory sales manager for Frito-Lay. This time I was on the other side of the desk.

Frito-Lay did not push the third element of the "win-win-win" scenario outlined above, but they required me to share with my customers the other two positive aspects of the trade-up.

Will converting to large-size candy drive our top line? Yes, but there are some considerations to keep in mind.

Two categories of considerations that each operator needs to cover before making the conversion are as follows. The first is non-financial.

You need to be committed to succeed

You must make the decision that you are committed to the conversion. Don't offer the smaller product next to the larger product. As an operator, I saw what happened when I converted to 20-ounce bottles. If I left the 12-ounce products in the account, the success of the conversion was limited.

As a sales manager, I also saw what happened when a regular size was left in the snack machines next to the larger size version. Customers would stay with the smaller bag instead of trading up.

We see this marketing tactic everywhere.

What about that 8-ounce cup of pop that you used to get at McDonald's? Where did it go? It's no longer being offered, is it? Ever wonder why? It's called trade-up marketing.

I also see it in my local market where the dominant convenience store chain, QT, no longer offers a 12-ounce coffee. Do I still buy QT coffee? Sure, but I buy 20 ounces, not 12.

Consider the competition

If we all moved as one body to the larger sizes, we wouldn't have to worry about losing sales. Unfortunately, collusion laws frown upon such things, so we must act independently.

There is a risk at being a leader in the conversion process. You may expose yourself to your competition who will invariably come in behind you and offer the customer the old products and the old price. In my opinion, this is the greatest of all the concerns of the conversion process.