Editor's note: Charts are available in the PDF format.
We are through the proverbial tunnel and can see the light. A slowly recovering economy and increasing consumer confidence has pushed dollars spent on foodservice upwards, including those spent in the vending industry. Overall, the four-year decline in vending operation revenues finally ended in fiscal 2012. Operators reported an average growth of 1.86 percentage points, raising this year’s Automatic Merchandiser State of the Vending Industry Report aggregate industry revenue to $19.31 billion, up from $18.96 billion in 2011. The growth was accompanied by more operators raising prices — 83 percent — in a continuing effort to keep up with increasing product and operating costs. These operators met with less resistance than in the past as end users saw other retailers also raise prices.
Technology was named as one of the top factors contributing to growth, along with the improving economy. Operators reported investing in systems that allow an operation to run with higher profits and lower operating costs, installing more diverse payment options and launching micro markets.
A challenge that affected many vendors in 2012 was healthy vending requirements in schools as well as other vending locations. Operators struggled with legislation that restricted the potential products sold and/or that placed taxes on traditional vending fare. They also reported concern about future legislation. Both the Food and Drug Administration’s final rule regarding calorie disclosure required by Obamacare and the U.S. Department of Agriculture proposed rule regarding the items allowed in school vending machines could severely constrict operator revenue and profits.
Compared to retail sales growth, vending revenue continued to lag in 2012. According to Technomic, a food research firm, restaurants and bars showed revenue growth of 4.5 percent for 2012.
Medium operations increase
Besides 2012 being a growth year in terms of revenue, many smaller operators were also able to grow. There was an increase in medium operations, defined as those with $1 million to $4.9 million in annual sales, as seen in chart 2. Locations hiring more employees and consumer confidence as well as embracing a new business model account for much of this change. The most successful operators reported analyzing their business more closely to focus on profitability and limiting waste better than they did in the past, which often required technology implementation.
There was a decline in the number of extra-large operators in 2012, as defined by revenue. Declining same store sales, loss of accounts and location downsizing were the most reported reasons for reduced sales which also led to staff reductions. More than half of operators made no staffing changes in 2012, however.
Of the owners that did make staff changes, more increased their delivery staff than other positions, followed by nearly equal increases in sales and repair staff, see chart 4B. Reductions in staff were also overwhelmingly in delivery personnel and usually brought on by dropping revenues.
Operators used a variety of strategies to handle rising costs in 2012 and were asked this year to report all steps taken, therefore the total in chart 6 will not equal 100 percent. However, the top ranking strategy was raising prices mostly in the candy, snack and confection category, shown in chart 7, which continues a four year trend. Operators were also likely to increase prices in cold drinks, OCS and vended food. Many operators reported they were more comfortable raising prices in 2012 due to other retail segments also increasing prices.
The need for all food retailers to raise their prices is supported by a forecast from the National Restaurant Association, which tracks data for full and quick-serve restaurants, bars as well as cafeterias. The NRA reports that wholesale food prices continued to rise in 2012, by 2 percent, making the aggregate increase for the last six years 30 percent, minus a 3.8 percent drop in 2009.