The higher prices of large serving size (LSS) vend products were supposed to provide vending operators with higher profits. However, the recession, and perhaps the selection constraints and payment options of vending machines, caused an overall reluctance in consumers to buy LSS, delivering fewer turns for operators. LSS salted snacks are faring better than LSS candy, but lower priced, alternative items make more sense for operators.
Vending operators can escape the restraints of the vending machine, noted above, by introducing cashless payment options and/or using self checkout micro markets to gain product display real estate. Self checkout micro markets allow operators to show the comparative values of regular size servings (RSS) versus LSS products, similar to convenience stores, where the LSS product category is growing.
LSS falls in vending
Data shows LSS candy and snacks have been steadily declining after a brief surge. According to Management Science Associates (MSA), an information management company, from 2009 to 2011, the LSS candy offered in vending machines nationwide has dropped 8 percent, and LSS snacks have dropped 4 percent.
“(Product) prices continue to increase,” said Matt Groff, account director at MSA. “Now (RSS) prices commonly break a $1 and (LSS) prices are closer to $1.50. This has curtailed the growth of (LSS) in vend.”
Groff noted that in many instances large size products turn less frequently in vending, so they don’t warrant the machine space. “Vending operators prefer lower margin products that turn at higher rates,” explained Groff. “It leaves them less exposed to expensive inventory costs, such as stales.”
The downward trend in LSS vends runs contrary to the convenience store data from MSA, which shows an increase in LSS in both unit and dollar sales for the past several years. While the rate in 2011 slowed, it was still a gain. Groff believes value is playing a role in c-stores, where consumers can see the large size next to the standard size. They choose the larger size for its value.
Dollar no longer a hurdle in vending
It used to be that any vending product priced at a $1 wouldn’t sell. MSA vending data shows the threshold has risen to $1-plus, especially for candy products. Hence, more operators are charging $1 for even standard size candy, according to Groff. “(RSS chocolate) is more than a $1 in more than half of the vending machines we sampled,” he said.
Groff views these higher prices as necessary so operators can cover manufacturer price increases over the last few years. “It (the higher price point) isn’t translating to higher margins for operators,” he said.
Eliot Faber, owner of M&C Vending in the highly competitive market of Hackensack, N.J., has eliminated most of his LSS products because anything over a dollar doesn’t sell.
“Money is tight for everyone,” he said, “and vending is discretionary spending.”
He tried upselling, with premium protein bars, but the $1.75 price point never took off. He has had more success with premium items that sell for the same price as the other products in his machine.
The winning strategy for Faber in these economic times is flexibility. “We’re more open to suggestions than we’ve ever been before,” he said. He thinks a lot about the type of account, putting fiber bars in accounts with lots of females, but changing to something else in heavily Spanish accounts. “If a vendor’s using the same planogram, they’re missing out,” Faber said.
Faber doesn’t think he’ll ever go back to larger sized products. “If I raise my prices even a nickel, the locations are on the phone with other vendors,” he said.
LSS candy too expensive
“We just eliminated our LSS candy,” said Devin Smith, purchasing manager at All Star Services in Port Huron, Mich. “A lot of times the price was too high. Anything over a $1 has dropped off.” However, All Star Services still puts in candy, the RSS size, and charges a dollar for it. That has helped them capture new sales.