The Pavlic Personal Touch

Success in today’s vending arena means knowing how to pair the best of yesterday’s vending business while offering competitive vending technology. No one understands that better than Rick Pavlic, a 30-year veteran of the industry and CEO of Pavlic Vending, a third generation company that his grandfather started with a tobacco route in the 1940s.

Pavlic believes in the personal touch — in being easy to work with — and it shows. The company’s sales were up nearly 10 percent this year, surpassing the pre-recession high water mark of 2007. Pavlic Vending is the oldest independent in the Milwaukee, Wis., marketplace. It is also one of the largest OCS providers in the area and the local distributor of Avanti Markets. With all this success, Pavlic still believes in being a family business. Customers call and they can speak to a real person — no voicemail — and it’s often a family member. “There’s still a Pavlic at Pavlic Vending,” Rick Pavlic said.

 

67 year vending legacy

Pavlic’s grandfather Victor started the business in the 1940s. He began as a tobacco wholesaler. As demand for the ‘new’ technology of the day increased, he started providing cigarette vending machines to local businesses and taverns. The business evolved into workplace refreshment in the mid-1960s. Pavlic’s father grew up working in the family business and took his turn leading it until his death in 1998. He was profiled in a 1996 edition of Automatic Merchandiser.

Current Pavlic CEO, Rick Pavlic, began running deliveries for the family business when he was in high school. While he attended college, he learned to repair and service machines. In 1982, after graduating with a degree from Marquette University in Business, Pavlic went to work for the vending operation full time. He is the third generation to own and operate the company and he’s not alone. His wife Shae, mother Marge and two sisters, Laura and Linda also work at Pavlic Vending full time. His kids help out as well when they are home from college. Because family depends on the business, Pavlic is very conscious of the return on investments of various purchases, including technology.

 

Hard look at ROI

Technology was not something Pavlic Vending added because it was the latest trend. Each switch had to have a solid business case with a needs versus costs comparison. “We’ve always tried to grow prudently, as well as profitably,” said Pavlic. “I have many people [family and employees] relying on the success of the company.”

In 1994, Pavlic’s father added ChallengeMaster Vending Management Software after carefully considering what was available at the time. The company still uses that system to provide cash accountability, commissions processing and route management.

Pavlic Vending has not yet added handhelds or telemetry, but instead trains its route drivers on how to choose products for the machines and anticipate what will be needed on a route. Nearly all of the Pavlic vending machines accept only cash. In fact, it was just this year that Pavlic Vending added its first credit/debit card readers to machines at the urging of a local high school. Pavlic chose the USA Technologies ePort system and he has seen moderate adoption. “Not a huge portion is cashless — maybe 5 to 10 percent,” said Pavlic. He will likely add more credit card readers now that two tier pricing is available. “It’s more appealing now that I can offset some of the fees,” said Pavlic.

 

Early adoption of micro markets

Prudence doesn’t mean Pavlic doesn’t see any benefits to technology. In fact, three years ago he saw the potential for a relatively new way for vendors to provide service and jumped at the chance to integrate it into his operation. It was 2011, and the new system was Avanti Markets. “It gave me a tingle,” said Pavlic. He visited Avanti-Founder Jim Brinton’s vending operation in Seattle, Wash., to see the micro markets in action and find out about the business model. “I was confident in his [Brinton’s] knowledge and experience,” said Pavlic. He has been selling micro markets ever since as Avanti Markets — Milwaukee.

Pavlic Vending currently operates 15 markets. Pavlic finds core vending products also sell well in micro markets, however, they need to be packaged differently. This is especially true of food. Pavlic has two third-party commissaries make the food. It’s packaged one way for food vending machines and another way for the micro markets, with a different label and, occasionally, ingredients. “I don’t know how much it impacts sales, but micro markets are such a different presentation than vending that people are attracted to it,” said Pavlic. He was the first to offer micro markets in the area.

Pavlic found early on that the toughest aspect of the micro market model was selling it to a location. “It was like trying to get them to take a leap of faith,” he said. This is something that has become easier as more competitors are offering micro markets. Locations are more familiar with the concept.

The biggest surprise for Pavlic was how much back-of-the-house work has to be done with micro markets. It’s not a “set it and forget it” technology. Each SKU has to be managed constantly. “It’s not as automatic as you’d think,” Pavlic said. However, he admits the extra effort is balanced by more revenue once the market is placed, which has fueled much of Pavlic Vending’s recent growth.

Lower maintenance due to less mechanical parts is something Pavlic appreciates about micro markets. Occasionally, a kiosk will experience an error, but it can usually be fixed remotely by restarting the kiosk. Pavlic has also had the occasional compressor failure on a cooler, but breakdowns are minimal — far less than vending. Pavlic Vending’s markets all have food coolers that will automatically lock if the temperature drops below safe levels.

The other thing that Pavlic has noticed about micro markets is that they don’t just appeal to one type of customer. At first, the special packaging and ability to offer specialty items looked like it would be most attractive to white collar locations, recalls Pavlic. In fact, the company’s first micro market was in a law office.

“It was an epic fail,” said Pavlic. He attributes the market’s soft sales to the fact that the lawyers still had an hour lunch break and there were many other food options in the area. However, there was an upside. It forced Pavlic Vending into salad offerings and nicer sandwiches, which has been an excellent addition to the markets in the long run. Per capita, Pavlic sees micro markets success weighted towards blue collar locations, it’s just a matter of getting the product variety correct. Also, the location has to be reasonably secure.

 

OCS variety in micro markets

How to provide coffee in micro markets seems to be unique to each location. Pavlic Vending offers coffee in its markets in three ways. The first is with a standard drip brewer, which customers pay for by the cup at the micro market kiosk. In other markets, Pavlic Vending offers bean to cup machines so the consumer can have a single-cup option. The company also has a few micro markets that use hot drink vending machines. “The coffee is a wild card when it comes to the micro market,” Pavlic explained. He finds many different hot beverage solutions are successful in markets.

 

Coffee equals family passion

Micro markets aren’t the only place that Pavlic Vending offers a variety of OCS solutions. Pavlic inherited a passion for serving great coffee and it shows in all Pavlic Vending divisions.

“It probably started with my dad,” said Pavlic about the operation’s dedication to coffee. The Modern Coffee division was added to Pavlic Vending in the late 1970s as coffee brewers were becoming more common and people showed a preference for pour over coffee compared to vended coffee. The OCS side has grown to include nine different private label blends in 2 and 2.5 ounce frac packs. “We try to promote good quality private label,” said Pavlic. In addition to private label, Pavlic has partnered with several regional roasters, most notably Colectivo, the former Alterra coffee famous in the Midwest and now part of the Flavia line of single-cup coffees.

Coffee represents about 25 percent of Pavlic’s total sales with the majority from private label frac packs. Single-cup has not been embraced in the Milwaukee area to the extent that it has in other cities. “It’s hard to get people to spend 60 cents for a cup when a pot costs a dollar,” explained Pavlic about his frugal marketplace. Still, for those locations looking for the flexibly and variety of single cup, Pavlic offers Flavia. Pavlic has also had success with other bean to cup machines and countertop machines that use freeze-dried, soluble coffee, especially when paired with specialty drinks like cappuccino.

 

Developing the personal touch — drivers

Providing personalized service is something Pavlic strives for in his operation. From the friendly demeanor of the person answering the phone to the drivers making deliveries. “I want customers to know there are real-life people taking care of them,” Pavlic said.

Hiring the right driver is imperative to create the right impression and it takes them a while to develop those skills. “The average tenure of our route drivers is 10 years with our company and they average 15 years in the industry,” said Pavlic. He looks for people with “court awareness” that are personable and take pride in their work. He pays drivers commission and expects them to anticipate what is needed to fill their machines and bring the trucks back empty. “It’s not a rolling warehouse,” said Pavlic.

It’s hard to find just the right person, so Pavlic feels lucky to have great drivers. “We have really good people,” he said. As a thank you, Pavlic invites the employees to his house on the lake for an annual picnic.

Pavlic Vending is a great example of the service-centered family company that people love to do business with. It’s bringing some of the most promising technology to the area while keeping its strong bottom-line. It’s a company with which it’s easy to do business — a motto Pavlic shares with his customers.

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