One challenge in vending is consumer perception of the salted snack sizes, and therefore their value. There are single form products where the entire bag is made up of a single snack component. These tend to appear larger or fuller. Multi-form products, where varied components are in one package, are typically denser. According to Kelley, this creates a pricing dilemma because the same weight multi-form package looks smaller to consumers than a single form product. When they are the same price in the machine, and the consumer is buying on value, the single form product will do better. “Size to value ratio is often questioned,” said Kelley.
Additionally, breaking the pricing paradigm is difficult in certain regions. “In the Midwest, the $1 (price point) is a big hurdle,” said Kelley, “On the West Coast, the $1 price point isn’t as concerning to operators and, in fact, is often embraced.”
Kelley also thinks operators sometimes miss out on products that would deliver higher profits because they have preconceived product standards. “We’re told, the product has to be this price, this size, branded X way, etc.” he said. “So in today’s environment we aren’t always able to bring the best products available to market.”
To stimulate sales and higher prices, Kelley recommends finding products popular in retail, even if they are priced above the vending realm. “Consumers have already accepted the price point and will purchase the item,” he said. Other higher priced products can then follow that breakthrough product.
The most encouraging trend Kelley sees in upselling is the self checkout micro markets. “It’s encouraging because a product can be priced based on its own merit,” he said.
Upselling with self checkout
Self checkout micro markets are a new alternative to vending banks that have some real potential for upselling.
“The trend now is people asking for bigger bags for micro markets,” said Joe Kuehner, vice president of distributors and brokers for Herr’s.
Kuehner’s experience at trade show sessions and talks with vending operators leads him to believe this is the future, due to cheaper upfront equipment and routine maintenance costs, compared to vending banks.
To meet this future demand, Herr’s is coming out with a new size product, a large value line, which is bigger than the LSS.
“The bigger product will have a higher price point,” said Kuehner, “resulting in a higher penny profit.” Kuehner used an example of selling a bag of chips for $.50 versus $1.29. At a 10 percent profit margin for both, the penny profit is $.05 for the former, and $.13 for the latter. That’s the benefit of self checkout micro markets, higher prices and no pricing blocks.
While the self checkout micro market business grows, Kuehner is still seeing an increase in LSS business, although the RSS size is more common in the vending channel. “There’s more variety in RSS,” Kuehner said, “but the new items coming out are planned for LSS sizes.”
The recession has again made consumers conscious of the $1 price point. They want value more than ever, which has led to the decline of LSS snacks, in the vending channel at least. Instead of LSS products, operators could use higher quality products to gain higher price points or alternative, lower priced products to drive turns.
Changing equipment in the right environments, such as installing cashless readers or self checkout micro markets, can also drive sales and profits.