Changing The Game

March 18, 2019

Healthy Generation Vending (HGV) has a reputation in Greater Houston, TX. This is a company that doesn’t shy away from offering healthier items in its vending machines alongside the more traditional vending products — it’s right there in the name.

Balancing a profitable healthy and traditional product mix can be difficult given the limited space available inside a vending machine, but the HGV team, led by co-owners Tim and Michael Ray, makes it work. They utilize item-level tracking technology to optimize products and focus on building strong client relationships — constantly striving to make a difference to people’s daily lives through service. It’s taken hard work, but this 12-employee company is winning in the highly competitive Houston market.  

Healthy beginnings 

Back in 2006, Tim came across the opportunity to buy an existing vending company from his employer. The owner operated vitamin stores and only offered healthy items in the vending machines. It wasn’t working.

Tim looked the business over and saw potential. He asked his brother to join him in the acquisition, but Michael, who was working for KBR Procurement in Kuwait at the time, declined. Tim ended up purchasing the company anyway with a goal of steering the perception of vending away from being a black box that someone starts shaking in order to get product. “I hate this image, and wanted this image changed,” he said.

After the purchase, which was a single account with five vending machines, Tim started pitching new accounts that would be a good fit for additional healthy vending machines. It was soon obvious that going purely healthy with the items wasn’t great for business. Instead, Tim decided to make 15 percent of his vending offerings healthy items with the remainder more traditional. He also had to change the name due to confusion with another company. Tim decided that Healthy Generation Vending better represented the changes he had instore for the company and transforming the consumer perception of vending.

In 2013, Michael returned from Kuwait and found his brother was still interested in making HGV a family business. “He wanted to increase cash in the business, so he asked me to buy in,” remembered Michael. “After looking at the business plan, I was confident it would work, so I did.” Michael also liked Tim’s vision for the company, the idea that HGV would be a place that impacts the lives of its customers and employees and strives for change. The brothers started implementing that into every aspect of their business.

Adjusting the product mix 

The Ray brothers use Parlevel Systems as their vending management system (VMS), analyzing the data it provides to customize the products inside the vending machine for a better refreshment experience. For example, Michael shares that if a product isn’t selling well at a location, HGV has a list of possible alternatives to try, based on the location type and what is in the warehouse. This aids in turning over product and minimizing stales as well as offering an ever-changing selection to customers. The company also established a threshold that when met, a product is dropped from inventory and a new one is added.

Establishing the standardized process of analyzing data, creating a list of product alternatives and optimizing warehouse inventory took time and led to a longer VMS implementation process than the brothers expected.

“We drastically underestimated the time it would take to implement a VMS,” said Michael. From entering planograms to incorporating inventory control warehouse modules, Tim and Michael felt it was a slow process with unanticipated challenges.  

“With the warehouse module every piece in and out is being captured,” said Michael. “Well, we had an arrangement with the drivers. We didn’t care if drivers took things here and there to eat during the day. It’s hard work. However, because the VMS monitors everything that comes in and goes out, we had to have a way to account for those products.” 

The solution was asking the drivers to scan the items they take. The items are still free, yet also recorded in the VMS, keeping the data up-to-date. It’s easy for drivers to use the mobile app because they already use it to service their routes. 

“All our drivers use the Parlevel app Stock,” said Michael. “Some drivers have company phones and get service provided as a perk from the company. Others use their own.” Often when drivers transfer their line to the HGV cellular provider, the drivers can upgrade their phone. This is something drivers really like, explains Michael. It’s seen as a benefit.

While drivers use mobile devices, the Ray brothers found that tablets are a better fit for warehouse employees. The tablets easily integrate with the VMS and allow employees to prekit products for the drivers.  

Creating touchpoints 

While technology plays a large role in helping HGV optimize its vending offerings, the team is equally important. “We create multiple touchpoints for customers,” said Michael. “It’s one of the things we emphasize as a company in our beliefs and core values.”

Drivers are one of the most valuable touchpoints, but in order for them to be effective, it takes education and open communication. “We communicate to all new employees during the on-boarding process that every day we have an opportunity to change the perception of vending,” said Tim. “Our mission has been to change that mindset of the black box being shaken and change the vending/refreshment experience. We do this with technology and customer service and how much we care. I know everyone says customer service, but we do it differently.”

Michael added that drivers are told what’s happening at their locations when they are not there and encouraged to follow up. “We want them to ask, ‘I know a tech was out here. Did we fix the problem?’” he said. “Problems are going to happen. It’s how you deal with the problem that counts.”

Another important touchpoint is the customer service representative. HGV has someone available 7 am to 1 pm every day, which is unusual for a company of its size. Michael feels it sets HGV apart.

“Every piece of equipment has a number that customers can call or text, which goes directly to that customer service representative,” Michael said. “Having someone who answers the phone is huge.”

Touchpoints plus technology

The customer service representative can be even more effective with the help of technology. “In today’s age of technology, we have to stay connected,” said Michael. HGV uses video screens from USA Technologies as a tool to communicate with customers. If there is a video screen on the vending machine where the customer has a complaint, a customer service representative can instantly provide a redeemable code over the phone. In essence, the code is a refund that can be used for future purchases. “The customer is instantly happy again,” said Michael. “It’s amazing technology.”

Tim agrees. “When you can instantly text or over phone give someone a code for a free vend and fix the situation, they are usually blown away,” he said. It’s one of the reasons he and Michael decided to invest in interactive devices. It works to effect the change in perception of vending that Tim is constantly working towards especially when paired with human interactions.

Selling product codes 

The Ray brothers also encourage the companies they serve to use the codes for incentives and rewards.

“We sell those codes to customers to give away to teams for reaching safety milestones or for retaining employees in seasonal business,” said Michael. The codes can be used at any of the HGV machines with a video screen, which is about half the equipment HGV has deployed. “We take the average price of all the items and make that the amount,” he said.

Tim is also trying to use the video screen and codes for charities. “We have been in talks with the interactive device company, with ways to donate to charities through the touchscreen,” he said. “We are always looking for ways to make a difference and have more of a purpose with our services. I believe our customers are looking for companies that have more of a purpose in life than just stocking machines and markets.”

Fewer machines mean better service 

One reason service level and product data is so important is that the Ray brothers are conservative with equipment. “We are really conscious about how much equipment we have and where we put it,” said Michael. He has seen some operators place additional machines at a location in order to eliminate service trips. He doesn’t think that is the best way to ensure good service. Instead he visits the machine when needed and adjusts the products to maximize revenue on each trip.

“We have someone in-house looking at equipment on a monthly basis,” said Michael. “Jake takes a particular time frame and looks at service frequency and amount of spoils. Sometimes we have to remove equipment and he’ll tell me, ‘Michael, it’s time to have THAT conversation with the client.’”

Cautious with micro markets  

The Ray brothers installed HGV’s first micro market in 2014. “Initially, I couldn’t see how it was going to work,” said Michael.

The driving force behind the installation was a new customer who really wanted a market instead of vending machines. Because of the type of location, Michael and Tim agreed to try it, with some conditions.

“To cover any theft, we started with high prices and eliminated commissions for one quarter, especially because there is no camera there,” said Michael. “Afterwards, we made commissions a flat fee.” The Ray brothers found that due to this location being near a convention center with big events, they could get high prices and volume, which really mitigated the theft. However, it’s a unique situation. “It’s a unicorn,” joked Michael.

After the success of that first micro market, HGV added several others throughout the greater Houston area. Currently, HGV services 10 micro markets, which make up roughly 15 percent of the company’s revenue. Michael says they will continue to add them, but he won’t be selling his vending side any time soon.

“I’m about 50-50 on micro markets,” Michael said. “Theft and spoilage make it difficult. It takes a lot of work to figure out if someone is stealing,” he said. Because of this, the Ray brothers are considering a locking food cooler system such as BYTE.

“I think BYTE, with the swipe to open feature, might be worth exploring, or using a geofence or key card access and an RFID reader that scans the area once the door closes,” Michael said. “I think that’s the future.”

Combining routes 

Because of the size of the Houston market, HGV combines routes. “Our micro market side isn’t big enough to stand alone,” said Michael. “Combining it with vending makes it more sustainable.”

HGV schedules micro market service on Monday, due to the fresh food that needs to be inventoried and stocked. Many will also get serviced towards the end of the week, but that varies by usage.  

Push for coffee  

While micro markets are one of the new segments HGV plans to focus on in the coming year with a new demo market in the warehouse, an even stronger contender is its office coffee service (OCS). “We are doing a huge push on coffee and picking up vending and markets as add-on’s along the way,” said Michael. “We will not do a new market or vending without picking up the OCS as well.”

In its coffee segment, HGV continues to look at how to change the experience for the customer. “The vast majority of our coffee business is frac pack, it’s been around the longest,” said Michael. “However, Starbucks started something that has snowballed. Now I always go in leading with single-cup options.”

One of Michael’s favorite single-cup brewers for its volume, reliability and specialty drink offerings is the Newco line of liquid coffee machines with touchscreens. “We can put in a liquid coffee machine, put an interface on it to make cappuccinos and other specialty drinks and it costs the location less than a dollar a cup,” he said. “It’s a huge benefit to the client because they are already spending money on coffee service, but this lets them create a better experience and get really happy employees for not much more money.”

The benefit of the liquid coffee is that it works well in large facilities, delivering a high volume of coffee, so this is what HGV offers first to locations such as hospitals and distribution centers. “Some of the other single-cup brewers are great, but are not a good method to deliver coffee to a lot of people,” said Michael.

Single-cup and small business 

Even in small, 100-employee offices, HGV presents single-cup options first. Michael often suggests converting a 3-pot brewer to a CX-Touch pod machine. “With its LCD screen and ability to make specialty drinks, it is more impressive to the location and doubles their spend,” said Michael. He will bring in a unit for the location to try that includes all the best features, powders and drink styles. He will even bring in extras that employees would normally find in a coffee shop, such as powdered chocolate and whipped cream. “I encourage employees to try it and tell the facility manager or human resources what they like,” said Michael. “After all, the company is trying to make them happy.”

Educating customers in better coffee options has led to an increase in pantry service for HGV. “Now companies will say ‘I know you do coffee, can you do this?’” said Michael.

Pantry service usually includes bringing in something extra that will be offered to employees for free, such as trail mix, protein bars, cookie trays or even whipped cream for coffee drinks. There are times a company has requested seasonal pantry service as well. During high volume times, some clients will ask HGV to bring in fruit trays or food for employees who are working overtime. “Coffee has opened the doors for us,” added Michael. “I see it as the next frontier.”

No matter what HGV does, it is trying to improve and change the perception of a vending operation. “We strive to partner with companies and change their employees’ refreshment experience, and keep them happy,” said Tim. HGV does this by ensuring the most accurate information in its VMS, which produces more efficient servicing of equipment. The strong VMS data also allows the company to balance the types of products available in the vending machine for a blend of healthy and traditional. The investment in technology strengthens the customer service culture, emphasizing communication in person or via phone or text as well as giving back in meaningful ways to the community. Add in the investment in micro market and brewer growth and HGV has a solid strategy that is certain to result in future wins.

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