The National Automatic Merchandising Association’s board of directors has sent out a letter calling for operators to be reasonable in their expectations of a trade association’s ability to resolve business-relationship conflicts, specifically the antagonism that periodically builds between operators and bottlers. Apparently, there are vendors who want NAMA to seek repeal of the Soft Drink Interbrand Competition Act (1980) and generally become more adversarial toward soft drink bottlers. The board points out that a trade association cannot legally involve itself in competitive disputes within an industry, and explains that NAMA has done much to provide a forum and make its good offices available for dispute resolution.
We have no expectation that anything we, or anyone else, can say or do will resolve this matter. We do think, though, that everyone would benefit from a more reasoned and moderate approach.
For starters, it is worth everyone’s while to read the board’s letter carefully. It can be downloaded from the NAMA home page at vending.org. So can a detailed, very informative analysis of operator-bottler relations written by senior vice-president and chief counsel Tom McMahon in 2003.
The problem is not unique to NAMA. We recall a tense summit meeting called a decade or so ago between the group of unaffiliated state associations that cosponsor the Atlantic Coast Exposition, on the one hand, and the region’s bottlers, many of which have sister companies active in full-line vending, on the other. Nothing was resolved, and what lodged in memory was the intransigence of some operators, and the stony silence of the bottler representatives; they had come to listen, but would not speak.
In the interest of moderation and even-handedness, it may be helpful to remember that the bottling industry can claim to have invented cold drink vending. Branded bottle venders were being placed by bottlers in the years before World War II. The full-line vending revolution of the 1960s had, as its cold-drink component, the postmix cup machine. Bottle and can venders were little used by “third-party operators” for a decade or more; and operators who did use them usually purchased them outright from manufacturers whose designs were not purchased by bottlers. Operators got their syrup from soft drink companies’ fountain sales organizations.
In this model, which prevailed (roughly) between 1960 and 1980, there was little opportunity for conflict between bottlers and “third-party operators.” But many trendlines were converging. The shift to disposable packages from refillable bottles that traveled in a closed loop from bottling plant to end-user and back had far-reaching, if subtle, effects on the entire business. Those effects were modulated by a continual shift in consumer tastes in the direction of wider variety, which affected candy, snack and tobacco manufacturers too. New opportunities masked unexpected pitfalls.
It certainly is true that bottling companies sometimes make mistakes that require a good deal of time and effort to correct. This usually involves some young tiger deciding that the bottler would make much more money if it didn’t sell its product to a third-party operator at all, but controlled the pipeline right down to the machine on location. If it works for gas stations, why would it not work for high-volume B&I accounts? The answer, as has been learned and forgotten over and over again, is the vastly greater demand for service there, and the much higher costs that result.
But it also is true that operators can be unreasonable. If someone is making a machine available to you at no cost, and spending a great deal of money to drive demand for the product it vends, it could be argued that this party is providing value that, at the very least, offsets a price structure that sometimes seems inequitable.
Meanwhile, we are concerned that external forces are building that seem dangerous to operators and vendors alike. The growing political traction apparently available to those wanting to tighten regulations and impose imaginative new taxes should concern all of us. We have been basking in the sunshine of an enthusiasm for free markets that has prevailed for a quarter-century, but which is by no means the historical norm. It is not unlikely that we will need NAMA to defend these industries’ right to sell legal products to willing buyers. It is in everyone’s interest to keep our trade associations strong. It would be ironic if a peace of mutual exhaustion, or a Pyrrhic victory by one side or the other, led to both being overwhelmed by the return of a dark age of statism.