VendingMarketWatch Blog

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.

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

During my visits with operators regarding cashless solutions invariably the word “cost” comes into the conversation. “How can we absorb more costs when our current bottom line profit is so small?”

 First determine how you can make more money in your accounts with a cashless solution.

• Price increases

I have been told that the average reduction in unit sales after a price increase is around 15% to 20%. I have seen time and time again when a cashless solution is implemented at the same time prices are increased, unit sales stay the same. As an example, you have a beverage machine that sells 100 units per week at $1.00 with a 6% sales tax and 10% commission and a case price of $15.00 (62.5 cents per unit). You raise the price to $1.25 and lose 20% in sales, you will gain $650 in annual profit. If you take the same scenario but install a cashless solution and maintain unit sales, you will see a $775 increase in profit after all the costs for cashless are taken into consideration. You will see an increase in profit of $940 if the account absorbs the processing and monthly service costs.

• Sell higher end items

I have visited operators who are using one machine to vend traditional beverage and snack items and other machines to sell higher end items such as energy drinks and teas and higher quantity snack items. By “mixing up” the pricing structure in a category, the price increase process becomes much easier as all items are not priced the same. Simply add new higher end items to maintain margins. Cashless will help you guarantee that you do not lose these high end sales due to the fact that the customer does not have the cash in their pockets.

• Have the account pay for part of the cashless expenses.

Many operators and bottlers are selling their accounts in such a way that the account picks up part of the expense for the addition of cashless to their machines. But the account must believe that there is a benefit for them to have a cashless solution on their machines. During the “price increase” meeting, explain to the account that we must go to $1.25 on our beverages. The convenience store down the road is at $1.39 plus tax., we only want to take price to $1.25 including tax.. We know how hard it is to buy something from a vending machine when the price is over $1.00. We have been thinking of installing a cashless solution using debit and credit cards for your employees (students, visitors). How do you think this could be of benefit to your employees (students, visitors)?

An answer you might get is that we have a young work force and they do not carry cash. Another might be that we would like healthier items in the machines but we know they tend to have higher prices. Another might be that we depend on the commission dollars and that a credit / debit card solution will allow you to sell higher priced items thus higher commissions for us.”

Your answer is “You are absolutely right in that this would benefit your people in these ways. Let me share with you our costs associated with implementing such a program. First the hardware cost is $???, the card processing fee is a certain percentage and our supplier charges a certain dollar amount per month for the cell phone and card settlement capabilities. If we pick up the hardware cost could you pick up the monthly fee and the card transaction fees? With the price increase, your commission dollars should stay at the same level if not go up after all the costs are taken into consideration.”

I know it is easier said than done, but I personally have been on these calls and I have seen it work first hand. Let me know if I can help you achieve the same results.