Fresh food accounts for 20 to 30 percent of today’s micro market sales. However, in this new vertical, the same old sandwiches and inexpensive salads from vending food carousels fall flat. Instead customers want gourmet and fresh, whether that’s sandwiches with lettuce or yogurt parfaits with diced fruit. Micro market operators are sourcing food from many local locations and rediscovering the positive revenues from this once dying vending segment.
Embrace the food business
“[Micro markets] are not something you toy with,” said Scott Halloran, co-owner of Trolley House Refreshments in Richmond, Va. “You don’t open up one or two. You either jump in with two feet and create efficiencies around it or just stay away from it.” Three years ago, Halloran decided to jump in and one of the most challenging efficiencies he had to create was centered on food procurement and transport. His vending operation never had a commissary, so his food experience was limited to branded food shipped frozen and thawed for the customers.
That type of typical vending fare did well, but Trolley House Refreshments also started looking for a higher end, gourmet offering for its micro markets. “Our customers are demanding a fresh product,” Halloran said, “with lettuce and tomato and mayonnaise…and things that have a shelf life.” He spent more than nine months looking at local caterers and restaurants that could make a product that was the quality level he wanted. But once Halloran found it, he had to make adjustments to his distribution philosophy, since his new gourmet fresh food had a 5 to7 day shelf life as opposed to traditional vending food with a life of 14 to 21 days.
“For our markets we do a one week buy on food products and…we do a heavy fill on Monday before lunch time -- everyone gets a fresh load of sandwiches in their markets,” said Halloran. During that Monday visit, drivers remove “out of date” products as well. As the market is serviced during the week, the food is back filled.
Halloran also invested in a 10 by 20 walk-in cooler to house the fresh products in the warehouse as well as coolers for the vehicles. “When you’re dealing with salads and sandwiches with lettuce and tomato and all these different products, you fall into a temperature window of 36 to 42 degrees where you have to keep that product at all times,” said Halloran. He’s noticed if it gets too cold, the lettuce will freeze and ultimately wilt and warm temperatures substantially shorten shelf life.
Sourcing food locally
Many micro market operators are sourcing food from local establishments instead of making it in commissaries. Joel Skidmore, owner of J&J Vending of Union City, Calif., has had success purchasing fresh food for his micro markets from a professional foodservice provider. “We have a local foodservice person make food weekly,” said Skidmore. The food is delivered to his markets Mondays and Thursdays and is labeled under the J&J Company Kitchen brand. His best sellers aren’t even sandwiches. “We sell a lot of salads,” said Skidmore. The next most popular items are yogurt parfaits and fresh fruit. “It’s been unbelievable,” said Skidmore about the success of fresh food in the micro markets.
Supplying fresh food to micro markets has been a new line of business for Kitchen Fresh Foods (KF Foods), a food service management company in Green Bay, Wis. Greg Hill, TITLE, at KF Foods, observes that operators are struggling to find just the right inventory for their markets. “What we found [early on] is that everything needed to be high quality for the micro markets,” said Hill. “Operators were looking for the $9 sandwich.” As the segment evolves, Hill sees operators request more basic items with higher quality ingredients.
“They want a turkey sandwich, but a turkey sandwich done well,” he said. That means a sandwich with lower sodium meats, better cheeses and bread with fewer preservatives. It also means the sandwiches need to be wrapped in clear plastic, not run through a machine. For salads, better quality means ingredients are mixed together instead of packaged separately (which increases shelf life). The salad is packaged in a clamshell container for better presentation (even if it allows in more air and decreases the time food looks fresh).
“There is an average 30 percent reduction in shelf life for these foods [compared to vending],” said Hill, “and they cost more.” Still, with the higher price point fresh food making up nearly a third of market revenue and more customers flocking to the micro markets over vending, there’s profitability. Hill recommends operators really think about merchandising. “In vending, an operator might have 440 fresh food items,” said Hill. “In retail, 113 is too much.”
The problem is how the food is presented. In a traditional food carousel, there is one product per slot. A customer can rotate the items and see all the different types of food products. In a micro market cooler there are only 15 to 20 facing, depending on size. This is how many different food products a micro market operator should offer, according to Hill, for the best merchandising. Each type of food item should then be three or four deep, instead of different varieties hidden behind each other forcing the customer to reach in and search through the cooler.
“Less food variety gives you the ability to merchandise better in the micro market [cooler],” finished Hill.
Micro market food trends healthy
Some of KF Foods top food sellers include the two boiled egg pack, fruit and vegetable cups, turkey sandwiches done well, and wraps. Interestingly, salads are the most requested item, but in terms of sales are not the best movers. “Salads are only 4 to 5 percent of sales [in micro market fresh food],” said Hill. There does seem to be a slight trend towards healthier items in micro market products. Also, Hill speculates there will be more requests for products with lower sodium, lower sugar and lower cholesterol in the future.
The biggest hurdle for operators launching a micro market fresh food program, who haven’t handled food before, is temperature control, explains Hill. “If a product is in ambient temperature for 20 minutes, it loses a day of shelf life,” said Hill. Additionally, because as cold food warms up, it releases moisture, when it cools back down, it causes frost on the inside of the package, obscuring the food inside. Hill feels operators need to be sensitive to how long food is outside a cooled environment, such as being transported into a location. In Hill’s opinion, this is another reason micro markets should have a dedicated route driver who can be cognizant of the required temperature control.
Refrigerate even in the warehouse
Maintaining food temperatures should also be considered in the inventory and picking process. According to Randy Smith, president of LightSpeed, with new technology micro market operators have the ability to take electronic pick lists directly into their coolers. Using a device like the LightSpeed mobile, warehouse staff can take the iPad into the refrigeration unit and “pick” food for a specific micro market locations based on the replenishment list from the backend system, without it leaving a refrigerated space.
Jeremy Cauble, marketing manager at Gallins Foods, Inc. in Winston-Salem, N.C. understands the value of fresh food and keeping it refrigerated. “It’s important to make sure that you have the system set up to maintain the appropriate temperature,” he said. Gallins uses refrigerated compartments on delivery vehicles to keep food at the proper temperature, a process they began when delivering food to vending machines years ago and have continued as they opened 20 micro markets over the last X years.
Products: hand wrapped, fresh
One thing that sets Gallins’ micro market food apart from vending food is the packaging, according to Cauble. Gallins’ food provider still does a lot of hand wrapping. “Customer can see it wasn’t run through a machine,” he said. What the product looks like is important to the micro market customer.
“In a lot of sandwiches when you put them in the freezer and then thaw them, it affects the look of the product,” explained Cauble. “Many manufacturers are trying to remedy this, but when we were first started out, it was evident to customers.”
Gallins’ micro market customers also appreciate freshness as well as a greater variety of healthy items. “We’re able to offer more diverse salads,” said Cauble. Instead of typical iceberg lettuce, Gallins offers spinach or mixed greens salads with fresh vegetables. Also, the micro market salads are larger by two ounces, but look substantially bigger due to better packaging. “Without the space limitations of the food vendor, we are able to put the salads in larger, nicer looking containers to improve the look and presentation of the salads,” said Cauble. He has noticed the micro market customer is more receptive to higher price points if there’s fresh product variety and healthy options. “[Comparatively,] there is a lower threshold on what customers are willing to pay for something out of a vending machine, regardless of the ingredients,” added Cauble.
Spoilage remains an issue
Of course one challenge presented by an increase in fresh food is spoilage. Cauble noted that when Gallins’ micro market drivers were first stocking food, they would put new products in the back and move older products forward. But customers quickly realized this and started taking product from the rear of the cooler - which did not lower the spoilage. Because of this, Gallins started mixing the dated fresh food in the cooler, instead of organizing by date. It has helped, according to Cauble, but hasn’t solved the problem entirely. “For anyone wanting to go into markets, there’s not a one size fits all solution to spoilage - it’s an ongoing problem,” he added.
Careful ordering is another way Gallins handles spoilage. “We don’t keep a stock here at our warehouse,” said Cauble, “so when we order food, we have to be aware of our different market locations and if they have anything going on that will affect the volume….that’s why we have our open market manager.” The open market manager is responsible for communicating with micro market clients about events happening on location that will change the markets’ activity. If there’s a catered lunch, for example, Gallins’ won’t stock as much food. The manager also monitors how individual items are selling, so slow movers can be rotated out or discontinued.
Fresh food represents a third of Gallins overall micro market sales. The best selling points of a micro market to the location is that the products can include fresh food, be healthier, as well as larger with more diverse ingredients. “It’s a better way to present it to them…that’s one thing that grabs their attention,” said Cauble. “They can pick it up and handle the product instead of looking through a window at it.” Cauble believes that in the end, micro markets really overcome the uncertainly end users still have about buying food from a vending machine.
As micro markets bring fresh food back to profitability for vending operators, they are discovering it’s possible to have a good food program without a commissary. It takes proper sourcing, warehouse changes and food temperature monitoring, but the increase in micro market sales helps operators make the commitment.
