Across generations

May 11, 2015

How do you keep a legacy alive? For Mark Lathrop, current president of Uncasville, CT-based Lathrop Vending Inc. the answer is both simple and complex, but can be expressed in one word — change. Since he took over the family vending business in 2011, Mark has successfully added micro markets, card readers, invested in GPS and is now offering more office coffee-related options that increase same-store sales.
The evolution of untapped revenue sources and use of new technologies were strategies Mark already knew would work to grow the company, as he had seen his father utilize similar measures in the years Mark was growing up. In fact, being raised inside the company his grandfather started over 40 years ago is one of Mark’s greatest prides. He was there as it grew from about one route to today’s 18 plus. And Mark doesn’t believe it’s done yet.

The legacy operation

Mark grew up doing ride-a-longs and filling vending machines in the family business. “I worked in the summer for my grandfather when I was 8 years old,” he recalled, “so I’ve been able to watch and be part of growing the business from my grandparents to over 30 employees in 43 years.”

In 1971, Mark’s grandfather, Lawrence Lathrop, was making deliveries for a beverage company and the clients weren’t happy with the business agreement. They told him that they would rather work with just him. Based on their comments, Lawrence set out on his own and formed Lathrop Vending. Unparalleled customer service was his mission from day one. Lawrence’s son, Larry, became head of the business in 1989 upon his father’s retirement. Larry had goals of making Lathrop Vending the largest vending company in Eastern Connecticut. Under his direction the company purchased other vending companies, invested in a vending management system and expanded heavily into the office coffee service business.

Larry officially hired his son in 1992, allowing Mark to learn the business from the inside. He worked in several positions, including route driver, vending machine maintenance technician, route supervisor and then operations manager. When Larry retired in 2011, Mark became owner and president of the thriving family business. His years of experience helped him to keep the core of the business — vending — strong. However, he had also seen enough change and expansion by his father and grandfather to appreciate the value of other revenue areas. Mark kept an open mind about other segments, which led him straight to micro markets.

Market growth for markets

When Mark first saw the micro market concept, he knew it would be a great move. The consumer would consider it new and fresh. Mark could see the potential, so the company installed five micro markets in the first year, 2011. The revenue at each location grew substantially. Lathrop Vending is now servicing 40 markets in the Eastern Connecticut area, which comprise 13 percent of Lathrop Vending’s annual revenue.
“I think micro markets are working as much as they are because it’s different,” said Mark.

He finds that consumers like the concept and will purchase a greater variety of products at higher prices. In fact, in the last 6 months to a year, he has noticed locations are not only more familiar with micro markets, but actively seeking this type of foodservice.

While there are many micro market operators with concerns about theft, for Mark it isn’t an issue. He admits there are some locations with theft close to 5 percent. However, in every location Mark had vending that switched to a micro market system, he has had revenues go up 50 percent. “We focus on the profitability of the markets,” said Mark, “especially because even vending has a one to two loss percentage.”

Food sales are what drive a lot of Lathrop Vending’s micro market revenue. People don’t buy as much from food vending machines, even the same item, indicated Mark. However, consumers will buy food from a micro market and pay more for it. Mark believes the key is being able to pick it up and examine it. He also notes that there are many top-selling items that just won’t fit in a vending machine, like soups and bigger candy packages. “Those are the items that sell a ton — increasing your volume,” he said.

Lathrop Vending’s biggest micro market seller is salads. They outsell any salad in his vending machines — even if it is the exact same salad.

Lathrop Vending offers some of the same products in vending and micro markets, but much of the food is specially prepared for the micro markets by a local caterer. “The micro market-only items might be a different size or have different breads,” said Mark. “They are also often wrapped differently than food for the vending machines.”

A challenge to managing fresh food sales is to minimize the waste. Lathrop Vending has one of its micro market supervisors dedicated to analyzing and reducing the out-of-date food. “He tries to minimize stales to 5 to 7 percent,” said Mark.

“Micro markets have changed the business quite a bit,” said Mark. It’s not just at the point-of-sale, but in how the operation works. Mark has dedicated micro market-specific coordinators, supervisors and warehouse staff to prekit the micro market products, inventory and clean markets and set planograms for new products. “It’s time-consuming to do all the inventories and to watch cameras. It’s changed the landscape of how we do things, but revenue-wise it’s helped grow the business,” he said. Mark thinks it will be interesting to see how far micro markets can go and how technology will make them more viable for smaller locations.

Despite the large difference in both the products that sell and how the segment is run, micro markets have brought at least one unexpected benefit to Mark’s vending segment. “When we’re looking for new items, specifically healthier items, we look at those that sell well in a micro market and ask if it will fit into a vending machine,” said Mark. If the answer is yes, since the company already has a SKU of that product in the warehouse, Mark will try it in vending and measure its success.

GPS has many benefits

Another change Mark decided to make was to install GPS on all his vehicles. He looked at the different systems and decided to use Fleetmatics. After 6 months, he’s finding it really deters wasted time and keeps fuel costs down.

“Our original problem was how to stop drivers from going out of the area they are supposed to be or ‘hanging out’ to waste time,” said Mark. “That behavior stopped once the drivers knew GPS was installed. And it really keeps the fuel efficiency in line.”

Mark can see the trucks on the computer in real-time, which allows him to find a vehicle close to a location that may be having a machine issue. The system also texts and emails Mark, and the other managers, if a vehicle is idling for more than 15 minutes. Mark can then have a conversation with the driver, who might have been stuck in traffic or might need to understand how idling can affect fuel costs. The GPS also alerts the company about speeding violations, which can be reviewed by managers. Higher speeds are less fuel efficient.

Untapped OCS lines

In the 1990s, Mark’s father decided to look at OCS to broaden the company’s offerings. “We’ve always offered OCS, but we never focused on it,” said Mark. “We changed our focus…dedicated some revenue towards it and it has grown significantly.”

OCS now makes up 6 percent of Lathrop Vending’s annual revenue. For the past 8 years that segment has seen double digit growth.

Mark doesn’t credit the increase to any one type of coffee item or added service. It is a combination of all the items including offering single-cup options.

“You can’t knock single-cup. Everybody seems to be going towards that,” Mark said. Although he offers multiple types of coffee equipment, both bulk brewers and single-cup, single-cup has driven the majority of Lathrop Vending’s OCS growth as the brand gained popularity. “The Northeast is a strictly Green Mountain area,” Mark joked. He makes sure those varieties are available even before clients ask for them.
Mark has also tapped into consumer hot beverage customization. Ancillary products, such as sugar-alternatives, have been a great way for Lathrop Vending to increase same-store sales. “Splenda has been a popular add-on,” said Mark. He has customers that ask for it over other brands they perceive as having more chemicals.

Offering ancillary products that are in high demand is important to Mark as it gives the opportunity for more same-store sales. In fact, adding items to a location’s invoice is a key growth strategy for Lathrop Vending. “It’s like money in the bank,” said Mark.

These additional lines for OCS encompass many types of products and equipment. Right now Mark is starting to offer point-of-use coolers. “It’s a nice business. It adds to cash flow,” he said. The company charges locations a rental fee and includes a filter change once a year.

Change is necessary

Vending still makes up the bulk of Lathrop Vending’s revenue, a fact that Mark is proud of. It’s the core of his business and remains viable. However it isn’t the only business. That’s why Mark believes operators need to stay focused and change with the times. “If you don’t, you’ll get left behind,” he said.

It’s this positive attitude about change and excitement about future opportunities that has allowed him to maintain a family legacy business and grow Lathrop Vending Inc. into a powerhouse operation that will last far into the future.