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Issue Date: Vol. 43, No. 3 / March 25, 2003 - April 24, 2003 , Posted On: 3/25/2003


Brands, Variety, Efficiency Are Keys To Success In Customer-Driven Vending Snack Operations


Emily Jed
Emily@vendingtimes.net

U.S.A. - Vending thrives insofar as its distinctive technology can be applied to meeting a real and growing market need. This principle is very well illustrated by single-serving snacks and confections, a category that has grown in prominence over the past three decades.

That growth has both aided and been aided by improvements in technology which have enabled vending equipment progressively to offer more variety, more reliably and with more effective merchandising. That capability has grown in importance as an ever more mobile and time-starved population has taken to "grazing" rather than consuming three formal meals a day.

Snack vender manufacturers continue to raise the bar in terms of machine reliability, the latest enhancement being positive vend assurance systems which are now available on the major equipment lines.

Increasingly numerous and diverse suppliers, many new to vending, continue to expand the single-serve product mix available to this industry. The mix now encompasses everything from classic salty snack favorites, to exotic flavor twists, super-sized packages, healthier alternatives, and ethnic specialties , with some items possessing several of these attributes.

Helping vendors to manage this vast variety is sophisticated hardware and software, making it simpler to capture item-level sales data and analyze it to maximize sales by optimizing customer satisfaction. Today's operator has all the ingredients essential for retailing success in a highly competitive environment.

According to third-generation operator Chris Graham, Graham Snack Foods (Jackson, TN), branding is the key to snack vending success today, more than it ever has been before.

Graham Snack Foods is one of the largest and oldest Tom's distributors in the country, dating back to 1937. The company has 16 routes, eight of which are devoted to vending, with the remaining eight delivering "Tom's" snacks directly to convenience and grocery stores.

"We started exclusively with the 'Tom's' brand in vending, but now we carry a complete line of nationally branded items in all flavors, shapes and sizes," said Graham. "If you're in the vending business today, you need all the major brands. It's a consumer-driven business, and consumers want the nationally advertised brands that they're familiar with. Vending companies can't succeed by trying to push any one product to the exclusion of others. Operators do best if they provide what people ask for."

WHAT'S IN A NAME?

To illustrate his own experience with the powerful leverage afforded by a leading national brand, Graham recalled his amazement at the results when Masterfoods USA renamed its original milk chocolate-coated, almond, caramel and nougat-filled "Mars Bar" last year. Without fanfare, the venerable "Mars Bar" became a "Snickers Almond Bar" (see VT, October 2002), and consumer responded, he explained.

"Sales went up five times over what we saw with 'Mars Bars'; right there is the power of a brand. I have a friend who always loved 'Mars Bars,' and he insists that 'Snickers Almond' is even better , even though I tell him it's the same thing! It's doing real well; it found a new following," emphasized Graham.

"I think branding in vending is more important than in most retail channels," he added. "You can't underestimate the power of a strong brand name in a glassfront machine. In manual retailing, you can build displays and do different things with merchandising to draw people. In vending, you're much more limited, and it's the brand that's the attraction. I think we'll continue to see different suppliers do more with line extensions, and more creative sizes and packages, to take advantage of their well-established brands."

He added that "Reese's FastBreak" is another good example of a popular line extension, which has built on the wide success of "Reese's Peanut Butter Cups" to establish its own following. "Sales have been real strong with 'FastBreak' because the 'Reese's' name is attached, and it's a little bit of a different twist on most of the candy bars that are out there," he pointed out.

Graham Snack Foods makes sure that the top sellers, the core items, are present in all its machines. Beyond that core, the company gives its route drivers ample leeway to customize the vending menu for each account.

"We put in what people ask for; it's a simple approach, but it's successful. In every region of the country, and in each account, different brands and flavors are going to appeal to different people; and the best way to find the right mix is by listening to the consumer," noted the operator.

In the chip category, fast-moving core items in all of the company's machines include plain potato chips and BBQ-flavored chips. "We've also had tremendous success with Vinegar & Salt, which is a 'Tom's' product. We sell as many Vinegar & Salt as any other variety from Frito-Lay," said Graham. "It's one of those regional phenomena."

In Graham Snack Foods' western Tennessee market, conventionally-sized snacks are still the norm in the offices, factories, health-related facilities, colleges, schools, hotels and motels it serves. "The larger packages are just beginning to gain in popularity. I can't quite put my finger on where there is the most demand; it's all over the lot in different accounts. It does seem to be the younger male who requests more LSS selections," said Graham.

In the pastry category, Graham Snack Foods carries a wide assortment at different price points, ranging from "Hostess" and "Dolly Madison" to "Mrs. Freshley's." The company merchandises pastries on the bottom row of the snack machine, and many locations demand two rows.

"I don't hesitate to put pastries in any machine, except maybe in schools; they sell very, very well," said Graham. "One problem is that vending gets a lower price for pastry than the convenience store channel. In a c-store, the minimum for a 'Hostess Twinkie' is 99˘. If you try that in vending, you won't get it; I don't know why. But people do love pastries, so they're well worth offering."

CREATURES OF HABIT

For the most part, Graham Snack Foods customers walk up to a vending machine in search of a conventional sweet or salty snack, without regard to the ongoing buzz about America's growing waistline and persistent calls for healthier options. "I'm a snack food company, not a health food company. A lot of people ask for 'healthy,' but fewer buy it. That's where salesmanship comes in," said Graham.

"I think it's a good idea, at every account, to offer pretzels, popcorn, granola bars and something like a sugar-free wafer. We have all of those items in inventory, so if fat or cholesterol is a concern to the plant manager, offering an alternative is a good idea, to give folks a choice , even if it doesn't sell too quickly."

In schools, Graham considers himself fortunate that little has changed in Tennessee, despite calls elsewhere for draconian new laws to curtail or eliminate vending machines in schools.

"We're following the traditional USDA requirements of meeting the minimal nutritional requirements that we've always followed in schools. Certain items like 'Skittles' and gummies and hard candies are not allowed; chocolate is still OK. But new restrictions in schools are an ongoing concern," said Graham. "We want to make sure we comply with, and conform to, what the foodservice directors and the principals ask for; and to be as agreeable as we can."

Graham does all he can to support his local trade organizations in their lobbying efforts for what he considers to be reasonable control over vending in schools. "Some of it is very unreasonable. If there were a law forbidding vending machines in schools, it wouldn't matter whether an operator wanted to offer healthier foods than a manual snack bar. We need to support our trade organizations," said Graham. "If they took vending machines out of all the high schools and colleges in the country, you'd still have the obesity problem in America."

VENDING CORE

Snack foods, along with cold beverages, are the bread and butter of Amanda Munson's operation, Munson's Munchies (Linden, MI). The operator runs her route single-handedly, spending two days on the road. She is able to do this because of today's vast variety of snack foods (many with long shelf-lives), along with high-capacity, high-impact, highly reliable glassfront venders. These developments allow Munson to remain a one-woman show.

The majority of her current 16 accounts are industrial sites that have been adversely impacted by the weakened economy. "Times have been tough in Michigan, and cutbacks in workforces have reduced my business significantly," said Munson. Her largest account had 50 employees just a few years ago, and now has a staff of 20. "A few of my accounts are barely profitable, but I just keep hoping the economy will get better," she said. "People will always buy snacks, which is a great thing about this business. There are just fewer people in the workforce in our market right now."

Munson launched Munson's Munchies when she answered an advertisement for a business opportunity and purchased several small countertop combination vending machines, with nine snack selections a small refrigerated section for cold beverages.

"I learned quickly that there is more money to be made with full-size glassfront snack machines; I use all different kinds," she told VT. "When I get an account, I buy a new machine to meet its specific needs. I'm always looking to serve larger accounts as I grow, and the full-size glassfronts are far more versatile and a much better sales tool from an operator's point of view. It's a lot harder to find a home for the countertop machines."

Since Munson does not offer refrigerated food, she has experimented with the growing variety of shelf-stable food items that have appeared in the debatable area between "snack" and "food" categories , such things as chicken salad and tuna salad kits. She reports limited success so far, but she continues to search for items of this kind that her customer base will find appealing.

"I tried 'Rip 'n Ready' meals in the snack machines. I tasted the product at a show and thought it tasted great, but I only sold one or two per week, so it made sense to put snacks in instead that move quicker," said Munson. "Price has been an issue with the food items, but I plan to keep searching and experimenting with shelf-stable meal options. I think there are people at the accounts I serve who would appreciate more of a meal than a snack."

Munson's strategy, as she strives to expand her operation, is not only to add new accounts but also to maximize sales in existing locations by complementing snack and beverage vending with office coffee service. "I provide OCS at two accounts so far, and I hope to do more," she said. "It's much more economical to support a 45-select snack machine when I'm also providing the OCS," said Munson.

The operator's close contact with her customers affords her a detailed and on-going look at which items are in high demand, as well as those that she would do better to pull. "I am the route driver, so if a customer requests plain 'M&M's' instead of peanut, I can make the change right away. I'm one step ahead of many companies with service. I personally see to it that a column is never empty and I have a close rapport with my customers so they don't hesitate to call if there's a problem or a special request."

Munson has found winning items that she might not have offered, just by listening to her customers. "I had one place request 'Pop-Tarts,' and they've gone over real well, right across the board," said Munson. "They're a good 'meal' type of item in a lot of places where there are two shifts and people work long days."

Like Graham Snack Foods' clientele, Munson's Munchies' customers generally demand a well-rounded mix of top-selling brands, and the big-name basics sell best.

"I never realized, until I attended a seminar at one of the NAMA shows, that people in our part of the country are bigger chip eaters than candy eaters. I've found that to be true all year-round, so I go heavier on chips when I fill the machines," commented the operator.

The key to maximizing sales volume is rotating the multitude of available flavor variations around the core items. "Frito's," "Doritos," and "T.G.I. Friday's Tato Skins" are staples for Munson's Munchies, but continually changing the available flavors of these top sellers, and offering other options, keeps customers interested. "Right now, the new 'Ruffle's Chili Cheese' potato chip is going real well," said Munson. "There are customers who always want the 'same old same old', and there are those who prefer constant change. So there always has to be a good mix of the basics and the new varieties."

In the candy category, the majority of Munson's Munchies' customers favor chocolate. "I carry a few non-chocolate items like 'Skittles' and 'Twizzlers,' but chocolate is the main attraction," said Munson.

New products from the major national chocolate brands always receive a warm welcome from patrons. "When a new candy bar comes out, sales will be hot and heavy for six to eight weeks, and then they slack off," said Munson. "As always, it's 'M&Ms' and 'Snickers that always remain the biggest sellers. 'Snickers Cruncher' was huge for a while, then began to fall off. Now 'Nestlé Caramel Crunch' sales are very good, but I'm sure they will ease up, too. I try to beat the stores to it when a new item comes out, in the hope that my customers will try mine first, and maybe get in the habit of buying it from me if it's something they like."

CHANGING TASTES

In every machine, Munson's Munchies provides granola bars and cereal bars, as well as cheese and crackers and meat sticks; all of these serve as meal replacements, of sorts, during long shifts. "Some of these locations have 12-hour days, and customers appreciate something a little more nutritious or filling than candy or chips," said the operator. "There are people who ask for 'healthy' items; trail mixes were going well for awhile, and tapered off. I'll leave a 'healthy' request in the machine for three weeks; it generally moves very slowly, and I end up telling them I have to take it out. I think what my customers really want is more 'hearty' than 'healthy.'"

Munson told VT that her biggest complaint is that she is limited in the snacks and confections she can offer her customers because her distributors carry only a fraction of the items that she sees come onto the market. "I'll see something at an NAMA Expo, and I come back all excited about bringing it to my customers; but too often, I never can get it in Michigan. This is a real drag," she pointed out.

The pastry category is a small one for Munson's Munchies, because of the limited shelf-life of most such products, and the lack of wide availability long-shelf-life items through the local distributors.

"I've compensated for the short shelf lives and the difficulty getting good variety by offering 'Little Debbie' snacks, which are doing quite well. Of course, it's important to rotate the varieties so customers stay interested," Munson summed up.

BACK TO SCHOOL

Savory Snacks (Rochester, NY) has found a niche in which it is thriving, one that is virtually recession-proof despite the economic downturn. While some operators are shying away from snack and beverage vending in schools, in view of the current furor over childhood obesity and criticism of vending machines, Savory Snacks has divested its business and industry accounts and reestablished itself as a school vending specialist. The vending company now serves 350 schools in all, including those in Rochester, Syracuse and Buffalo, NY. It also pursues opportunities in other high-visibility public venues.

"There is a huge opportunity in schools. We decided the labor cost is too high at most B&I accounts, when we can use the same labor to take care of a school with many more machines," said Bryan Touchstone, Savory Snacks' vice-president. "So we've made ourselves experts in the school niche. Board of education members, parents and state legislators are targeting vending machines, but we work with them to build a well-received program."

The Savory Snacks vice-president added that school vending does not demand the intricate logistics and thin margins of refrigerated food; shelf-stable snacks and cold beverages are far more profitable, especially given their velocity in schools.

Savory Snacks is currently testing the prototype Fastcorp "Incredible Snack Machine," which has about three times the capacity of a conventional glassfront machine (see VT, September 2002), and Touchstone is encouraged by the results so far. He thinks the concept has the potential to further enhance efficiency through additional streamlining of service, which will directly impact the bottom line.

The company has 10 vending routes, plus and two direct sales routes that provide "Frito-Lay" and "Gatorade" products to school a la carte programs.

To forge ahead in the school channel, Savory Snacks purchased a small vending company five years ago that had a strong roster of school accounts. It then stayed ahead of the curve by proactively committing to the school districts, two years ago, to provide a "better-for-you" product selection. "We planogrammed our snack machines entirely with products that can be sold during lunch, by meeting the minimum nutritional guidelines of New York State. We removed things like 'Sour Patch Kids' and put in 'Milk & Cereal' bars and 'Nutri-Grain' bars, and put more focus on cookies and crackers," said Touchstone.

Savory Snacks revisited its school planogram this past fall, when Frito-Lay upgraded its product mix to offer choices with a healthier profile: its "Sensible Snack" portfolio. "With Frito-Lay placing more emphasis on better-for-you selections, like baked 'Doritos' and 'Lays' and reduced-fat 'Cheetos,' we incorporated those items into our portfolio, and it has helped us dramatically," said Touchstone. "Frito-Lay has changed its cooking techniques to eliminate trans fats, to help become part of the solution and to help combat the negative connotation associated with snacks. We stock regular Frito-Lay products and some better-for-you options, and we encourage school foodservice directors to let the students make the choice. Given the choice, it's nice to see that the healthier items aren't doing badly!"

WHAT'S BEST

As part of its recently awarded contract for snack and beverage vending in the entire Buffalo City school system (see VT February), Savory Snacks is taking part in a pilot test with Frito-Lay in which one-third of the columns in the machines are merchandised with "better-for-you" items.

Touchstone added that there is strong demand for LSS snacks among schoolchildren. "There are still many students who want the option to spend 50˘ or 60˘ , rather than 85˘ or $1, so we offer both size bags in the machines," said the Savory Snacks vice-president. "We encourage the foodservice directors to have the vend size on the cafeteria line, and LSS in the machines; this seems to work well."

Savory Snacks has boosted snack sales by as much as 25% in some schools by replacing its snack machines with branded "Frito-Lay" equipment. And Frito-Lay's efforts to provide healthier options have made school decision-makers more receptive to programs promoting the popular brand.

"Being so heavily involved in the education channel, we need to do all we can to combat the perception that vending machines serve 'junk.' We were proactive by implementing healthier choices before the states began looking at possibly changing the rules regarding what's available in vending machines during lunch," said Touchstone. "We are always looking for items that the foodservice director will see as healthier. We partner with foodservice directors; we want them to be our allies."

In addition to providing the popular non-carbonated "Snapple" and "Gatorade" lines, the operation's school program includes milk vending , 30 machines to date, and growing , which has been received very well by parents, students, foodservice directors and school administrators alike.

Savory Snacks maintains strong ties with school decision-makers in its region through its corporate membership in the New York State School Foodservice Association. "It gives us a forum for open dialogue with state school foodservice directors. We always try to market our concern for the health of the New York State student. We don't want to be labeled by the parents as unhealthy," Touchstone concluded, "and I think we've developed a very positive program."


Topic: Vending Features

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