5 key growth trends in 2013

Editor's Note: This is the updated and corrected version. The correction was made to the cashless vending section. The word cashless was changed to cash in the following sentence: "The number of cash transactions is expected to drop to 23 percent by 2017."

Vending has always been a customer-oriented industry, offering the public convenient food and beverage options at an affordable price — anytime, anywhere. The industry has evolved over the years from the traditional coin-operated vending machine to unattended micro markets, cashless vending, touch screens and coffee services, to name a few.  

So how will the industry continue to evolve in 2013? We asked the experts, and they collectively agree that it must advance by giving customers what they want — including convenience, value and quality.

“When I look at our industry and our three business lines [vending, micro markets and coffee service], I tend to look at it holistically, and think we will remain strong with some growth in 2013,” says Carla Balakgie, president and CEO of the National Automatic Merchandising Association (NAMA). “We are a consumer-oriented industry, so if we give our customers what they want, our businesses will grow. You have to think about where your outlets are placed, what the customer base is, what’s going to sell. There may not be one solution, so diversify your business lines and diversify your product mix within them in order to succeed.”

So what does the customer want? And how can the industry continue to grow? Here are five ways the vending industry can meet today's consumer needs and continue to flourish in 2013:

1. Healthy Choices

Long thought of as machines that only dispense cookies, candy, chips and sugary beverages, vending machines are including a wider variety of product selections following a change in consumer snacking preferences. Global research company, Hartman Group, recently released a snacking report that said 57 percent of Americans rated having healthy snack options as important or very important. Another 2012 research report, by Symphony IRI Group, shows 87 percent of consumers are trying to eat healthier. Many operators have already jumped on the bandwagon of providing healthy options, but in order to stay ahead of the game, the industry as a whole must show it is nutritionally responsible.

“As an industry, we have to take a very proactive role in showing that we are a part of the solution, instead of a ‘devil’ that only offer unhealthy options, especially in special markets such as schools and health care facilities,” said Balakgie. “If we show that we are part of the solution and not the problem, various public and political administrators will see us as an active partner, and will be more likely to support a blended set of offerings that provide consumers what they want, including healthy options.”

Of course there will always be those consumers who would like to purchase a traditional snack, such as chips or a candy bar; however, more and more Americans are becoming health conscious. In order to increase sales, operators should offer a wide variety that includes both healthy and traditional options to ensure a sale every time.

2. Cashless Vending

For years, vending was a coin-operated industry; however, fewer and fewer people carry around cash, or coins, these days — especially the younger generation.

“Cashless payment, enabled currently in less than 5 percent of all vending machines, will continue to grow as vending patron demographics shift,” said Chuck Reed, director, marketing and sales operations support for MEI, a manufacturer of cashless technology. Generation X and Y consumers are clearly predisposed to carrying less cash and they are demanding alternate payment methods on vending machines. Vending operators will need to accept any form of payment, cash or cashless, in order to compete with retail establishments.”

The 2012 Automatic Merchandiser State of the Vending Industry report showed there are less than 200,000 vending machines in the field that currently offer cashless as a payment option. Compare that to market research from Javelin Strategy & Research which reports that in 2011, only 27 percent of all point-of-sale purchases were made with cash and you see the problem.  The number of cash transactions is expected to drop to 23 percent by 2017, so the industry will need to make this payment technology a priority in 2013, in order stay competitive. Otherwise, what will keep a consumer with no cash from going somewhere else?

While credit transaction fees may be a concern, payment solution providers are making this option more affordable.

“Cashless payments must become the norm for vending to moving forward,” said Anant Agrawal, co-founder and chief marketing officer of Cantaloupe Systems. “With increased pricing, and changing demographics, it’s the only way to keep sales minimally at the same level as they are today. With two tier pricing [where consumers get a discount for paying with cash], the increased transaction costs can now be shared, making it more affordable.”

3. Micro Markets

As the fastest growing segment of the vending industry today, micro market placements will continue to increase in 2013. According to Automatic Merchandiser research, 5 percent of operators added micro markets in 2011. Out of those who do not operate micro markets, 16 percent planned to add them in 2013.

Although increasing in popularity, micro markets will not replace vending all together, but instead serve as an enhancement for the industry.

“I am very optimistic about the future of micro markets,” said Paul Schlossberg, an industry consultant and president of D/FW Consulting. “Micro markets offer a much better shopping environment for consumers, due to the fact that we can offer a much wider range of product categories and package sizes. Sales results have been very positive for operators, as the investment is much less and the payback is much faster. I would recommend that operators carefully assess their locations to see where this alternative can be deployed.”

One of the driving factors behind the growth of micro markets is the variety of products they hold, meeting a spectrum of consumer needs.

“Micro markets are a great opportunity. The customer satisfaction is incredible,” said Randy Parks, president and founder of ProStar Services in Carrollton, Texas. “There is also so much room for growth here, it’s crazy. It’s the best thing to happen to the industry since glass-front venders.”

4. Machine Upgrades

Customers are no longer satisfied with the traditional vending machines. Much like all other technologies and industries, everything has become bigger and better with more bells and whistles. And the vending industry must keep up.

“Consumers have a choice, and our industry is competing everyday with other retail channels,” said Brad Ellis, president of Crane Merchandising Systems and NAMA chairmen emeritus.  “Convenience stores have transformed themselves over the past decade; while the average vending machine is 12-plus years old. You can take an old machine, clean it up, paint it, add new plastic front panels and sell it to locations as like new, but that’s not changing the consumer experience. Today, technology advancements have become much more cost effective and reliable, including cashless, touch screens, wireless technology and brand promotion, and are truly changing the consumer vending experience.”  

Although it may require investment, this advancement in technology will help the vending industry differentiate itself, catch the consumers’ eye, improve the experience and drive more sales.

5. Coffee

How would the world survive without coffee? The customer will definitely want to continue receiving their morning fix in 2013. Recent NAMA-sponsored research about the coffee trends among consumers reveals that only 41 percent of consumers have access to coffee at work. Only 22 percent of those locations have gourmet or specialty coffee, which is the most highly consumed and preferred coffee drink. There's certainly opportunity for growth in the coffee service segment.

“We expect to grow 25 percent this coming year,” said Scott Guardino, vice president and general manager for Paramount Companies, a coffee service provider. “This will hopefully result from expanding our geographies, sales force and product offerings, as well as forging into more micro markets and foodservice locations, such as restaurants and hotels.”

Knowing what to change and what to keep while running a business is the key to succeeding. In 2013, customers will want more healthy products, additional payment options, better coffee and technologically advanced equipment, including micro markets. Operators can expect a good price and continued profits for meeting these needs.