FLORENCE, SC - Identifying a market need and finding a cost-effective way to satisfy it has proven to be a winning strategy for Pee Dee Food Service here.
The company was established by the Avent family, Pepsi-Cola bottlers whose franchise dates back to 1936. Frank Avent joined his family's bottling company more than three decades ago, and has learned the business from the ground up.
The Avents recognized the opportunity for a new full-line vending company in this booming southeastern market, and saw the potential of such an operation for increasing Pepsi's penetration of the workplace segment. The area also was (and is) booming, since its workforce and environment is attractive to employers.
Frank Avent was no stranger to workplace refreshment service. He and Rod Ruth (now on-premise manager for Pepsi-Cola of Florence) formed a coffee service company in 1989. It was a successful venture, but it began to grow in ways the founders had not anticipated; half its volume was represented by one client. Concerned about having an increasing number of eggs in one basket, Avent and route manager Joe Firimonte sold the OCS business and launched their full-line vending operation, named after the nearby Great Pee Dee River, in 1992.
Avent called on Firimonte, who joined the bottling company in 1991, to head the new vending operation as general manager. Route managers were assigned to seek out new business and maintain close contact with clients, and Pee Dee Food Service was off and running.
The company recognized that the vending market increasingly is dividing into two different sorts of client, large firms that need and can support the most sophisticated equipment available, and small ones that can be served best by the new generation of streamlined machines. Pee Dee Food Service has programs to meet the needs of accounts with small and large populations. Its smallest site houses 35 people; its largest has more than 12,000. At present, Pee Dee Food Service does not provide office coffee service.
A new service organization with strong roots in the community, an experienced and well-informed sales force, and the ability to provide first-rate equipment can build a client base rather quickly. Once built, of course, it must be maintained; and Pee Dee Food Service has concentrated from the outset on strengthening customer loyalty by responding quickly and flexibly to specific location desires, providing very fast service, and communicating freely and frequently with decision-makers and patrons.
The first of these goals is pursued by giving route sales representatives (the company does not employ "drivers") wide discretion in stocking machines in accordance with customers' expressed wishes. They talk to their patrons on site, and collect sales data with handheld route computers from CompuVend, Inc. They are backed up by the route managers, who conduct periodic surveys as part of their liaison with their clients. The information gathered by sales reps and managers is reviewed frequently by management. New products are tested continually, and sales representatives are informed of the best-selling items that should be in every machine.
Firimonte believes that this approach is more customer-friendly than the typical use of classical planograms, which prescribe what can (and, thus, what cannot) be offered. The idea is not to allow a management policy to prevent patrons from having what they want, he explained; and that is too often the outcome of inflexible planogramming of the traditional sort.
The wide latitude given to route sales representatives in designing location-specific menus that will maximize sales is backed up by a compensation program heavily weighted toward commissions on sales, and by intelligent supervision and training. Each representative is, in many respects, an entrepreneur responsible for the route's performance, and for taking care of the customers on it. Assistance in meeting that responsibility is provided by the company's route managers, who not only speak with customers during their frequent location visits, but also view the equipment from the patron's perspective, insure that machines are "clean, filled and working," and check product date-codes.
DOING IT RIGHT
Additional information on getting the best results is provided by a mentoring program. A quality assurance manager position has been created, with duties that include riding with a different route sales representative for a specified time period, usually a work-week. The quality assurance manager, the route manager and Firimonte then meet with the route sales representative to commend the things that are being done right on the route, and to offer the information and instruction necessary to enhance performance in areas where improvement is desirable.
Firimonte reports that this program, now a year old, has proven extremely effective in maximizing job performance and customer service, and in building morale. At its inception, the idea of unannounced in-depth inspections by a new sort of supervisor naturally was viewed with some suspicion by the route sales representatives. When they recognized that it was producing positive information that they could use to increase their sales , and, thus, their compensation , and to do a better job of taking care of their customers, they became enthusiastic about it.
"There's no negative feedback; everything is constructive," Firimonte told V/T. "The route sales representatives know that someone cares about them, that the company is trying to help them. We tell them how they're doing, and how they can do better. And the customers like it, too."
Quality assurance managers are recruited from senior route sales representatives, providing a path for advancement within the company and making certain that the quality assurance manager understands what's involved in running a route. Quality assurance managers who perform well can look forward to further promotion to route manager.
This emphasis on training and mentoring, and on opportunities for career development at Pee Dee Food Service, are very important in today's tight labor market, Firimonte emphasized.
Route sales expertise requires a combination of skills, and not all job applicants possess that combination, plus the personality traits that build rapport with customers. Firimonte strives to make the right hiring choices by giving qualified job applicants a thorough orientation in the nature of the route sales task, a process that has been made easier and more emphatic by a new film, The Route to Success. This was prepared by the National Automatic Merchandising Association, and is available as one of NAMA's educational resources. Firimonte also makes every effort to meet and speak with the spouse of a new hire, to explain the importance of the job and its value to the company and the community.
Also making a major contribution to good recruiting and personnel retention is human relations manager Lloyd Brown. He is always on the lookout for new methods of finding qualified candidates, and also is responsible for administering the company's generous compensation program, which includes insurance and profit sharing. This attention to matching the employee to the task has contributed greatly to the stability of Pee Dee's workforce.
A new source of potentially capable route sales personnel is a local technical college, which is eager to place its graduates in good jobs. Its testing, records maintenance and ability to provide background information goes a long way toward qualifying graduates who are interested in a career in distribution and merchandising, and the school has implemented a training program specifically for students desiring such a career.
With the route sales representatives and quality assurance managers as one leg of a tripod whose second leg is the route managers, the third customer support element is provided by Pee Dee's technical staff. Five technicians keep the equipment in good working order, and permit the company to handle service calls promptly on a 24-hour, seven-day-a-week basis.
The technical staff also conducts ongoing, rigorous preventive maintenance. And one of the responsibilities of the route manager is to inspect water filters and other accessories requiring periodic attention, to make sure the maintenance schedule is being followed.
By implementing policies designed to promote long-term expansion through securing and retaining good accounts, the company has enjoyed steady growth from the outset. Pee Dee Food Service also seeks to expand by acquiring compatible businesses as well as through internal growth. Thus, it purchased W.R. Thames Tom's, with three full-line routes, in 1994. Two years later, Pee Dee acquired Southeast Vending Services and its four routes from Dave Lesesne. In 1999, the company purchased five routes from Cromer Food Services (Anderson, SC).
The combination of its own swift market development with these strategic acquisitions has given the company solid coverage of its market area, with 28 routes.
Pee Dee Food Service is very receptive to new vending concepts that expand the ability to market products that appeal to today's patrons. For this reason, the company has embraced equipment offering 20-fl.-oz. soft drinks and other bottled cold beverages.
Firimonte explained that bottles are extraordinarily popular, and now account for 40 percent of the company's packaged-beverage sales. He attributes this not only to the higher perceived value of the larger portion, but also to the resealable package. Since the purchaser can carry the bottle safely to a workstation or an automobile to enjoy at leisure, people will buy a bottle even when they do not have the time to consume it in the vending area. This has increased unit sales.
MEETING THE MARKET
Fruit beverages also are growing in popularity, the Pee Dee general manager reported. The company is doing well with "FruitWorks," Pepsi's line of 5-10 percent juice drinks, which appeal strongly to the area's price-conscious consumers. And packaged water sales continue to grow dramatically, Firimonte added, with water volume doubling annually in each of the past three years. Interestingly, he said, patrons are not as sensitive to bottled-water prices as they are to the cost of other packaged cold drinks.
The shift in preference toward soft drinks in 20-fl.-oz. packages has been a positive development for vending, Firimonte said. In the Southeast, the 12-fl.-oz. can format has become something of a commodity, with fierce price competition across the retail spectrum, and profitability has suffered as a result.
Branding always has been important in vending, and has become much more so over the past decade, the Pee Dee general manager observed. This is particularly notable in the snack and candy segment, he said. In this area, too, contemporary preference appears to be shifting toward candy, which is taking over some cracker slots. Patrons seem to be less concerned with "healthier" attributes, and more interested in flavor and brand. Sales of branded bagged snacks remain strong , although, for some reason, "large size" versions have not found favor with vending patrons.
The emphasis on branded items also has had a positive impact on hot-beverage sales. The company reports good results with "NescafĂ©"-fronted venders, which deliver a tasty product immediately recognizable by consumers. And the eye-catching, colorful "NescafĂ©" front panel enhances appeal of the vending bank.
FROZEN PRODUCT INITIATIVE
Ice cream also is showing new strength as a result of technological advances, Firimonte said. Pee Dee Food Service uses Fastcorp's "F631" machines, in conjunction with locked, on-premise storage freezers that free route sales representatives from the need to handle ice cream. The dairy that supplies ice cream fills the freezers, and the route sales representatives use that stock to fill machines.
Branding also is valuable in promoting vended ice cream sales, the industry veteran observed. He reports good results with "Dove" and "Hershey"-identified machines.
The company also is experimenting with "Michelina's" frozen-food vending program, and believes that branded frozen foods of this sort have tremendous potential in vending. Two test sites in major full-line accounts located near Pee Dee's headquarters are performing very well, and experience has confirmed that branded convenience entrees do not cannibalize the fresh-food business, but add substantial volume.
The challenge of entering the frozen food business is that a commitment to a frozen-food program requires considerable investment in delivery vehicles. Nearby locations can be handled by small insulated carriers, but servicing equipment on typical routes will call for a freezer truck, Firimonte said. Results of the "Michelina's" trials have been so positive that the company is planning to expand its placement of the equipment, and will purchase a suitable delivery vehicle as this rollout progresses.
Recognizing from the start that a good fresh-food program is a key to getting large accounts, Pee Dee Food Service operates its own commissary to produce an extensive variety of sandwiches, salads and platters. The menu includes not only such perennial favorites as chicken salad and tuna, but also regional specialties like fried bologna and "chicken bog" (a South Carolinian specialty featuring chicken and rice). The company strives to provide a good assortment of popular fresh foods at very reasonable prices.
Expanding the menu and addressing demand for branded items are prewrapped items, including the Jimmy Dean, Pierre Foods "Fast Choice," and White Castle lines. The presence of immediately recognizable high-quality convenience food products alongside commissary items not only enhances consumer choice, but improves perception of the value of the fresh selections.
Another vending engineering advance that has proven successful for Pee Dee Food Service is the couponing option available on Coin Acceptors multi-drop bus bill validators. This option allows an operator to obtain "paper tokens," banknote-size scrip custom-imprinted by Coinco with special ink. The operator can program the validator to assign a specific value to the coupon, which then can be used in a wide variety of promotional and client-relations programs.
Many accounts offer small but highly-prized incentives to their personnel on an ongoing basis, to reward performance in such areas as workgroup safety, quality control and productivity. In large vending locations, these incentive programs often have been implemented by giving the rewards in the form of tokens (often called "wooden nickels") that can be exchanged for cash by the vending attendant, then redeemed by the operator at an agreed-upon value. It is a cumbersome system, but locations like it.
Firimonte reported that the Coinco "paper tokens" make it much easier to implement this kind of incentive program, and clients are very receptive to it. It can be conducted in locations without an attendant; it is easier for patrons to use; and it is more flexible.
The coupons also are valuable to accounts that wish to offer a cashless payment medium, such as schools offering full-price, reduced-price and free lunches on the basis of student need. One objective of such programs is to insure that all transactions are handled in the same way.
Firimonte recalled that a local school desired to issue $2.50 meal tickets to each student, and was delighted to learn that the Coinco "paper tokens" could be used in this way. This greatly simplifies the administration of the program.
New technology also works to the patron's advantage by making the route sales representative more productive, and thus able to spend more time on tasks that maximize customer satisfaction. The CompuVend Systems handheld route computers have proven popular with drivers, prompting them on just what each machine requires and keeping track of sales. Locations also like to see drivers making efficient use of cutting-edge data processing gear, Firimonte reported.
AUTOMATING DATA RETRIEVAL
The next step will be to capture information directly from the machine over a DEX connection. To date, the lack of a universal industry agreement on how to implement the vending version of DEX (the Vending Industry Data Transfer Standard) and the differences in system architecture from one generation of vending equipment to the next have made it difficult to deploy a cost-effective data capture and retrieval program across the entire operation. But this is the future, Firimonte emphasized, and Pee Dee Food Service is working steadily toward a true paperless route environment with automated line-item sales tracking.
Despite the recent slowdown in nationwide economic activity, the Florence market area remains vibrant, the Pee Dee general manager said. While some companies are downsizing, new ones are relocating to the area. There is ample business for a vending company that is responsive to customer needs and well-organized to meet them.
The vending industry changes continually to conform to its consumer base, Firimonte emphasized; and operators who fail to recognize this are in danger of being left behind. "You can never be complacent in this business," he stated.
Trade associations play a crucial role in keeping operators up to date on new technology, operating concepts and industry trends. For this reason, Pee Dee Food Service is active in both the National Automatic Merchandising Association and the South Carolina Automatic Merchandising Association; and Firimonte reported that the benefits of membership far outweigh the costs.
NAMA offers outstanding training programs, he instanced; in addition to its very useful route sales orientation video, the association can provide educational materials addressing a wide range of operator concerns, from on-the-job accident reduction and vehicle safety to training prospective supervisors in order to promote from within. Its annual round of educational meetings also gives operators ample opportunity to stay on the leading edge of industry developments.
Firimonte is a director of the South Carolina Automatic Merchandising Association, and has found its effective industry representation in the state legislature extremely valuable. SCAMA also emphasizes education, and its annual winter conference (most recently held in Hilton Head last month) has become a prime member attraction. Generously supported by large companies, the event gives operators an unmatched opportunity to benefit from formal seminars and workshops plus informal networking at very low cost.
Pee Dee Food Service's management is optimistic about the future of the company and the industry. Demand never has been greater, and today's operator has an ever-growing variety of products and equipment to meet that demand effectively.
However, Firimonte noted, vending seems always to be at a crossroads. On the one hand, the opportunities are expanding; on the other, ferocious and often short-sighted competition puts continual pressure on margins.
The solution to this problem, beyond industry education in setting profit objectives that will enable a company to stay in business, is to provide excellent service and to stay in close touch with location management, Firimonte said. Some accounts are easier to work with than others, but today's businesses seem to be more aware of the cost constraints on their service providers.
"If you're doing a very good job, it's possible to explain that you have to offer competitive wages and benefits in order to attract and keep the caliber of people necessary to meet the location's needs," he said. And many accounts are aware of the burden that higher fuel costs have imposed on route distribution businesses, and can be persuaded to accommodate the operator by compensatory price improvements.
And, while large workplaces are and will remain essential to full-line vending, the industry must face the reality that the market of the foreseeable future will include more and more smaller locations, Firimonte concluded. As large organizations decentralize and become more productive, workplaces increasingly are populated by fewer, but better-compensated and more demanding, employees. Vendors must recognize the growing role of small sites, he emphasized, and must have a game plan in place that allows them to address this market segment successfully.