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

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

This example suggests to me that outsourcing opportunities for the unattended sale of non-food and beverage products may exist.  Many hi-tech savvy, full line vending companies could do better than MTA in managing the process of unattended sales of train tickets.

Sources of new revenue from the vended sale of food, snacks and beverages are vanishing and will continue to do so.  It is time to get serious about searching for new revenue sources.  Take a look around your market place and note any unattended sale of any product and service.  It might be worthwhile to approach government agencies or private locations with a respectful proposal outlining the strong advantages of your experience in the management of unattended sales.

An absolute prerequisite for soliciting this channel will be the need to meticulously study state-of-the-art software systems and machines used in the sale of non-food and beverage items.  It will require plenty of hard work and lots of new learning; is it worth the effort?

I am not sure, but it certainly beats the alternative.

Gosh, I didn’t mean to demean the mom & pops of the vending industry. I try to choose words carefully, but maybe I bungled it by using the words of the vendor this particular time.
I think his larger point was that he believes it is unfair competition when some vendors don’t get their businesses licensed and insured.  It is overhead they don’t pay, which he does. Also, lacking insurance can have devastating consequences for a lot of people if something goes wrong. This can happen in any business.

It might be easier to skip these costly legalities if the business operates “under the radar,” say from a garage. That doesn’t mean that every garage-based vendor does this.
Thanks for sending me your counterpoint. It made me think hard. I think it will make be a better reporter. And, thanks for reading,
Laura L. Ruane
Business reporter
The News-Press
Voice (239) 335-0392
Fax (239) 335-0265
Visit us on the Web at www.news-press.com 

The term Garage Vendor is a vending industry term used to describe a small vending company that operates out of their garage or a small rental storage facility.  Other industries often use the term “mom & pop” operation.

Most of these companies are family businesses with only 1 or 2 maybe 3 people working long, hard hours desperately trying to compete with larger vending companies who have advantages that they don’t have or may never have.  They have their life savings wrapped up in their fledgling companies and are struggling to stay afloat.  I know lots of Garage Vendors; they are some of my favorite people.  I help them whenever I can, usually at no cost. 

Many of the largest and most respected companies in the vending industry started as lowly Garage Vendors.  Nathanial Leverone (Canteen’s founder) and Davry Davidson (one of Aramark’s founders) both started as Garage Vendors in the 1930’s.  The prosperous dot com companies existing today that were started in garages are legendary.

Let’s be sporting. Give these folks the respect they deserve for risking their capital and making the effort to build something from nothing, it’s the American way.

Tom Britten
 Analyst . Intermediary . Consultant 
Phone 813.469.5437
E-Mail tombritten@msn.com

Before you accuse me of being totally off my rocker, read on:

Mr. Client, I know you have read all the same stuff that I have about employers helping their employees’ cope with the dramatic rise in prices at the gas pump.  Some employers are giving stipends based on commuter mileage, offering work at home Fridays and company sponsored car polls. I was wondering if there was a way I could help you help your people and I came up with an idea I would like to explore with you.   What if you agreed to a reduction in commissions and I agreed to a corresponding reduction in the retail price of vended food and beverages?

Not everywhere, but, at some accounts this could be a win-win. 

As same store sales continue to slide most folks I talk to blame lack of discretionary dollars.  This is only part of the cause of lost sales.  Consumer resistance to higher prices is a big factor here.  Even if the amount of the commission reduction is exactly equal to your drop in the price, I am betting that the vending operator will experience increased sales as consumers return to lower priced products.

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

In our industry, we clearly see the effect of declining disposable income in our same store sales analysis. Now a new element threatens to take a bite out of revenue.

There is a rapidly growing movement underway to take a new the workweek. Employees all across the country are currently submitting petitions to employers in attempt to gain approval of four-day weeks and telecommuting. They are citing more the just gas savings, here are just a few points that are being laid out very convincingly.

The 4-Day Work Week would mean less traffic congestion.

The 4-Day Work Week would mean fewer auto accidents each year.

The 4-Day Work Week would mean a reduction in absenteeism

The 4-Day Work Week would give us more time for family

The 4-Day Work Week would decrease labor costs

The 4-Day Work Week would decrease operational costs

The 4-Day Work Week would mean a reduction in the cost of childcare

These employee proposals also stress the use of internet as a tool to scrap the antiquated notion we should all be at the office from eight to five on Monday through Friday.

The revenues in the business and industry channel for food service, vending and OCS will decline in direct proportion to the decreased time employees spend in their traditional work place. This is an iron-clad certainty.  I suggest that you keep your ear to the ground at all accounts; you may have to adjust your revenue forecast and identify actions needed to protect the bottom line now.

I agree that the quality and variety of vended products has vastly improved since the 60’s.   Too bad the industry lost most of the ideal venues for the application for vended food and beverage services.  Ironic isn’t it?

While my Dear Friends in the traditional full line vending business are agonizing over how to sell candy bars, potato chips and soft drinks profitably, something is going on in the background.

The self Service Revolution:

* 97% of consumers would use self-service to handle a transaction or service.
* 86% of consumers say they are more likely to do business with a company
   that offers the flexibility to interact using self-service.
*66% of consumers say the availability of self-service technologies
  creates a more positive perception of the brand.
*56% say their likelihood to use self-service has increased over the last
  12 months.

Speed, convenience and ease of use are identified most frequently by respondents when asked why they would choose self-service over personal assistance in each of four industry sectors:

* financial (faster-70 percent, more convenient-67 percent, easier-52 percent);
* retail (faster-68 percent, more convenient-64 percent, easier-52percent);
* travel (faster-63 percent, more convenient-61 percent, easier-60percent); and
* healthcare (faster-53 percent, more convenient-50 percent, easier-47percent).

Our industry was once the leader and innovator in the “unattended sale” concept.  Are we to be left behind in this major shift in retailing?

 *Sources of statistical data:Time Magazine, March 2008NCR Self Service Consumer Survey, 2008 

Do not look for a vending machine that cooks from scratch (as in, peels the potatoes, slices the carrots and braises the beef) anytime soon I foresee a couple of barriers this type of device:·        

Sanitation, temperature control and related food safety issues. ·        

Extended processes, even though automated, mean longer delivery cycles and the vending advantage is fast and convenient delivery. 

Vended products are not usually served up with candlelight and violins. Frankly,  I do not see the need anyway.  There are lots of vendable microwaveable packaged meals and sandwiches available that are of excellent quality.  

 Advances in the packaging microwavable foods have been a big plus factor for the quality of vended foods. Absence of clear, concise cooking instructions on the package can be an issue.  Failure to follow the heat and time instructions will adversely affect finished product quality.  

A little consumer education is always beneficial when new products are introduced.

Keep the new ideas coming……Best RegardsTom

The need to understand change in your industry may seem obvious. However, companies misinterpret clues and arrive at faulty conclusions all the time. Despite all the talk about the need for organizational agility, an astonishing number of businesses stay stuck in neutral when they need to implement new strategies. It is a business certainty that if you stay in place, the competition will run over you.

Your company needs to be aligned with the changes taking place. You need to have a strategy in place to do this. This is what I hope to accomplish in my blog, “Growth, Profitability and Acquisitions.” You don’t need a history lesson…or maybe you do!

Close your eyes…you’re are in the past, in the room as these events as happening.
As reported in the New York Times:
May 9 1914
Aiming for efficiency a merchandise vending machine, has been put into use and is attracting considerable attention from shoppers patronizing it. Entirely made of steel and electrically operated, it sells merchandise from 6 cents to 25 cents. The machine requires only casual attention from one employee to keep it in operation.

November 8 1948
Machine expansion into soft drink cup machines predicted to be practically limitless. There is strong trend away from bottle vending machines which have a higher source of accidents. Machines have come long but there are still problems when dispensing more than 4 drinks a minute and complicated service procedures. The average gross income to machine operators is 2 cents on every 5 cent drink.

November 30 1949
Vending machine men told taxes are trending towards lower levels. Representatives outlined a new NAMA service that will aid vending machine operators in understanding their costs better. Business is excellent, especially in the cup beverage and cigarette machines.

November 15 1951
The time is approaching when vending machines will outnumber retail sales people. A new giant vending machine has been developed which is capable of selling 25 different packaged items, it has adjustable pricing and can give change.

February 18 1953
The increasing conditioning of American people to wait on themselves is significant. Items sold through machines will quadruple within the next few years. Low cost, impulse items offered in high traffic locations are best. Chewing gum sales are heaviest in the morning and evening rush hours when people are nervous.

January 3 1956
While growing in popularity vending machines are still supplement to cafeterias. Many factories report that they had cafeterias and mobile carts for food but also use vending. More and more companies are using vending machines to feed employees.

October 16 1957
A major marketing shift maybe shaping the carbonated beverage industry with vending machines possibly dispensing beverages in cans. The problem has been the need for a can opener that will sterilize itself.

January 6 1958
Industry tops 2 billion for first time. Machine sales of coffee continued to gain.
A true robotic restaurant capable of delivering on-a-plate meals from frozen storage to ready to eat in 20 seconds may be achieved by 1960.

June 21 1959
Formerly at work beverage was offered in barrels sawed in half, washtubs or other large vessels. Now there are 2 types of beverage vending machines in use, bottle and cups. The ratio of cup to bottle sales will continue to increase.

October 21 1962
The machine displayed at a merchandising convention is 9 feet high, 5 feet wide and 5 feet deep and is billed as the world’s largest vending machine. The machine makes possible the automatic vending of refrigerated foods, sundries, housewares and textiles. It is called the dial-a-sale.

February 19 1964
Stockholders of a major vendor of cigarettes were told that the surgeon generals warning about the danger of cigarette smoking probably would not affect cigarette sales. The spokesman said he is very optimistic and expects continued growth in vending sales and income.

March 15 1964
Search for safe smoke picks up. There are indications that the sales decline is leveling off and that a rebound to pre surgeons general report levels is in the making.

January 15 1967
A record amount of new equipment was shipped by vending machine manufacturers, more than double the shipments in 1955. Shipments of single cup, fresh brew, coffee machines and canned beverage vendors are up. This indicates the healthy growth of the American vending industry.

September 2 1965
Servomation reported record profits. The continuing trend towards full service installations which provide meal service and coffee is reflected in financial statements.

(Note: Macke, Interstate, Wometco, Zabo and Automtique, also had a good year)

August 18 1980
Beleaguered by factory layoffs and a downturn in the economy, the vending industry is predicting a plunge in unit sales. Plants and factories count for 47% of vending sales. Some vending companies, with sales off as much as 40% are laying off employees for the first time.
As you examine this chronology of events what goes through you mind ?

How could they have been so wrong ?

Couldn’t they see it coming ?

What could have been done differently ?

What can we learn from it ?
They were on the right path all along, they lost their audience ?

What happened: 4 major factors which brought about the decline of an industry

• Deindustrialization: factory and plant locations gone, smaller accounts
• Legislation: cigarettes gone, school vending now limited, taxation
• Competition: bottlers as competitors, pouring rights agreements, convenience store encroachment, intensity of vending companies chasing fewer accounts to survive
• Economy: end users have less discretionary income and spend less, increased costs of fuel and product

What’s next?

The natural life cycle of all products and services flows and ebbs with emerging technology and the often fickle needs of the marketplace.

Telephone booths, typewriters, polaroid cameras, fall by the wayside to be replaced by Ipods, e commerce and blackberries.

Where the vending industry now must be accepted as the normal evolution and progression of things, it has not or will not fall by the wayside. It will continue into the future as a new and much improved delivery system for those who embrace change.