Operators Add More Micro Markets In The First Quarter Of 2016

Despite a few areas of the country struggling with lost micro market revenue when large locations close, most micro market operators report strong sales in the micro market segment for the first quarter of 2016 and have a positive outlook in the summer months.

While vending sales are stagnant for some operators, micro markets continue to produce higher sales and improve the bottom line for many. In the first quarter of 2016, Oregon-based Royal Vending opened nine new micro markets and posted a 71 percent revenue growth from the first quarter 2015, driven largely by the success of the micro market segment, according to Royal Vending President Ryan Harrington. “Micro markets are the main contributor to our company's continued growth,” he said.

On the opposite coast, sentiment is similar. One New York operator reported, “A lot of our business is in Connecticut where the overall economy has been quite stagnant, however, we have seen a large amount of micro market business because it is new to many customers.”

Operators continue to convert traditional vending locations to micro markets, including Georgia-based Southern Refreshment Services, which installed nine micro markets in the first quarter of 2016. “Micro markets have shown great growth in the past year, and about half have been conversions from vending,” said Renee King, marketing manager for Southern Refreshment Services.

For Jeff Leider, president of California-based Tri-R Coffee & Vending, micro market sales remained flat in the first quarter, despite introducing new products and removing poor sellers. “We are going to start running commercials at the kiosk to see if that helps,” Leider told VendingMarketWatch.com “Having said all this, the market sales are better than vending and the offering to the customer is much nicer.”

Micro markets make a splash at the OneShow

New products and innovations surrounding micro markets were abundant at this year’s NAMA OneShow in Chicago, IL. It was clear that micro market integration is growing. Rod Nester, president of Iowa-based Smith Vending told attendees in one education session, “If you’re not doing micro markets, you will be or you’ll lose business. It’s not a fad. It’s here to stay.”

The show floor was packed with items fitting the ‘better-for-you’ category, from snacks filled with protein to flavored, healthy beverages. Operators looking to add better-for-you items to micro markets were not at a loss for options, especially because the product sizes are not restricted as they are in vending.

In fact, the variety of product offerings is a key selling point for operators. King of Southern Refreshment Services noted that fresh food is the strongest selling category in its micro market segment, followed by LSS chips and 20-ounce sodas. “We attribute this to most of our customers buying a full meal (entrée, side & drink) which is exactly what we want,” she said. In the coming months Southern Refreshment Services is looking to introduce “trendy” items with a higher price point such as low-calorie, sparkling beverages and gluten-free and non-GMO snacks in its downtown, white collar markets. “As for our more industrial, blue collar locations, we are looking to keep up with the demand for energy drinks and salty snacks by introducing different flavors/varieties to keep the choices fresh,” said King.

Cold beverages are the strongest category for Royal Vending, reported Harrington. In fact, cold beverage sales made up 42 percent of the company’s total micro market revenue in the first quarter of 2016. “We think employees may still bring some food or snacks from home but they will still purchase a beverage from the micro market,” said Harrington.

Summer challenges

With warm weather comes extra challenges for operators. The summer months mean that operators will need to move products that melt (candy bars and pastries) into the delivery vehicle coolers. For Harrington, the addition of these products with the increase of fresh food can be challenging. “We've recently installed a new, larger cooler in one of our delivery vehicles in anticipation of the extra refrigerated space that we will need,” he said.

For Southern Refreshment Services, one challenge is keeping up with the demand for hydration products. King reported that in most of the company’s locations hot beverage sales decline in the summer months, so it will be necessary for Southern Refreshment Services to implement a promotion to push the segment.

Despite the challenges, micro markets continue to be a positive segment for those that have added them.