The Coffee Summit in Cherry Hill, N.J. once again hit a bull’s eye. Some thought there was no way that the 2-day education summit could repeat the outstanding success that it delivered last year, given the state of the economy, but it did. In fact, as a second-time observer, I can attest the response surpassed last year’s in both attendance and quality.

In a challenging economic time such as the present, industry organizations have to get members to think more creatively, and the National Automatic Merchandising Association certainly accomplished this at the recent Coffee Summit.

One thing that business owners have to remember is that every change brings new opportunity. Those who are embracing this today are succeeding.

There is a lot to say about the Coffee Summit, and for the purpose of clarity, I’m only going to focus on one aspect of it in this blog – the eye-raising keynote presentation from Leo Fante of Consumer’s Choice Coffee in Louisville, Ky. An upcoming edition of Automatic Merchandiser will summarize the other sessions at the summit, which covered marketing, team building, the future of single cup, and new consumer data.

The keynote presentation was titled, “Excellence in Coffee Service.” Leo Fante, director of business development at Consumer’s Choice Coffee, gave a video presentation of customer testimonials about the quality of his company’s customer service. This was a very uplifting presentation. The purpose was to demonstrate for coffee service operators the full meaning of endearing customer service. Nothing can communicate this as effectively as customers speaking for themselves.

Fante noted that customers are rarely heard from at industry events, and he felt that input from customers would be useful to operators.

Prior to presenting the testimonials, he noted that his company’s mission is “to be the best.” “I want to be the very best vendor that location has, period,” he noted.

The testimonials included several high profile accounts, all of whom spoke glowingly of Fante’s personal passion for coffee excellence. “There should be a Leo Fante with all my vendors,” one customer stated.

Fante then related how he attempts to impart his passion throughout his organization.

The message challenged the audience. Not everyone was favorably impressed; some felt the presentation was too much about Leo Fante. But even for those who felt put off by the emphasis on Leo, the message hit home. We are in a people business, and to succeed, you or someone in your organization has to be a company cheerleader. Fante gave a great example.

Every company has its own unique strengths. Not every company has the passion that Consumer’s Choice Coffee has in Louisville. Whatever a company’s strength may be, it can and must use it to its best advantage.

Fante asked his listeners if they have a mission statement, if it’s “to the point,” and if all team members can recite it.

He ended his presentation by challenging his listeners to gather their own customer testimonials and bring them to the next Coffee Summit to share with their colleagues.

The presentation set the tone for the entire summit, which served as a 2-day brainstorming session. Coffee is about passion, and one man demonstrated how he conveys that passion to his customers.

Would anyone who was in that room want to be competing against Leo Fante?

Last week, I received a call from a California state official who oversees the state’s blind vending contracts. He was seeking input on establishing guidelines for vending operators bidding on contracts that support the blind vending program. His concerns give me reason to believe that technology will be making faster inroads in our industry in the next couple of years, despite the challenging economy.

In April, I noted in this space that remote machine monitoring offers a tool for making sales reporting more credible. I was not specifically thinking about blind vending contracts when I wrote this, but this recent phone call from a California official alerted me to the role that remote monitoring can play in both improving the blind vending programs and opening up a business opportunity for vending operators. And not just blind vending operators.

For those of you who are not familiar with blind vending programs, a federal law known as the Randolph-Sheppard Act gives legally blind individuals preference in state and federal government vending contacts. The law is administered by the states.

The blind vending programs extend well beyond contracts awarded to blind vending operators. The programs have authority over many federal, state, and oftentimes local government locations. There are many sites for which no blind vending operators are available. Hence, these locations are contracted to non-blind vending operators who are required to pay a percentage of the earnings to the state, which in turn uses the funds to support programs that help the blind.

It is estimated that about half of the locations administered by state agencies are awarded to non-blind vending operators.

As with any government program, these initiatives have varying degrees of success.

The California official who called me said he is concerned about vending operators underreporting sales. “We know for a fact they’re underreporting; we can’t catch them,” he said.

He isn’t only concerned about not receiving the proper commission. Because the winning bids have usually offered very high commissions, many vending operators don’t bother to bid on them. California recently received a bid that promised a 54.6 percent commission.

This official realizes that unrealistic bids have discouraged good operators from competing for them. As a result, he suspects many locations aren’t getting the best possible service.

While he thinks there is no foolproof way to audit sales, he believes that a set of operating guidelines would help, which is why he called me. I referred him to the National Automatic Merchandising Association’s operating ratio report for realistic operating averages.

But there is an even better solution to his problem: technology.

Technology has already addressed this issue in some states and stands ready to make an impact in others.

Cantaloupe Systems, a provider of remote monitoring technology to the vending industry, has helped four states improve their blind vending programs: Colorado, New Hampshire, Tennessee and Georgia. South Carolina and Pennsylvania recently came on board.

Cantaloupe Systems reports that close to 600 of its Seed boxes have been installed in machines that enable government officials to monitor sales. In most of these programs, the states cover the cost of the Seed boxes. In some cases, they also cover the monthly monitoring fees.

David Ramsey, a blind vending operator based in Concord, N.H., was able to double the size of his business, The Lunch Place, using the Seed boxes. The purchase of the hardware was covered by the state while Ramsey covers the monthly monitoring fees. “It allowed me to make that jump to a much larger route,” he said. He currently services about 80 machines under blind services contracts. Ramsey said the Seed box made it easier to track his sales in addition to allowing him to expand the business.

Ramsey said he was initially interested in reducing his delivery costs. Once the Seed boxes were installed, he was able to switch to a smaller vehicle, which yielded an additional fuel savings.

Just a few weeks ago, the state of Pennsylvania issued a bid covering all of the postal facilities in that state which requires independently monitored wireless systems in all locations. With budgets tightening in almost every state, similar programs could expand around the country.

These programs are a good investment for the states. Not only do they provide independent verification of sales data to prevent underreporting, they also track service data that can be used to measure operator performance. Since the operator bidding on the contract knows the state has a way to verify the sales, they have good reason not to bid unrealistic commissions.Vending operators don’t have to wait for state governments to offer them the use of remote monitoring devices. Operators can bid on contracts and note in their bids that they use the technology to verify sales.

In addition, operators need to think beyond winning bids to harness the opportunities wireless data can provide in reducing operational costs and increasing route efficiencies. Combine the two, and you have an explosive combination for better profit margins.

Many operators are cynical about bidding on government business based on past experience. Dishonest government officials and dishonest vending operators exist and have undermined what would otherwise be an outstanding business opportunities for vending operators.

But it doesn’t have to be this way.

What better way to respond to these challenges than by creating a vending program with complete transparency?

Investing in technology is expensive, and today’s operating environment is not an easy one. But at the same time, operators have to consider all of their options for getting more customers. The government customer base is more stable than the overall customer base right now.

G&J Marketing in Palm Harbor, Fla. held one of its educational conferences a few weeks ago in which 60 industry members brainstormed ways to make this industry more profitable. Actually, the range of topics covered was a lot more extensive, but the underlying purpose for all attendees was to agree on what to do about this very challenging business environment.

A summary of this 2-day meeting was prepared by Dr. Ron Cichy, a presenter at the conference and a director and professor at the School of Hospitality Business at Michigan State University, Dan Mathews, senior vice president and chief operating officer at the National Automatic Merchandising Association, and Greg Sidwell, president of G&J Marketing. Their summary is available on VendingMarketWatch 05-11-09.

It’s encouraging to see so many operators and suppliers recognize the need to invest their time and money in identifying new and better ways to do things. It’s one thing to complain about conditions, but quite another to get off your duffer and do something about it. These individuals recognize the situation is challenging, but not hopeless. They returned from the 2-day meeting with some concrete ideas to put into action.

Every business owner needs to have a long-range business plan. This is a given. In challenging times like the present, the business plan serves as a road map to success (and possibly survival). The plan is a document that allows you to organize and manage your thoughts and your resources. It has always amazed me how many vending and coffee service operators ignore this basic business tool.

The G&J meeting in Atlanta uncovered numerous strategies operators can use to improve their companies.

Not only were operators in a position to learn from one another, but there were also business experts such as Michigan State University professor Ron Cichy leading seminars on important business topics.

The conference was invigorating. The ideas will only help those who put them into action, and here is where the business plan comes into play. A formal business plan gives the owner a tool for putting ideas into action. The plan itself is something that can only be useful if it is actually used. But without it, the business owner is lost.

There were more ideas that came out of that conference than an operator can hope to “get his hands around” in the short term. A business plan allows the owner to set goals and strategies for achieving them. Big goals in particular require planning.

The ideas that came out of that conference were similar to those that our staff at Automatic Merchandiser hears in conversations with operators and suppliers regularly. Many industry members recognize the big challenges facing this industry. Many realize that the industry needs to become more professional in order to become more profitable and more relevant to the customer base.

Getting the industry to that point takes commitment, and it will not happen quickly. But it will happen.

Congratulations to the organizers of the G&J Marketing conference, and to everyone who made the time and investment to attend.

There are many ways technology allows our industry to become more professional. It gives our industry the ability to make giant strides as a retail channel and even surpass the performannce that competing channels provide.

One improvement that needs to be made is the transparent reporting of location sales. In April of 2007, our cover story addressed this topic under the headline: Will technology catch the R factor? Some members of the industry objected to this focus since they believe it better to ignore an issue that makes our industry look bad. But the issue needs to be addressed before we can expect the same level of respect as other retail industries.

The R factor is closely related to another major problem that needs to be addressed, and that is exorbitant location commissions. In many cases, the commission rate significantly exceeds the operating profit.

Commissions are a long established part of the business, and they aren’t going to disappear in one day. But operators can reduce commissions and begin a process to diminish their impact on the industry. The current state of the industry gives this challenge new urgency.

The biggest complaint we hear among operators today is that profits are hurting. Operators cannot make enough money to reinvest in their businesses.

The National Automatic Merchandising Association took a major step last year in expanding its industry ethics campaign. The tool kit that NAMA introduced is designed to support honest reporting of sales to locations. It is also designed to make customers aware of the need for honest reporting. The tool kit includes a variety of materials operators can use to help show accounts how they can identify unethical operators. 

Many operators dismiss NAMA’s initiative as an exercise in futility. Many feel that if a program can’t provide an immediate fix, it’s a waste of time. This is short sighted thinking. The industry’s challenges today require long-term action.

NAMA’s industry ethics campaign is designed to support honest sales reporting. Integrity in reporting is an issue that is closely intertwined with commissions. Operators who are concerned about commissions, which includes most operators, should do more to educate customers about honest sales reporting. There is a lot that can be done in this area. Any improvement will give operators more opportunities to compete on a fairer playing field and at the same time improve the industry’s professionalism.

In every region of the country, major contracts stipulate prices and commissions that do not allow the operator to make a fair profit. Some contracts stipulate 30 percent commission on 20-ounce bottles priced at $1.25. Some commission rates are even higher.

How are these operators able to stay in business? It doesn’t take a rocket scientist to figure it out.

It would be hard to estimate the amount of money that is underreported. The problem is national in scope.

Technology provides a tool to address this situation. As with the NAMA ethics code, technology does not provide an immediate fix for every situation. But it can make a difference in many situations.

Most of the big contracts with double digit commissions are let by public institutions. In many cases, the location manager does nothing to verify the accuracy of the sales reports. In some cases, the location manager doesn’t care about the accuracy of the reports, and in some cases he or she doesn’t want to know the real numbers.

Operators do not have to accept this situation. Big public locations are responsible to the public. Operators can request that contracts require the location to formally report the sales. Again, this isn’t a cure all, since reports can be fabricated. But it gives an outside party the opportunity to review the numbers and possibly challenge them.

Government accounts only represent a small portion of the vending business, but cleaning up the sales reporting in this segment would be a good first step in improving the industry’s business practices. It would also make the private sector more aware of the problem.

Unfair commissions and dishonest sales reporting are problems that our industry can no longer tolerate. Given the recently introduced NAMA tool kit and the capabilities of new technology, the industry has the means to take corrective action.

I hate to say it, after all the years of hard work our industry put in on this subject , but, I agree with this guy.  The Dollar coin is a losing battle, NAMA needs to let it go and focus their time and energy achievable bottom line issues. 

Friday, December 19, 2008 5:38 AM EST (excerpt)

By Richard Miniter
Times Guest Columnist

NAMA’s members expect their operational costs to drop dramatically if dollar coins are the norm. Since coins tend to take up less room inside machines than bills, collection personnel can make fewer stops at vending sites.

At a July hearing held by the House Financial Services subcommittee, NAMA president Richard Geerdes claimed a switch to dollar coins would save “the American taxpayers at least $600 million a year.”  But this year, according to the Federal Reserve, the entire budget for printing all U.S. currency is $578.5 million. So unless Geerdes is actually advocating the elimination of the nation’s entire monetary system, it’s safe to say his figure came out of thin air.

The pro-coin lobbying push is not only bad for taxpayers; it also undermines the interests of the vending-machine operators NAMA claims to represent. Today, more Americans are using credit cards than ever before. Instead of pushing for dollar coins, NAMA should be encouraging its members to invest in technology to allow credit card purchases at vending machines.

Yet at the behest of special interests, the federal government persists in spending millions trying to convince us that we should. This campaign for change is costing taxpayers dearly. It’s time for lawmakers to use a little common sense and say, “no thanks” to the dollar coin.

(forwarded by)

Tom Britten
Analyst . Intermediary . Consultant
Britten Management Services, LLC
3922 Bubba Drive, Zephyrhills FL 33541 Phone 813.469.5437
Fax 813.783.7908
E-Mail tombritten@msn.com

Do you do REviews or PREviews at your company?

Are you still trying to predict the future from past performance?  How is that working for you? 

You look back and see ALL that happened, but you don’t know WHY it happened, right?   

• Performance REviews: see only what happened yesterday, not why.

• Performance PREviews: see what will happen tomorrow, based on an employee’s skill set today.

The Wall Street Journal says “Instead of stimulating corporate effectiveness, they [performance reviews] lead to just-in-case and cover-your-behind activities that reduce the amount of time that could be put to productive use”

Managing employee performance is like trying to catch water with a sieve.  

A REview of past performance is no indicator of future success.  Rather, it usually finds there were (or may still be) performance shortfalls that caused objectives to not be met.  The REview does NOT tell you  WHY the objectives  are not being attained or, as important, how performance might be improved to help attain the objectives.    

Today all operators have the capability to do Performance PREviews.  These are appraisals that CAN affect future performance because they show WHY an employee may be lacking in performance.   

Some PREviews include Coaching Reports for employees (think instruction manual for EVERY employee) that identify strengths and growth opportunities, not a REview of past results.

For more information on PREviews vs. REviews, comment or raise your hand on this blog, and I will help find the best solution for your company.

Stop looking backward; ……..Start looking forward! 

Happy Holidays to all!

Dave McCaffrey

For vending and onsite foodservice operators: Some good news and some bad news.

You are in a self-service business. There are three big questions for you to consider:

1. What exactly do my customers expect when they shop at my vending machines or foodservice operations?

2. How well is my company doing in delivering a great shopping experience?

3. What else do my customers expect and how can we deliver on those expectations?

It’s been a tough business climate for vending and onsite foodservice operators in 2008. Along with the bad news, there is good news. Let’s look at what’s going on – good and bad.

First the bad news: The U.S. economy is not doing well. All of your costs are up. Gas prices, while down recently, are well above what you budgeted for as you planned for 2008. The products you’re buying are increasing in price. Let’s not forget that your suppliers are also facing increases in their costs.

Sales are flat or even down for the past few years according to industry reports. The people shopping at the sites you serve are also feeling the economic pain. They’re cutting back on what they spend. The decision-makers at the locations you serve have become even more resistant to price increases.

What this means in your business: Sales growth is tougher than ever. Costs are up. This is the toughest economy for the food industry in many years – especially so for vending and onsite foodservice operators. It’s going to take new solutions to get out of this situation.

For vending and onsite foodservice operators: Some good news and some bad news.

Despite the bad news – there is some good news hidden within the bad news: There are opportunities you can capitalize on – if you recognize what’s happening and understand how to capture more transaction. Economic reports indicate that people are driving less. They’re making fewer trips and driving fewer miles each week. That means that there will be more people staying at work for lunch and breaks. College students going back to school in the fall will have less discretionary cash to spend. Their parents won’t be able to give them as much extra money as in the past. That might mean a cutback in late night pizza delivery orders. What new and different things are you doing to offer more late night snacking choices?

Technology is changing the way we all shop – presenting an opportunity for you to enhance your service to your customers. In many other convenience food shopping situations, we’re seeing technology applied to deliver new customer service applications and improved service. Kiosks in convenience stores allow shoppers to customize a sandwich or salad order. It saves time for the service staff – no need to take orders from each individual shopper. It simplifies the ordering process and absolutely eliminates errors – the customer sees a screen summarizing what was ordered and can change it if necessary before finalizing and approving the order. Supermarkets are doing the same at deli service counters – to eliminate the long delays and frustrating waiting periods until your number is called.

What this means in your business: Technology is perhaps the biggest opportunity for vending and onsite foodservice operators. This is more than route management and demand management software applications. Those cost savings benefits are real and can deliver a meaningful productivity gain on your bottom line. If you think about in terms of a restaurant – those are “back of the house” systems. Those applications are very important and are tools every vending and onsite foodservice operator must address immediately.

But the unrealized opportunity is in the “front of the house.” How do we make the vending machines and service counters better shopping environments?

We saw a new perspective on how technology is being applied in consumer marketing – for retail locations. At the Self Service & Kiosk Expo we saw the latest and greatest in new kiosk technology. More about what this means for vending and onsite foodservice operators in my next posting.

September 23, 2008, 10:30 am

When I joined The New York Times, a couple of things surprised me. One was the collegiality of the newsroom (let’s face it, everyone expects this
place to be a snake pit). Another was that a vending machine candy bar costs $1.25. Yes, $1.25. At other places I’ve worked, the same item typically would have been 75 cents. That’s an increase of 67 percent! I’ve been wondering if the mark-up is simply because of higher New York prices; before coming to The Times, I had worked mostly in Washington. (By the way, I’m temporarily working from the newspaper’s Washington bureau, where a candy bar costs 75 cents.)

My leading theory, though, is that unlike most vending machines, those in The Times’s New York office take prepaid debit cards. Pretty much any food item on sale in the New York building — through the cafeteria or the vending machines — can be purchased through FreedomPay, a cashless card system in which employees and guests pay with the swipe of a prepaid card. I wonder if the resulting absence of cash from the transaction makes buyers less sensitive to pricing.

We’ve already put the money on our cards, so it feels like a sunk cost; and besides, we aren’t physically fumbling around for nickels and dollar bills, so we’re missing the tactile cues that make us conscious of how much we’re spending. Credit and debit cards have been known to make people more footloose and fancy-free. And studies have shown that the installation of E-ZPass, an electronic, cashless toll system, has led to higher tolls.

Then again, maybe the vending machines I’d previously battled had unusually low prices. So I’m hoping you all can help me unlock the mysteries of candy-bar economics. Some question for our readers:

(1) In the vending machine nearest to your workstation (if there is indeed such a machine), how much does a standard-size Snickers bar cost? How about a bag of chips? (Leave convenience stores, pharmacies and cafe aside; their prices should be higher because these establishments have higher overhead costs.)

(2) What city do you work in?

(3) Does your vending machine take credit or debit cards of any kind,
or is it cash-only?

COMMENTS by Tom Britten (the vendor defender)

I was bothered by your vending machine cost comparison direction to “leave convenience stores, pharmacies and cafe aside; their prices should be higher because these establishments have higher overhead costs”

With all due respect to your well established expertise in economics Catherine, maybe, you could use a little lesson in the seldom understood field “candy bar” economics.

The vending business is a “buy it by the mile sell it by the inch” business that involves huge numbers of small transactions over wide distribution areas. This involves precise logistical planning and management of how candy bars are moved, especially in metro areas such as New York and Washington. This required micro distribution of products is in itself a major overhead cost unique to this industry.

Vending companies don’t manufacture the products they sell, they merely purchase and resell, and accordingly they are allowed only a small mark-up over prices changed by Hersey, Frito, Pepsi and the like.

In reality, the manufacturers set the price of the candy bars, the vending company does not.

The skilled service people who replenish the machines when candy bars are sold are well paid career employees with medical insurance and full benefits. Compare that to convenience stores, pharmacies overhead costs.

You ask why prices for the same candy might be different from Washington to New York. Accommodating credit card purchases of candy bars does in some cases increase sales; however, the cost of telemetry and credit card company’s transaction fees negates any bottom line effect. Your theory, relating higher selling prices to the availability of cashless purchases is flawed. The most-likely reason is the commission on sales that your vending machine company pays to your employer.

I suggest you add this to question for your readers: How much less would a candy bar cost if the vending company didn’t have to pay a commission?

Tom Britten (the vendor defender)

Tom Britten
 Analyst . Intermediary . Consultant
3922 Bubba Drive, Zephyrhills FL 33541
Phone 813.469.5437
Fax 813.783.7908
E-Mail tombritten@msn.com

A study published by Harvard Business Review indicated that normal ‘performance indicators’ (education, experience, sex, gender, race, age) are NOT what cause a person to fit their job and become a superior performer with an increase in productivity and a decrease in turnover.

The study (360,000 employees over 20 years in 14 industries) concluded the factors that cause a person to fit their job are how well the respective person matches the needs of each job with regards to: mental capabilities, behavioral traits and occupational interests.

As we all know, success in any job is related to how well the person does the job.

However, the measurement of success in any job (sales volume and/or profit are commonly used measures along with inventory value, orders filled completely, etc) does not tell us WHY someone was successful or not, they just tell us IF the person was successful or not.

How well any person does in any job is DIRECTLY related to the learning skills required by the job, the behavior necessary in that organization, and the interests needed to stick with the job COMPARED to the capability of the respective employee.

In most companies, top performers have more productivity (at least 60%) and less turnover (up to 300% less) than average workers. Thus the connection between Job Fit and productivity and turnover is clear: the better the job fit, the higher the productivity and the lower the turnover.

Since top performers capabilities CAN be measured with regards to learning, behavior and interests in any job, a job pattern can be established that indicates what the job requires. Once the pattern is established (every job in every company is UNIQUE), potential candidates (or struggling incumbents) can be compared to the pattern to determine job match.

If a high job match is present, productivity goes up and turnover goes down because the employees LITERALLY fit their jobs.

If a low job match is present, productivity goes down and turnover goes up because employees can’t do the job (mental), can’t do the job the right way (behavior), or won’t do the job (lack of interest).

Unfortunately, an interview is the most common hiring process toda, which finds a top performer less than 15% of the time. In other words, the process fails to find the top performer you are looking for more than 85% of the time. Talk about a dysfunctional process!

If you are coming to St. Louis for NAMA National in mid October, I would recommend you plan to check out the HOT TOPIC presentations that are presented during show hours at the main NAMA both. You can be face to face with experts that CAN help your business, and ask them the questions you always want to ask….but never have the chance.

Coming next quarter: How your hirning process impacts your bottom line!

“See you in St. Louis, Louis”…..travel safe!

Sincerely,

Dave McCaffrey

Thank you for your recognition that Employee performance management is an important tool successfully used by best in class companies.

As you state, and I agree, many best in class companies also use objective measures of employee performance as well, including mystery shopping programs. I also agree that when used correctly and positively, this type of program can objectively measure employee performance on an ongoing basis, allowing managers to provide feedback and additional training where needed as issues arise versus waiting for a performance review.

While mystery shopping will measure employee performance in an objective manner, it cannot tell the company WHY the employee is not doing the job properly. Was it a training issue? Is it a management issue? Unless job fit is determined, all we can see is the fact, yes, through mystery shopping, that the performance is lagging when compared to company standards and objectives. However, the real information needed is WHY the performance may not be known at this time.

What you will see in our next post is the relationship between Job fit (a.k.a job match), productivity and turnover. Once a standard of success for a particular position is established, it becomes much easier to define the ‘WHY’ component of success in any position in any company.

Thanks again for your comment!

Sincerely,

Dave McCaffrey