Technology gap: cost keeps latest vending innovations out of reach for most operators

Nation's Restaurant News, April 26, 2004 by Paul King

The vending industry has evolved markedly over the last 20 years. Advances in both technology and product variety have led to a number of bells-and-whistles-type high-tech gadgets, such as credit and debit card readers and other cashless systems and innovative machines that can cook fresh items, such as French fries or pizzas, in less than three minutes,

Chances are, however, that the average customer using a vending machine in an on-site location isn't seeing such technology. Operators attending the semiannual Vending Expo in Las Vegas, staged by the National Automatic Merchandisers Association, or NAMA, say there are several reasons why most vending machines still dispense common items like packaged snacks and sodas with nothing more sophisticated than a dollar bill acceptor attached.

One reason, according to Sodexho's Tom Smith, is return on investment.

"The technology is out there ahead of the industry," said Smith, senior vice president of vending and refreshment services for the Gaithersburg, Md., food management firm. "The return on your investment on some technology simply isn't there, either because of the cost of the technology itself or because of fees attached to its usage, say, in the case of credit and debit card readers."

Debra Prestage, director of marketing communications for Swanson's Corp., an operator of vending and manual cafeterias based in Omaha, Neb., agreed.

"It's not that these are not great types of machines," Prestage noted. "But there is a gap that will have to be bridged. Operators need to know where the payoff is."

One example, Prestage said, is a French fry maker that has been on the market for several years.

"That machine is extremely expensive," she explained. "Clients then ask the question, 'How do you maintain it, and where do you place it to get the most usage?'"

Vending has become a $30 billion business in the United States, according to the NAMA, $23.4 billion of that coming from actual machines. The balance is made up of manual foodservice provided by vending companies.

And yet, with all the food variety available in the industry, the major product drivers continue to be sodas and snacks. NAMA statistics indicate that more than 60 percent of the items purchased from vending machines fall into one of those two categories, accounting for $11.62 billion in sales.

In fact, vending is much more accepted in Europe and Asia than it is in the United States, said Rich Geerdes, chief executive of NAMA.

"In Japan, for example, consumers spend approximately $56 billion at more than 5.5 million machines, or one machine for every 20 people," Geerdes noted. "Now Japanese can shop at Tokyo's first fully automated convenience store. This one giant machine offers 200 different products, at three different temperatures."

Gary Coltrane, customer relations manager for Swanson's, said his company's customers are still satisfied with the basics.

"What customers really are looking for is what we call C, F and W--clean, full and working," Coltrane said. "We've never had too many clients out there asking us what's new and exciting. They want reliability and safety factors to be addressed first and foremost. Until the cost to the providers comes down, we're not going to be seeing a major shift in what our clients want us to provide."

Where technology definitely is making a difference, however, is on the tracking side. Operators note that computer chips embedded in most machines make it easier for companies' route drivers to tell, just by using a hand-held reader, which products are selling and which aren't. In some cases the chips can be read from a remote location so that drivers can stock their vans with the right products in the right amounts before they depart on their routes.

"Equipment innovation is accelerating as technology is making it more affordable to do planagram management," explained Richard Wycoff, president of the Refreshment and Office Coffee Services division of Philadelphia-based Aramark. "That gives us the ability to track product at the SKU level and predictively put into machines the products that consumers want. What we get is a payback on improved route productivity as well as growth in our base business."

But if technology isn't exciting consumers, product variety certainly is. As more branded products--particularly in terms of such items as salads, sandwiches and entrees--are rolled out, consumers are becoming more accepting of vending machines as a place to get not just a snack but also a meal.

"Automated retail is being refined as around-the-clock retail," said Brian Zaslow, director of marketing for Aramark's Refreshment Services division. "Consumers are moving more toward convenience, whether it's because of busier lifestyles, shorter lunch hours, whatever. The attitude is becoming more of a 'grab it when you can' mentality."

Nutrition also is catching the attention of the vending industry. No fewer than six companies used the Vending Expo to launch low-carb items--everything from ice cream to entrees' And more operators are hoping to find a sustainable market for healthful items.