VendingMarketWatch Blog

Recently I heard from a reader who took an exception to a comment I made in one of my “editor’s notes” on 06-13-10 concerning what I thought to be a high commission in a vending contract for a public account.

The reader took exception to my implication that the successful bidder did not give a fair and accurate accounting of themselves. He raises a valid point.

More importantly, he has caused me to consider what the proper course of action our industry should be taking with regard to vending contracts that appear questionable.

The commission in question struck me as excessive. And since there are now auditing tools to ensure honest sales reporting, I suggested that the newspaper that reported the story ask the customer how they audit the sales.

The reader took exception to my statement because it called into question the bidder’s honesty.

He has a valid point: I do not know all the facts. While I did not specifically call the bid dishonest, I suggested the newspaper ask the contract holder to explain how the sales are accounted for. Which in essence questions the honesty of the bidder.

Which leaves us with a question. Should the industry encourage customers to use new auditing tools that improve sales reporting? I believe making customers aware of these tools will improve the industry’s reputation.

Dishonest sales reporting is not rampant throughout the industry, but it does exist.

To the extent that it exists, much of the problem rests not with the vending industry, but with customers who don’t have a way to make sure sales are reported accurately.

Some customers assume the collections are accurate, or that there is no way to ensure that they are.

Auditing tools exist to improve the accuracy and transparency of sales reporting.

Is it not in the industry’s interest to make customers aware of this?

The most advanced technological solutions take time to find an application. I’m pleased to say that the Starbucks “E-Cup,” a Starbucks interactive brewer with cashless capability, has found a niche, and that niche is going to become more prevalent in the future.

Automatic Merchandiser reported on the “E-Cup,” in a feature article in March 2009. The “E-Cup” has a USA Technologies’ ePort card reader that accepts both magnetic stripe and contactless cards.

I recently came across the first “E-Cup” in Cleveland, Ohio at a biomedical facility that houses a several research and development companies. The “E-Cup” was a perfect solution for this account.

This is a new building. The building wants to attract biomedical companies from all over the world to this modern medical facility.

The building, which is in the process of finding tenants, is not in a position to have a manned cafeteria. Hence, the owners realized that vending would be necessary.

The owners also understand the importance of high quality coffee for the clientele they are trying to attract. One of the decision makers was intent on having Starbucks coffee available.

They also needed a system that would allow the tenants to pay for their own coffee. Hence, the “E-Cup” was the best solution, noted Chris Terrell, general manager for Aramark Refreshment Services in Northern Ohio, which services the account.

This biomedical building represents the future for Cleveland, a one-time heavy manufacturing region that has lost most of its traditional industrial manufacturing. In its place, health care and new technology companies have gradually become dominant industries.

The employees in these types of accounts are well educated people who work irregular hours and often have a taste for the best meals and refreshments.

The owner of this account has made every effort to make the amenities attractive to the professionals they want to attract. The Starbucks “E-Cup” was part of this initiative.

The technology that our industry is developing is all going to serve its future.

We are living in challenging times, and the refreshment services industry has been specifically singled out for discriminatory taxes to help local and state governments meet budget shortfalls. Government officials have proposed taxes on soda and other refreshments, claiming to seek funds to battle obesity but in reality are looking for badly-needed revenue.

Opposing these proposals is tricky, since the industry is easily vilified as holding undue influence when it opposes discriminatory taxes.

Nowhere was this more apparent than in the city of Philadelphia, where the mayor recently sought to saddle consumers with a soda tax.

The Philadelphia Inquirer opposed the soda tax for many of the same reasons that the industry did, but it made sure to criticize the industry for its lobbying. The newspaper didn’t want its readers to think it doesn’t share their disdain for “big business” using its influence to affect policy decisions.

One of the more troubling developments in this skirmish was the revelation that the beverage industry offered to shell out $10 million to support  health and recreation programs.

The Inquirer reported Harold Honickman, owner of the Canada Dry Delaware Valley Bottling Co., said the industry is willing to donate $10 million to pay for city health and recreation programs. In a May 20 editorial, the paper noted, “Instead of pay to play, it’s pay to go away. If Council raises real estate taxes while backing away from the soda tax, it will be showing its disregard for everyday Philadelphians. Bending over for deep-pocketed constituents is no way to run a city.”

Three days later, after council shelved the soda tax and jacked up property taxes, Inquirer columnist Karen Heller commented that “Maybe we could get more of his (Honickman’s) ilk to show up – Comcast’s Brian Roberts or Urban Outfitters’ Richard Hayne – though, apparently, a tax is what it takes.”

The danger here is that government entities will see taxes as a way to solicit industry contributions. Donations of this sort set bad precedent. They not only invite new tax proposals. They also portray the industry as well-funded at a time when profits are hurting for most industry members.

The beverage and refreshment services industries need to strategize their opposition to discriminatory taxes. There are good reasons against these taxes, and the industry should base its opposition on them.

The beverage and refreshment service industries have responded

It’s a cliché to say that an industry, any industry, is at a crossroad. But I’ll risk using this cliché, because this describes where the vending industry is at.

The recession has caused more vending operators to consider making serious investments in their businesses than at any time in recent history.

The best news operators have had to report recently is that the loss in sales has stopped and begun to recover slightly. Some locations have begun rehiring. Consumers in general are not freaking out about losing their jobs if they haven’t already, and have begun spending a little more freely.

During the recession, operators realized the only way to remain profitable was to operate more efficiently. In many cases, this involved reducing payroll.

The National Automatic Merchandising Association (NAMA) 2010 profit report, which summarizes 2009 financial performance, indicates that operators posted a stronger bottom line in 2009 than the previous year even though sales declined even more in 2009 than 2008. This was mainly due to the fact that operators took action in 2008 to improve profitability.

The NAMA report further notes that operators’ return on assets, which it identifies as the most important financial indicator, was acceptable in light of the economy in 2009. It notes that firms were able to gain control of their operations in a way not solely dependent on sales growth.

Most operators realize that sales probably aren’t going to recover in a big way any time soon. Many also realized the only way to improve profitability is to use technology.

Our magazine’s research indicates more operators are installing DEX handhelds. More are also investing in remote machine monitoring.

DEX has been around for years, and line item tracking gives operators a way to make service schedules more efficient. It also gives them a way to better track individual product sales.

“Open” cashless vending has also been around for a while, and more operators are showing interest in it more than ever. The hardware has improved, and the providers have more field experience to use in assisting operators with “open” cashless. This is happening at a fortuitous time, since retail commerce in general is moving to cashless.

It sounds like a cliché to say the future belongs to the leaders. But at the present time, the cliché applies to the vending industry.

This is an exciting time to be in vending.

It’s old news now, but the recession has brought the food wars back, and the restaurant chains are doing backward summersaults to get people in their doors. Most chains are offering discounts to get value conscious consumers inside.

Pizza Hut began the year offering any size pizza with toppings for $10. Taco Bell has a $2 menu featuring four different combo meals. Denny’s has $2, $4 and $6 and $8 value meals.

Burger King recently made a bid for the casual dining audience with its $8.99 ribs. It only shows how anxious they are to grab market share wherever they can.

Convenience stores recognize the opportunity to win more food sales, and they are also offering more value meals.

The vending industry has as much to gain and lose as any class of trade in this economy. While the vend food sector has taken a big hit in this recession, vending operators cannot afford to throw in the towel. The food sale is up for grabs, and operators need to think creatively how they can win that sale. It’s not just the sandwich sale that’s at stake here; it’s also the beverage and snack sale.

The range of food products for vending is broader today than ever before, with plenty of high quality, name brand products. Vend food offers the best values available to consumers.

Besides the traditional cold food machine, there are products that can go in ambient snack machines.

Many excellent food products were displayed at recent National Automatic Merchandising OneShow in Chicago.

Despite the beating that the food segment has taken in recent years, the product manufacturers have continued to offer high quality sandwiches and entrees.

Vending operators also need to upgrade their marketing to let customers know the excellent values they offer. One technique that has worked is to compare the offerings in the vending machine with those in competing fast food restaurants and convenience stores. In captive audiences, this can be done fairly easily using email and social media.

Are you getting hungry?

Did you catch the Seattles Best Coffee (SBC) bean-to-cup vending machine in the Starbucks and Crane booths at the National Automatic Merchandising Association OneShow?

A lot of you did, judging from comments I’ve received.

Starbucks, which owns SBC, has taken a close look at the vending channel. This machine could do a lot to revive hot beverage vending, which took a beating even before the recession.

The SBC product, at 12 and 16 ounces, tastes great. The machine looks fabulous.

Vending operators have long missed the boat when it comes to branding their hot drink machines, which is one reason that segment has suffered so much.

Some vendors, such as Canteen, have branded their hot drink machines with house brand  coffee. But national brands have long been missing in action.

Some observers think Starbucks is placing SBC into vending as a way to put some distance between SBC and its flagship Starbucks brand. Those who say this aren’t familiar with Starbucks’ business philosophy.

Starbucks has done more to bring SBC to market in the last year than all of its previous owners ever did combined. The brand has been introduced to Burger King, Subway and other chains, supported by national advertising.

But the onus for maintaining SBC’s reputation for excellence in vending falls first on vending operators. They’re the ones with the most to gain or lose if that brand’s reputation suffers.

More than most other product categories, coffee has been undermined by the cost-based approach vending operators take.

Diedrich Coffee introduced a Gloria Jeans branded vending machine in 2003, but got few takers.

Hopefully, vending operators have learned some things about the importance of branded coffee.

The advances in single-cup brewing technology have already allowed national coffee brands to help revolutionize office coffee service.

Branding deserves attention given the fact that other retail competitors, such as c–stores, supermarkets and specialty stores, are aggressively marketing branded coffee.

There is no good reason that hot beverage vending can’t revitalize.

When the National Automatic Merchandising Association (NAMA) announced plans to move to one annual show, they took on a big job. Planning for a larger and longer trade show that would give exhibitors one opportunity to present products and give operators a year’s worth of knowledge, all in a comfortable setting, was no mean feat.

Last week, they delivered in spades.

Most of us are still trying to dig out from under the piles of sample products, literature and notes.

Here at VendingMarketWatch, we’re in the process of covering the show through our podcasts from the show floor, videos taken on the show floor, and written reports of education sessions. Stay tuned daily.

The pleasant spring weather in Chicago helped things go smoothly.

The new wing, McCormick Place West, was a welcome change for those of us who remember the older McCormick buildings. It was easy to get to the meeting rooms from the trade show floor, and the floor was spacious and well organized. 

An elevated stage in the middle of the show floor hosted entertainment and awards. It refreshed attendees and gave a sense of unity.

The show conveyed a sense of excitement that’s been missing for several years. Perhaps the move to one show was needed to bring about an outstanding education and entertainment program. This is not to say past shows were not good, but when the association decided to switch to one show, the staff and the board of directors both realized the show had to make a lasting impression. As a result, more resources and energy were invested, resulting in accolades from all who attended.

On the first day, the government affairs symposium addressed a host of topics that will affect vending operators for years to come: calorie disclosure rules, new taxes, proposed currency changes, and more.

Operators need to realize the hard work NAMA does fighting for their interests in the regulatory arena. I’ve stated many times and I’ll say it again; any operator who doesn’t support NAMA is a cheap skate. No organization is perfect, but this is not a valid reason for not paying your dues.

The educational sessions covered a variety of topics. The best attended were cashless vending and the new vending technology standards. The fact that operators turned out for these seminars in such large numbers (It was nearly impossible to find a seat if you came late) demonstrates the growing understanding of the need for change. Cashless, remote monitoring and video screens are all making strides, giving a new of excitement at a time when we need it the most.

The keynotes by Herman Cain, Ted Koppel and Terry Bradshaw were all invigorating.

Congratulations to the NAMA staff and the NAMA board of directors on an outstanding job.

Many observers have postulated that technology will help make the vending industry more professional. The newer software systems, the remote machine monitoring, the video screens and the cashless technology have all been cited as helping to change our industry’s reputation for the better.

These are tools that in and of themselves won’t change anything unless the behavior of our industry changes.

The way in which technology players are approaching the industry gives reason to believe they are setting a good example as professionals.

The dictionary defines “professionalism” as “professional character, spirit or methods,” and “the standing, practice of methods of a professional, as distinguished from an amateur.”

Vending has long been viewed as less than professional for many reasons. The way in which many people have conducted business has left much to be desired. There is a lot of badmouthing among competitors in our industry.

Professionals, by contrast, are less inclined to badmouth each other. Ask a doctor, lawyer, architect or accountant his or her opinion about a colleague, and I’ll wager they will speak highly of him or her. That’s because they know when they speak of a fellow professional, their comments reflect on how they see themselves.

I thought about this recently in relation to how technology is changing our industry.

Apriva Inc. has entered the vending market with a cashless solution. Digital Transaction News, a trade journal for the digital transaction industry, ran a story on Apriva’s entry into the market, challenging USA Technologies Inc., another cashless system provider.

When the reporter asked Stephen Herbert, president and chief operating officer of USAT about the new competitor, Herbert said, “We’re glad to see a company like Apriva taking this space seriously, and we think it’ll be good for adoption in an emerging market.”

This month, Automatic Merchandiser reported on the market entry of Avanti Markets Inc., a self checkout system similar to Fast Track Convenience. When I asked Ray Friedrich, the Detroit area vending operator who has been marketing Fast Track Convenience about Avanti Markets, he said Avanti Markets “validates” the self checkout concept.

These technology providers are taking the high road, and in doing so, they are setting an example for the industry as it evolves.

Technology will make our industry more professional.

To change the consumer’s perception of automatic merchandising, individual operators must act professional.

If you haven’t made plans to book a room for OneShow next week, don’t put it off much longer. Attendee registration is already running 20 percent ahead of last year’s national show, and according to the National Automatic Merchandising Association (NAMA), registrations are coming in daily.

In the last few months, I’ve gotten the sense that the industry is re-energizing with new products. Some exciting new manufacturers have gotten into the vending industry. In addition, some established players that have been less active in recent years have developed new products that they are introducing at the OneShow.

Exhibitor registration is 20 percent ahead of last year’s national show, and that number could get higher still, as exhibitors continue to call daily.

Don’t hesitate to book a room and make travel arrangements.

Two of the six hotels that NAMA arranged discounts with still have rooms available. To get a rate, call 866-889-9635.

When NAMA first announced OneShow, some wondered if the difficult economy would discourage operators from coming. At this point, it’s clear that if the economy is influencing people’s decisions, they are viewing it as a reason to attend OneShow.

Operators recognize they must do a better job serving customers and improving their profits if they want to succeed, and the OneShow is a tool that will help them accomplish these goals.

There is more education, more special events on the show floor, and a host of networking opportunities. There are also more nationally renowned speakers than at any previous national NAMA show.

NAMA has redesigned the floor layout, the badges, the goodie bags, and has added some exciting new features such as the “iSpot” medallions for innovative products.

The industry remains challenged by the economy, but the decline has ebbed and there are signs of recovery in most geographic regions.

For a video preview of some of the key presenters, go to http://www.vendingmarketwatch.com/video/

See you next week!

Don’t look now, but you’re surrounded by video screens. From the moment you get on the freeway to when you shop in drug stores, supermarkets and mass merchants, video screens of varying size are sending you messages about what to buy, tips on health, and information on a variety of topics.

It really hit home a few days ago when I went to my local Walmart. There were video screens on the endcaps of every section in the store flashing images of products and text about product features.

We may not like it. There is a “Big Brother” feel about it. But I can’t deny that it made shopping at Walmart easier since I knew at all times where I was in the store; there was no scanning the ceiling for far-away signs. The video screens gave me more information faster, even if it was more information than I wanted.

I also noticed it last week when I went to the doctor for a physical and a video screen on the wall in the waiting room flashed health tips and prescription ads.

The video screens make things more convenient and they’re changing how we live and shop.

In automatic merchandising, a host of video screens have been introduced in recent years. More will be on display at the upcoming National Automatic Merchandising OneShow.

All three of the nationals – Compass Group, Aramark and Sodexo – have pioneered digital video signage in their foodservice operations. They are using video menu boards to communicate nutrition information and other information in real time to customers. The software allows them to update their daily menus faster and easier.

Video screen technology has “green” benefits as well. It reduces printing, paper and maintenance costs, as well as waste created by the disposal of out-of-date materials.

Being a relatively new technology, the cost and capabilities of video screens are improving. Users note that the hardware costs are falling and there is a greater range of image options and screen sizes available.

With so many environments going “digital,” the absence of such presentations in vending becomes more noticeable to those of us who are particularly attuned to it.

The tools are emerging to change this.

And the need is growing as consumers are getting conditioned to seeing video screens just about every place they conduct their daily activities.

Vending operators have a lot of challenges to contend with in today’s business environment. Many may think that evolving technology is something that belongs on the back burner.

The fact of the matter is that some of these technologies will help vending operators become more relevant to consumers. 

The next time you notice a video screen while shopping at a store, consider what impact it would have on one of your vending machines.