PHOENIX- The key to turning a part-time enterprise based on one machine into a growing full-line vending company is energetic sales, good-working modern equipment and the ability to look at the operation from the perspective of its customers. This formula, applied with a good deal of elbow grease, has worked for S&L Vending here.
The company was founded by Steve and Lori Endres, both of whom were doing something else at the time. Steve was an eight-year veteran with Coca-Cola, responsible for delivering product to area vending companies. Lori worked at a real estate management firm. Steve became familiar with the vending product mix, liked the concept, and bought a machine in 1988. Lori arranged for him to install it at her workplace, and they were in the vending business.
Operators with a single machine are not ready to quit their day jobs, so Steve found part-time employment with Consolidated Freightways, making local deliveries. His mechanical aptitude also enabled him to perform maintenance work for Lori's employer. And he continued to purchase and place vending machines, servicing them during lunch breaks and between assignments. In 1993, he decided that it was time to devote his full attention to vending.
Steve, who also is a softball coach, had many contacts who could be approached about installing vending equipment. He also did extensive cold calling. Lori promoted the enterprise among friends and family, and the new business's client roster grew steadily.
By 1995, it had outgrown the founders' house and the ability of one man to handle it. So Lori joined the business full time, and they moved the operation to a subleased warehouse. In 1998, they were able to take advantage of an opportunity to double the size of the company by acquiring a small vending firm from a business acquaintance and moving into their present headquarters.
With four routes, S&L Vending hired a technician, and Steve removed himself from route delivery duties to handle route management and supervision, new installations and technical oversight and training. He stays up to date on new equipment by attending every factory service school within reach, and continues to take service calls. His objective is to respond to any request for technical support within two hours, preferably less than an hour. "There's nothing worse than a machine being down," he emphasized.
A vending machine that is out of service not only cannot sell anything, but it sows distrust of the vending service among prospective customers. For all these reasons, S&L emphasizes preventive maintenance and other proactive steps to keep its equipment in good working order. Drivers are trained to look for developing problems and to notify the office promptly if they find any. The company has equipped its field staff with cellular telephones, so it's easy to call in and report a condition that may warrant a preemptive service call.
Lori handles sales, customer relations and administrative duties, and recently retained an assistant to free up more time for dealing with clients and prospects. As a general rule, the company targets locations with full-time populations of 50 or more. she explained.
In her sales role, she has found that many attractive locations have been saddled with old equipment by their existing operators, and are tired of it. Since Steve started with a brand-new machine, he has continued to buy nearly all new equipment, and this has been a steady source of new business for the company. Most of its machines are produced by Automatic Products international, ltd. and Crane National Vendors. The company leases its cold-drink machines from area bottlers, who always provide up-to-date equipment with the latest refinements.
The increasing modularity of vending equipment has encouraged improvements to machines of all kinds. Lori pointed out that today's venders are far more reliable than their predecessors, even those of 20 years ago, and this has built public confidence in vending. Among noteworthy new developments favored by customers, location management and operators alike are greater flexibility in accommodating different package formats (notably, cans and bottles), and bill validators that can accept proprietary coupons as well as banknotes. Machines today also are easier to work on, and thus to maintain at peak efficiency.
As a Coca-Cola veteran, Steve naturally began by placing cold drink vending equipment. This logically led S&L to add snack vending, then hot beverages, and finally food, both refrigerated and frozen, as well as ice cream.
WILLING TO INNOVATE
Always willing to try something new that will profitably meet a specific location need, S&L makes some use of Dixie-Narco's "BeverageMax" glass-front 45-select cold drink venders, as well as dedicated chilled "M&M's" and "Hershey" branded machines. Also finding favor are the new "plastic pint"-packaged milk beverages, which S&L offers through the milk-specific "BeverageMax" (with health control), and to some extent in refrigerated food venders.
The frozen-products program, built around Fastcorp's robotic-arm frozen food and ice cream vender, has been expanding rapidly; enthusiastic clients range from schools and hospitals through factories and warehouses to large corporate facilities.
Like many operations, S&L has found that a combination of ice cream novelties and branded frozen items tends to maximize sales through the Fastcorp machines. The lack of shelf-life concerns with frozen foods helps to resolve the long-standing problem of waste that has impaired food vending profitability for more than four decades. Lori also reported that offering ice cream to a prospective account has proven an effective sales tool, and the frozen category in general is experiencing solid growth.
There is an ongoing demand for high-quality refrigerated food, and S&L meets this market with a mixture of branded prepackaged convenience items and freshly-prepared products from a well-established local supplier, Chef Catering. Vend-specific prewrapped convenience lines that do well locally include Bageltime, Bridgford, Jimmy Dean, Michelina's and Smiley's, Lori reported. As a rule, the company wants a population of 100 people or more in order to consider providing food vending equipment.
Responding to requests from existing accounts, the Endreses also added coffee service for vending clients that have a need for it. A particular favorite is the Crane National Vendors "CafĂ©" series, notably the "System 7" and "Executive." S&L Vending is prepared to lease these small fresh-brew machines to its vending accounts, so they can place them where they wish and provide single-cup coffee service free, or at whatever price meets their particular objectives for an office refreshment program. Since the service is offered to existing vending accounts, route service personnel can provide the weekly cleaning and other maintenance needed by all fresh-brew equipment.The client easily can keep the machines filled, in between service calls.
Like ice cream, Lori said, countertop single-cup machines are attractive to locations and thus can be good sales tools.
The company presently serves its 300-plus accounts on four regular routes, using box vans on Isuzu chassis and "Omnicube" temperature-controlled transporters with cold packs for perishable items. One route serves high schools in which all machines are stocked according to a prescribed load plan. The daily orders for each site thus are prepacked in the warehouse.
S&L has just added a specialized vehicle to supply high-volume stops with ice cream, frozen and refrigerated food, and milk. This is, in effect, a fifth route that presently runs three days a week.
The Endreses emphasize that people in their market area are very much in tune with the latest trends, and like new products and new ideas. Successful innovation in vendible products often is the result of the supplier's understanding a trend and developing vendible items in conformity with it.
Two examples of this are large single serve snacks and the 20-fl.-oz. cold drink bottle. Both were developed in response to the public's demonstrated demand for larger portions, and both initially encountered some resistance from vending operators who did not want to make their logistics more complicated.
Steve confesses that his first reaction to the larger, heavier 20-fl.-oz. bottle was, "What a pain!" But he quickly determined that it is easy to sell it for a dollar, while it's hard to get today's consumers to spend 65˘ for a 12-fl.-oz. can. This is reason enough for him to welcome the larger container.
Frito-Lay conceived the LSS format on the basis of similar strategic reasoning, and it too has been proven right. S&L's large-size snack selections primarily are Frito-Lay products, and these are well-received in the greater Phoenix market. S&L no longer offers the traditional vend size snack format.
In recent months, the company has been working with Frito-Lay to test the new "king size" snack format, vended through Fastcorp's "Incredible Snack Machine." Lori reported that this program, so far conducted only in schools and high-traffic public sites, has been a spectacular success: "they just blow out product," she said. "It's been awesome."
The logic is similar to that underlying LSS: given the fixed costs of producing, packaging and delivering snacks, the incremental expense of putting more product in a larger bag is much less than the perceived increase in value. If the classic vend size contains a 1-oz. portion and the operator must vend it for 50˘, while the king size contains 3 oz. and sells for $1.00, the customer sees a real advantage in buying the bigger bag.
The novel machines, which use a robotic vacuum arm to lift product from vertical magazines, took some getting used to, she added. But initial issues have been addressed successfully, and they are working very well indeed.
The company strives to address specific patron preferences while maintaining fast inventory turns, and has adopted a flexible planogramming system to accomplish this. Drivers always have been encouraged to invite customer requests for new or different products, and Lori makes every effort to determine client preferences before the installation and during periodic conferences thereafter. She encourages customers to contact her with requests and comments, favorable or otherwise.
At the same time, S&L was convinced of the value of planogramming after attending a seminar sponsored by Hershey Foods and conducted by marketing veteran Brad Bachtelle. Late last summer, the company took action, implementing standard planograms for all its machines , with a number of slots allocated to "special request" or discretionary "flex" items.
To comply with specific requests, drivers are given a box (not a case) of the desired product, and must place it only at the location where it has been requested. Sales are evaluated to determine whether to keep offering the item, or to replace it with something with greater potential appeal.
The Endreses are aware of the role handheld computers can play in making this kind of sales tracking faster and easier, and providing a greater depth of line-item preference information. And the company is convinced that scheduling service to conform to actual machine load levels (which has been called "flex routing") would be a productivity-booster. However, the cost of implementing such a system is a real issue for a growing company, Lori said.
The advantages to the new technology are evident, she pointed out. The question for the operator is to determine when the benefits, which increase steadily as functionality is improved and standardization becomes more and more widespread, clearly exceed the costs of hardware, software, retraining and management system redesign. The company is watching developments.
S&L Vending's commitment to education and professionalism as the keys to customer satisfaction and account retention led the company to join the Arizona Automatic Merchandising Council and the National Automatic Merchandising Association eight years ago.
"At first, we weren't sure that membership would be worth the cost, but it's been a very good thing," Lori emphasized. "We receive information that we simply couldn't obtain anywhere else. And Arizona has a very good lobbyist who tells us exactly what we need to know."
Convinced of the value of membership, Steve has become active in AAMC activities, and presently serves on the state council's board of directors.
The regional expertise of AAMC and the resources of the national association are a very valuable combination, Lori summed up. "The NAMA trade shows give us the opportunity to see what's new," she told VT. "We get so much good information that I can't imagine not belonging."