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Issue Date: Vol. 41, No. 6 / June 25, 2001 - July 24, 2001, Posted On: 6/25/2001


Vending Ponders Strategies For Boosting Coffee Volume


Tim Sanford
Editor@vendingtimes.net

U.S.A. - Coffee is gaining strength as a beverage choice, according to research conducted by the National Coffee Association, and this increase in popularity appears to have halted the decline in per-capita coffee consumption that began in 1962.

The NCA's 2001 National Coffee Drinking Trends study shows the number of Americans drinking coffee, either occasionally or every day, has increased substantially over the past decade (see story starting on Page 17).

The driving force behind this renewal of enthusiasm for coffee has been the specialty segment. NCA research shows the number of people who sometimes drink specialty coffee nearly quadrupling over five years; the total now is nearly 30 million.

FULL TOOLBOX

Vending, and coffee service, have attempted to meet the evident demand for specialty coffee with a marketing arsenal containing a remarkable array of advanced coffee delivery systems and an unprecedented variety of hot beverages. However, some long-time observers of the workplace service industries are concerned over the declining role that high-quality coffee plays in the vending product mix.

"Coffee should be the mainstay of vending's profitability," said Ron Reinhardt, Take-A-Break (Escondido, CA). "As an industry, our return on investment is terrible. Everyone blames 'competition,' but no one looks at how vending profitability went away."

A veteran of more than three decades in vending and OCS, Reinhardt recalled that the rule in the early days of full-line vending was that 50% of profits had to come from the "wet mix" , coffee and postmix cold drinks , or the operator couldn't make it in that location. Because cup cold drink machines were costly and required skilled service, and operators could get branded can machines at little or no cost from soft-drink bottlers, the vending industry gradually gave up one of those two profit mainstays. He is concerned that the other, coffee, is becoming marginalized as well. Confined to higher-volume sites, priced much lower than packaged cold drinks (and, increasingly, lower than branded candy and snack items too), coffee contributes a declining percentage of gross dollars. Thus, it no longer commands the attention of many operators.

Ted R. Lingle, executive director of the Specialty Coffee Association of America (Long Beach, CA), suggested that the problem extends beyond vending. In general, he charged, the foodservice industry in the United States has not done a good job of marketing quality coffee. This failure has spurred the growth of the specialty coffee business, he pointed out; and that growth should provide guidelines that vending and coffee service operators , and restaurateurs , can apply to profitably meeting the growing demand for better coffee. "Consumers today increasingly prefer to pay $4 a pound rather than $2 a pound for coffee," Lingle pointed out.

While the specialty coffee revolution is often thought to have begun in the late '80s, its true origins were 15 years earlier, Lingle recalled. The pioneers in the specialty coffee trade had resolved to get the price they needed for the quality they wanted to provide by working with their customers. They began doing this before the Brazilian frost of 1975, and it proved to be a successful strategy throughout the turmoil that followed that disaster.

Scott Guardino of Paramount Automated Food Services (Pompano Beach, FL) agrees that the customer's perception of value is critical. He believes that today's informed decision-makers know the importance of a high-quality coffee program, and he does not understand the prevalent opinion that it's very difficult to get a fair price for vended coffee.

"When you sell, you have to give the prospect a reason to make the change, to choose your product and service rather than someone else's," he pointed out. "The reason to make that choice is the quality you bring to the table. I provide modern whole-bean equipment, Sweetheart insulated plastic cups , they cost more, but they're much easier to hold , and the best products I can get. My route people are great; they're well compensated and highly trained, and they keep the equipment clean, working right and stocked with fresh product. They carry handheld computers to help them. To provide this kind of service, I want a fair price. And no one has a problem with this."

Given today's costs, Guardino regards a fair price for vended coffee as 60 to 75 cents. Of course, some locations have specific reasons for desiring a lower vend price for coffee, but they understand that this must be offset by adjustments elsewhere in the program. In general, today's accounts and their patrons readily accept the need for market pricing, at least in a relatively young and growing market like Florida.

PROFESSIONAL CONTEXT

The quality of the equipment and the product certainly is important, but much of the consumer's quality perception is created by other things the operating company does, the Paramount executive emphasized. "We bring value that most of our competitors don't," he said. "They may say they'll provide the same machine and use the same product; but are their drivers uniformed and highly skilled? Is all their insurance and licensing in order? Do they wash their trucks every day, and 'detail' them every week?

"I want to sell to 'educated' decision-makers," he explained. "That's why I don't go after small accounts. I want to deal with a purchasing agent who got the job by being competent." Contracting for vending service should be a rational process, based on understanding the entire value proposition. "We identify the customers we want, and we sell to them," he explained.

Guardino pointed out that vending machines cannot become gourmet coffee houses, and that the operator's objective thus should be to run an excellent coffee vending program. This surely requires well-trained route and service personnel; but it also requires the application of the same category management tools that are used to maximize sales through snack and cold drink machines. Paramount does not stock tea and soup in its hot drink machines, simply because its clientele does not consume significant quantities of these items.

SCAA's Lingle observed that convenience stores serve a customer base that's very similar to vending's, and operators might study the success C-stores have had in boosting hot-drink volume. The key to their success has been variety, he noted; and, while vending is unable simply to add flavors by displaying another thermal server, vendors should take full advantage of the enhanced selectivity of today's equipment.

Reinhardt believes that more attention by suppliers and machine manufacturers could expand operator options. Today's machines do a fine job with traditional products, but are not optimized for dark-roast coffee, which exudes oil and creates the need for additional maintenance. Also, green tea is very popular among the Asian population, and a fresh-brew option for preparing it would be eagerly received in a number of markets.

While vending technology, like every other service method, imposes its own limitations on what can be done, Reinhardt believes greater attention to coffee can lead vendors to develop programs that build sales and consumption, even in the absence of enthusiastic supplier support. Machines should be kept clean, grammed properly to throw a sufficient quantity of good coffee, and matched to specific locations.

In Take-A-Break's market, two kinds of location predominate, the industry veteran said. One is industrial, with a largely Hispanic customer base; the other is populated by white-collar workers in offices. These markets require different products and demand different pricing.

Guardino observed that vendors in general spend too much time looking for one doctrine that will work well forever. "The calendar changes every day," he said, "and we have to change with it."


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