VendingMarketWatch Blog

Who killed Juan Valdez? Las Vegas police have a suspect, according to the news media.
Whoops! That’s the wrong Juan Valdez.

The Juan Valdez that VendingMarketWatch is interested in was never party to a street drug deal like the Juan killed Sunday in Las Vegas. We’re concerned about the guy with the mule whose image stands for 100 percent Colombian coffee, the one-time gold coffee standard.

Where are you, Senor Valdez? You and your mule got lost in the mountains while Starbucks, Peet’s, Caribou, Green Mountain, Seattle’s Best Coffee, McDonald’s, Dunkin’ Donuts, Folgers, Millstone, Maxwell House, and others changed America’s relationship with coffee. One hundred percent Colombian coffee is no longer the mark of excellence it was!

Dow Jones News recently reported that the money-losing Juan Valdez chain of Colombian coffee shops closed its Times Square branch in New York City on Feb. 28. To understand how out of touch the iconic Juan Valdez has become with the consumer, a spokesman for Colombia’s National Federation of Coffee Growers, which owns the Juan Valdez brand, said the closure was due to changing consumption patterns because of the ailing economy, and consumers buying more coffee from supermarkets to brew at home and fewer coffee drinks prepared in shops. Talk about being lost in the mountains!

Most of the big coffee chains have reported strong growth despite the sluggish economy. That’s because they, along with some of the leading convenience foodservice chains and coffee service operators, have delivered the value consumers are looking for. Coffee retailers are winning despite the recession because they are committed to quality and constantly reminding the consumer they are giving them what they want.

Juan Valdez offers a lesson in failed marketing and advertising. Brands mean everything in refreshment services. To sustain their strength, operators and manufacturers have to continue to support their brands with marketing and advertising. The responsibility rests with both parties; manufacturers must provide the creative messaging, and operators have to use the communication programs that marketing initiatives provide.

Otherwise, grab your mule, pack a lunch and give our best to Juan.

Given the state of the economy, does reading the news stress you out? Probably.
The news is stressful because times are hard. But it’s more complicated than that.
Most of us keep a close eye on the news because we are anxious for signs of change. Hence, we get more stressed.
Those of us who have been here before – such as the big early 1980s recession – already know that signs of progress are murky in the beginning of an economic recovery.
The economy is multi-faceted, and there are usually contradictory trends taking place simultaneously.
Today, for instance, we learn that U.S. banks posted their steepest decline in lending since 1942, which doesn’t bode well for the economy.
Last week, we learned U.S. manufacturing activity has been gathering strength, and major factories are gearing up to rehire workers, a positive economic indicator.
The stock market is moving up and down. One day corporate reports show great gains. Another day it’s losses.
Looking more closely at foodservice, the reports are anything but uniform.
Commercial foodservice continues to suffer as consumers remain cautious spenders. Whether that’s good or bad news for vending and onsite foodservice is a discussion unto itself; it depends on how the individual operator responds.

What can we do?
As a news editor, I feel some obligation to address the stress that these disparaging and disparate reports cause our readers.
One way to deal with the stress is to recognize what we can and cannot do, and make sure we pay proper attention to the former.
I find it helpful to make it a point to check in with friends and colleagues. On days when I’m feeling down, they share a bit of good news that improves my mood.
They, in turn, call me when they’re feeling down. I often find the reasons they are stressed are overblown, and I encourage them to put things into perspective. Doing this makes it easier for me to do the same thing.
Being organized also helps.
Setting goals with an action plan that organizes our time and making sure we stick to that plan are important.
And as part of that plan, reach out to friends and colleagues. 
 

The recession has driven the nation’s fast food chains to new strategies to win consumers. Their actions are instructive to refreshment service operators who face the same cost pressures in this recession.
One immediate lesson is that the big players have recognized the importance of good quality coffee.
Yesterday, Burger King announced it will add Starbucks Corp.’s Seattle’s Best Coffee to all its U.S. restaurants in a phased roll-out that begins this summer. The nation’s number two fast feeder is responding, belatedly, to McDonald’s McCafe offering, launched almost a year ago.
Chick-fil-A, Hardee’s and Subway have also switched to better coffees in recent months. Hardee’s and Chick-fil-A developed their own premium coffee blends, while Subway, like Burger King, is transitioning to Seattle’s Best Coffee.
Meanwhile, the fast food giants have struggled with one of their core offerings, their double cheeseburgers.
The price of a McDonald’s Double Cheeseburger recently went above $1 in many markets after the company replaced the item on its Dollar Menu with a double burger with just one slice of cheese.
Burger King also decided to raise the price of its $1 double cheeseburger to $1.19 starting in April. The chain’s franchisee association filed a lawsuit alleging that the company can’t require restaurant operators to sell the sandwich for $1 and that they are losing money at that price.
The big fast feeders have struggled to convince consumers to pay premium dollar for one of their core sandwiches. But they can win higher prices for premium coffee.
Refreshment service operators should know by now that high quality coffee is one core product for which they can charge a premium price.  
McDonald’s has consistently delivered strong financial results during the recession. It has done so by providing and marketing value, consistently and aggressively.

Feeling confused about calorie disclosure mandates for vending machines? It’s understandable, but don’t let yesterday’s news distract you.
Yesterday was a busy news day on the calorie disclosure front. The President and the First Lady introduced their “Let’s Move” campaign to battle childhood obesity.
The beverage industry announced its commitment to make calorie disclosure clearer on 20-ounce bottles and to include calorie information on vending machine selection buttons.
In the meantime, we have been wondering when and how the government will require disclosure on vending machines in ALL locations.
The vending industry doesn’t like being in the public eye, especially when the mandates implicate vending for making consumers unhealthy.
Don’t be confused.
Calorie disclosure is still in the works.
Scott Brown’s recent Senate victory in Massachusetts slowed down the health care reform measure. This is the bill that requires vending operators who have at least 20 machines to post calorie information at the point of sale.
But the mandate is still coming.
NAMA has kept a close watch on this mandate, and NAMA reports that with health care reform less certain, federal lawmakers have added calorie disclosure to the food safety bill, which is currently in a joint House/Senate committee.
It remains uncertain how vending operators will be required to meet the requirement.
Vending operators will be facing calorie disclosure requirements, but the details are not yet clear. In the meantime, if you haven’t joined NAMA, the group that’s looking out for your interest, join. That’s the least you can do.

For several years, we have cited the country’s declining manufacturing base as one of the biggest challenges facing automatic merchandising, since these locations have long been the biggest and most profitable customers.
And while the manufacturing sector continues to decline, our magazine’s State of the Industry Report has noted that manufacturing remains the single biggest customer segment for automatic merchandising.
Yesterday’s Wall Street Journal carried an analysis of the state of U.S. manufacturing that sheds further insight on this key customer segment. The report noted that “heavy” manufacturing, such as automobiles and basic chemicals, has given way to higher-tech concerns such as computer chips. To access this article, go to: http://online.wsj.com/article/SB10001424052748703338504575041510998445620.html
The industries that have added capacity during the recession include: semiconductors, communications equipment, computers, electricity, and oil and gas.
Those that have cut capacity are: plastic and rubber products, motor vehicles/parts, furniture, printing and textiles.
The Wall Street Journal essentially notes that the recession has hastened some of the key changes taking place in the nation’s employer base.
What this means for vending is that many of the largest customers require a more professional service. The manufacturing concerns that are growing have more white collar workers, and these consumers are more demanding than their blue collar counterparts. Vending operators have to understand their needs.
White collar accounts typically give their employees more time for breaks and allow them to leave the worksite.
The white collar customer is often more health conscious than his or her blue collar counterpart, and often more quality conscious.
White collar workers usually want better coffee.
Growth will occur through improving customer satisfaction. This will require understanding the new customer.
It will also require using technology to better understand customer needs and to respond to customer needs faster.

A difficult business climate can challenge one’s commitment to quality, which is something everyone in our industry claims to focus on. I recently had a conversation with a product supplier about the impact the economy is having on his business. He commented that the recession has made refreshment service operators more aggressive price shoppers than any time in recent memory.
I argued that coffee service operators have learned from history the importance of not “commoditizing” their product, which is why coffee service sales have held up better than vending sales in the current recession.
During the 1970s, many coffee service operators switched to lower pack weights to save costs. Their sales suffered, and it took years before they learned to focus on quality. Once they did, their sales and profits recovered.
Coffee service operators, I claimed, recognize the consumer’s demand for a quality coffee service and know they must provide high quality products.
The supplier responded that coffee service operators, as a rule, will change their buying plans if they can get a lower price.
I, in turn, responded that operators always want the best value for their money, but based on all evidence available, they have not “traded down” to lower quality products. I further suggested that because a lot of coffee service today is provided by vending operators (as opposed to dedicated coffee service operators), these operators are less quality focused.
I maintained that dedicated coffee service operators are not trading down en masse, evidenced by the fact that coffee service sales have held up much better than vending sales during the recession.
I suggested that it may be difficult for a supplier to see the distinction in behavior between dedicated coffee service operators and vending operators who do coffee service.
We continued our discussion for a few minutes more and ultimately he did agree with my observations.
But I wondered: Operators, like their suppliers, are facing a more cost conscious customer these days. Some customers are asking for new options to save costs.
Operators and suppliers alike need to realize the demands are more diverse than ever, and this calls on them to listen to customers more carefully.

Back on 11-18-09, I asked vending operators to give me one good reason why they don’t belong to a national or state vending association. Not one operator offered a reason.
Association membership has hit an all-time low, and supplier members are picking up a disproportionate share of  the tab.
If any operator remains unconvinced of the need to support their associations, the Tri-State Automatic Merchandising Council meeting in King of Prussia, Pa. last week gave some strong reasons. Several speakers updated attendees on some critical national and state initiatives that have major consequences for vending operators.
Pam Gilbert, manager of the National Automatic Merchandising Association (NAMA) eastern office, gave an update on how NAMA is trying to make the calorie disclosure rule in the national health care bill manageable for vending operators.
Any operator who hasn’t paid attention to this requirement, which is expected to become law in some manner, has had his head in the sand.
Tom McMahon, former NAMA chief counsel who is now working on retainer for the Tri-State council, reviewed efforts to change the 48-inch vending machine access rule in Pennsylvania. This rule has already been enforced in newly-constructed buildings and it has the potential to become a major headache for all Pennsylvania operators if it isn’t resolved.
With legislative and regulatory issues like these to contend with, vending operators need to reconsider their apathy about joining associations.
Operators are struggling financially, but they haven’t seen anything yet if these issues aren’t resolved.
And it isn’t going to get done without associations.
Most operators consider themselves ethical business people.
So I ask: is it ethical to allow a minority of operators foot the bill for everyone else?
Do your part now!

Over the past two weeks, a veteran vending operator presented his doubts about vending technologies introduced in recent years. Dominic Finelli, owner of Custom Vending Services in Beltsville, Md., expressed doubts about pre-kitting, remote machine monitoring, item level reporting, tracking column sales and cashless vending.
Based on the number of podcast downloads, many of you listened to what he had to say.
Some of you – operators and technology providers alike – asked me why we hosted these interviews.
If technology is important to the industry’s future, shouldn’t we all support it?
Why should VendingMarketWatch give a forum to a skeptic?
My answer is twofold:
1) Dominic Finelli is an experienced, successful operator who pays careful attention to his financial information, and he is not convinced the products being marketed will deliver the promised results.
2) He is not the only operator who believes industry forums have not done enough to challenge the claims that technology providers make about their products. Many operators hold this view.
I do not agree with the second point, but I realize many operators believe it, so I feel an obligation to discuss it.
New technology tools are expensive, and they take a lot of study.
Depending on a company’s operating procedures, introducing technology can require changing established procedures. There is usually a lot of training involved.
Introducing technology also relies on good communication between the provider and the customer. 
During the podcast interviews with Dominic Finelli, I invited all technology advocates to come forward if they want to answer the questions raised. Several providers took me up on my offer.
They are preparing their responses.
In the meantime, if there are other industry issues anyone feels need further exploration, please let me know.
These podcasts are educational for all involved.

Adversity is part of being in business, but some people in our industry recognize it as a fact of business life. Talking to these people can invigorate you.
I checked in with my old pal, Charlie Ray of Ray Coffee Service in Savannah, Ga. Charlie turns 69 this month and he’s operated his two-man business since 1970 and he’s weathered the ups and downs over the years.
Charlie was on a roll last year before the recession pulled the rug from under his feet. His biggest account decided they no longer wanted to provide free coffee. Charlie had just placed a lot of single-cup brewers at this account. Then they decided to cut expenses. Charlie’s only option was to install payment mechanisms on these machines. This meant an added expense with the understanding that sales would be cut in half.
The customer wanted to offer payment cards to employees so they could cover some of the cost of their office refreshments.
Charlie studied up on his options. He learned about prepaid card systems from Vendors Exchange International Inc., Microtronic US, and Multi-Max LLC. He ended up investing six figures in prepaid card systems.
And the big customer has loved it. It has also helped Charlie recover some of his sales and given him something new to offer his other customers.
Getting into cashless wasn’t easy. Charlie is turning 69 and he isn’t the most technology savvy guy in the industry. But he knows the importance of educating himself. He was one of the first coffee service operators to introduce single-cup brewers in Savannah.
By listening to customers, Charlie also learned that many of them want to be able to place orders online, so he recently launched a superb looking Website, http://raycoffeeservice.com.
What’s great about guys like Charlie is they prove how great our industry can be. There are always new and better ways of doing things that allow an operator to be the solution provider for his customers.
Times may be tough, but opportunity abounds.

Those of you unfamiliar with the U.S. Mint’s free coin delivery program might be missing out on an opportunity to earn credit card miles to pay for travel expenses.
 There are several Websites that share information about earning frequent flyer miles. One informative Website is www.flyertalk.com.
The Mint offers Presidential dollar coins and Native American dollar coins in 25-coin rolls packaged in quantities of 10 rolls per box with a face value of $250. Customers can order a maximum of two boxes, for a total of 500 Native American dollar coins. The Mint pays the shipping and handling fees on orders delivered via standard shipping methods.
Pat McAfee, director of the Mint’s Office of Dollar Coin programs, told me the vending industry has made good use of the free shipping program, which has been in effect since June of 2008.

The Mint’s concerns about the program
The tactic of ordering large quantities of dollar coins to earn travel miles has become so popular that the Mint is trying to crack down on letting people benefit from the free shipping just to rack up miles. In the meantime, dollar coin availability from the Mint is at an all time low.
Don’t confuse the current shortage of dollar coins with the Mint’s efforts to crack down on people ordering coins to rack up miles.
You may have read recently that credit card companies are going to stop awarding miles on dollar coin purchases.
In his conversation with me, McAfee confirmed that the Mint is working with credit card companies to try to stop people from racking up free miles for dollar coin purchases. At this date, nothing’s been finalized.
He also told me that the Mint wants to continue offering free shipping of dollar coins to vending operators.
As far as the dollar coin supply is concerned, McAfee said he expects dollar coins to be available in two weeks. He noted that inventories do get low periodically.
For information about the program, go to www.usmint.gov.