A key reason was pricing. Large size candy carried price points in excess of $1.00, which most operators viewed as the ceiling for what consumers would pay.
Instead of carrying large size candy, operators raised prices of regular size candy, mostly staying at or below the dollar price point.
Chocolate candy, which comprises the majority of candy sales, slightly increased its share of the business in 2011 at the expense of all other types of candy, indicated in chart 14b.
In the snack segment, food snacks and nuts and seeds increased market share the most in 2011.
Food snacks sales and turns improved for the second straight year; this year the turns gained even more.
Nuts and seeds improved both sales and turns following declines in 2010.
Baked goods, crackers and nutrition snacks also grew market share in 2011, although they lost turns.
Nutrition snack turns and sales took a hit in 2011 after growing in both areas in 2010. Possibly operators grew less interested in offering items that don’t turn well, even as customers kept asking for them.
Hot drink vending struggles; opportunity calls
Hot beverage vending remains unable to capitalize on a growing U.S. coffee market. The survey reported the number of machines declined in 2011, continuing a trend that precedes the recession.
Fewer hot drink machines, coupled with stagnant coffee prices indicated in chart 15d, once again undermined hot beverage sales in 2011. Yet the 1.3-point decline was less severe than for vending overall, indicating progress in this long suffering segment.
Hot beverage vending has some unique challenges.
One challenge is the unfavorable economics of operating a hot beverage machine.
The vending industry has found itself in a “chicken and egg” scenario with hot beverage vending. Equipment manufacturers have not innovated in this segment mainly on account of perceived weak operator demand. Operators, in turn, have not had machines to provide higher quality coffee that could fetch higher price points.
One exception was the Seattle’s Best Coffee machine, introduced in 2010 by Starbucks and Crane Merchandising Systems.
While many operators reported being able to win higher price points with the Seattle’s Best Coffee machine, machine purchases were stymied due to operator unwillingness to invest in expensive equipment during a recession. The opportunity was limited to accounts large enough to support the investment.
Many vending operators compensated for the decline in hot beverage vending in recent years by expanding into OCS, which was the vending industry’s only growth area in 2011. By getting locations to pay for employee coffee, operators created a new revenue stream with OCS. OCS sales surpassed hot beverage vending sales beginning in 2007 as a percent of total vending industry sales.
In 2010, OCS posted the largest 1-year sales gain among all product segments measured in the State of the Vending Industry Report. In 2011, OCS was automatic merchandising’s only growth segment.
Consumer research indicates vending operators have an opportunity to improve hot beverage sales.
In 2011, NAMA announced the results of a consumer survey that pointed to a big opportunity for both OCS and hot beverage vending. The consumer survey, conducted in 2010, found consumers overall hold coffee at work in high regard.
The NAMA survey found that while only 20 percent of consumers said their coffee comes from a free coffee maker or vending machine at work, 60 percent of all employed coffee drinkers considered free coffee as an important employee benefit. Generation Y consumers (age 18 to 27) were the most likely to try a coffee vending machine; 60 percent said they would buy less from a specialty coffee shop if vended coffee tasted better.
Coffee sales overall have not only sustained, but grew during the recession. The National Coffee Association reported that following a decline in 2010, coffee consumption increased among consumers 18 to 39 years of age in 2011.