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Issue Date: Vol. 42, No. 14 / December 25, 2002 - January 24, 2003 , Posted On: 12/25/2002


Colleges And Universities Turn To Vending To Address '24/7' Needs Of Academic Life


Tim Sanford
Editor@vendingtimes.net

U.S.A. - Colleges and universities always have been an important segment of the vending market, and that importance is likely to grow. In 2001, institutions of higher learning produced $4.5 billion in vending sales, close to the $5 billion sold by vending machines in plants and factories although made at far fewer locations.

In many respects, college students are ideal vending patrons: they are active at all hours of the day and night, they tend to be open-minded about new technology and the sales propositions it can offer, and they often are pressed for time. And they soon enter the workforce, where they expect to find amenities similar to those they have learned to enjoy.

FLEXIBLE APPROACH

All Seasons Services, a fast-growing regional operating company headquartered in Brockton, MA, serves 72 college and university accounts throughout the Northeast and mid-Atlantic regions. According to vice-president of sales and marketing William Batchelor, 90% of these are clients for vending services only, with the remainder contracting for both vending and dining. All Seasons is flexible in its methods of approaching prospective academic clients, and is prepared to work with bottlers which have negotiated vending contracts and need to partner with an operator who can provide a range of products beyond cold drinks.

Campuses, like other vending locations, often pose dilemmas in terms of locating equipment. Students naturally want equipment to be sited conveniently for them, in dormitories. However, these seldom provide enough traffic to support an extensive variety of products.

This issue confronts both contract service providers and the campus administrators responsible for managing the service. Batchelor pointed out that a good site survey is essential before working with the administration in determining what equipment to place, and where to place it. "We watch traffic flow, and we look for key buildings like the library and the student center," he told VT. "Standard beverage and snack machines have their place in dorms, but we look for higher-volume sites for the high-impact machines."

All Seasons endeavors to find suitable sites for its preferred cold beverage vending installation, which uses glass-front machines to create a sort of small convenience store.

Steve Eberly, director of food stores for Purdue University (West Lafayette, IN) is responsible for the vending services on Purdue's campus. He explained that the university contracts for all of its vending service, but self-operates its dining program. The university wants vending machines in student residences, and Eberly sees that they are available there; but he has been working to expand the availability of 24-hour vending services at central locations, working together with its contract operator, Bertsch Vending Co. (Warsaw, IN).

"University residences are steady performers for can and bottle venders," Eberly said. "But we're increasing access to vending in the major academic centers, and we're seeing more sales as a result."

All Seasons' Batchelor also has found that administrators are receptive to proposals that will generate sales increases. Operators know the importance of placing machines where they are visible to prospective purchasers, and should share this expertise with their college clients just as they do with other locations. It's easy for someone looking at a floor plan to decide that a vending machine can be placed in a handy recess; "but you need venders on easy sight lines , not hidden," the All Seasons executive emphasized. "A vending program isn't going to work if the machines are down some obscure hallway. They have to be accessible and visible, 24/7."

Purdue's Eberly has found that machine performance in university residences is a good predictor of how they will do in more central "destination" sites. For this reason, he is particularly excited about the performance of a new frozen-food machine that Bertsch Vending has installed in the McCutcheon residence hall. The residence houses more than 750 undergraduate students, and Eberly reports that the machine, which replaced a manual facility, has been doing more than $1,000 a month in sales, selling a mix of main-meal and ice cream products at vend prices from $1 to $3.

While the university has done well with dedicated ice cream machines, he said, the mix of food and ice cream in the new vender seems to maximize patron appeal and turns. The test machine offers an array of branded frozen entrees plus eight selections of ice cream.

"We've had great success with this machine," the Purdue administrator explained. Students can patronize a convenience store located half a block away; even so, they are using the vender in sufficient numbers to promise very gratifying performance when a similar machine is installed in a central location. The target location has a population of 5,000 for much of the day, and should be a prime site, he predicted.

THE RIGHT CHOICE

Batchelor agrees that location is the key to successful placement of specialty vending equipment. All Seasons Services has had good luck with the "Hot Choice" machine from KRh Thermal Systems, which holds up to five items frozen and reheats them during the vend cycle, in suitable sites. "We've found that it works very well in high-traffic areas like the student center and athletic areas, where you not only have a lot of students, but their guests as well," he reported.

In Eberly's view, a key to the strong sales generated by the new frozen-food machine is the students' ability to use their "Boiler Express" debit cards to make purchases. Without that convenience, he believes, the relatively high-priced merchandise would not turn nearly as rapidly, since patrons often would have to choose between a vending purchase and some other immediate use for their small bills.

Colleges and universities have been in the forefront of cashless vending innovation, since they have many and diverse uses for cards issued to students, faculty, administrative and other personnel. All Seasons' Batchelor has observed a steady move toward multi-use cards at institutions of higher learning.

"I think the future is in smart cards, which students can use instead of cash for all sorts of purchases on campus," he said. "Big schools don't want students encumbered by cash. Smart cards make it much easier to buy a beverage or a snack, if you've left your money in your room." All Seasons offers a variety of options for offsetting the cost of equipping its machines with location-specific card terminals. A popular one is to negotiate lower commissions, so increased net profit pays for the devices. The investment in a large installation can be substantial, so the contract usually contains a buyback clause under which the institution agrees to pay the unamortized remainder of the cost if it does not renew the contract before the apparatus has been paid down.

The move toward card-based payment systems is much less pronounced at community colleges, the All Seasons executive added. These institutions have large commuter populations, transients who are more difficult to fit into a comprehensive card program.

Purdue's "Boiler Express" card was launched in 1997 as a door access control and meal plan solution, Eberly told VT. It is a "declining balance" instrument that simply debits the user's account maintained by a central computer, so all terminals that accept it are hardwired into a network connected to that central computer.

The card continues to gain acceptance, and the university is widening the uses to which it can be put. Eberly observed that these additional applications do add to the card's popularity, but he believes the real key is that successive cohorts of students are more and more comfortable with noncash media. "It's a generational thing," he suggested.

Most recently, card use has been extended to retail purchases at on-campus franchised pizza and yogurt stores, Eberly explained. To date, the card has succeeded on its own merits, without benefit of extensive promotional discounting. A more aggressive approach to promoting card use, especially by faculty and staff members who now use their cards almost exclusively for access only, is being considered.

College students naturally share many of the same product preferences as vending consumers in general, but there can be significant differences in detail. All Seasons' Batchelor noted that a substantial shift is occurring toward consumption of new noncarbonated beverages. These include juices, especially the "big brands" like "Tropicana" and "Veryfine;" waters, including "Poland Spring," "Dasani" and "Aquafina;" and the isotonics "Gatorade" and "Powerade." This last category constitutes a huge growth market, he said; "The isotonics used to be 'accommodation' items, but they've become necessities."

CAMPUS DRINK TRENDS

Carbonated beverages continue to be the dominant cold drink category on campus, but the alternative beverages are closing the gap, Batchelor emphasized. "We've seen some movement with 'Vanilla Coke,' 'Cherry Coke' and the 'SoBe' line, but water, isotonics and juice drinks are in greatest demand right now." An increasing percentage of the space in the glass-front "convenience store" installations is devoted to those increasingly popular categories.

Dairy-based beverages also are showing considerable strength. "'Nesquik' is coming into its own," the All Seasons executive told VT. "We've been amazed at how quickly it moves. We have some dedicated milk machines, and some machines designed for milk that also offer other beverages , the mix depends on where we can get the velocity." All Seasons also runs some dedicated water and isotonic machines in fieldhouses and other athletic locations.

Eberly also has seen marked growth in the sale of isotonics through vending machines at Purdue, where Coca-Cola's "Powerade" is showing great strength. Beyond categories, he said, students prize the ability to reclose their cold beverage containers, and so are showing a marked preference for 20-fl.oz. PET and 16-fl.oz. glass bottles. "Bottles are eclipsing 12-fl.oz. cans," the Purdue administrator told VT.

The return of younger consumers to hot beverage consumption also is continuing, Eberly and Batchelor agree. At Purdue, students are exhibiting a distinct preference for specialty hot drinks, especially flavored coffees and soluble cappuccino beverages. While sales of freshly brewed coffee through vending machines are not spectacular, Eberly noted that the university sells Starbucks brand coffees in its own foodservice operation, and students are consuming both the specialty and the traditional varieties with evident pleasure.

All Seasons Services has done well with hot beverage machines in sites where there is enough traffic to support them, but limited accessibility to coffee from manual outlets. Some student centers and many athletic facilities, including hockey rinks, meet these criteria, Batchelor told VT. All Seasons uses Automatic Products international's "Café Diem" full-house hot beverage merchandisers to address this market segment. These machines typically offer 16 selections, including all popular cappuccino flavors and hot chocolate. Variety builds volume in the presence of adequate traffic, Batchelor noted.

"Starbucks has taught us that young people want specialty hot drinks, and we offer them when we have the location and the numbers," the All Seasons executive explained. "Students' beverage tastes have changed over the past five years; they're consuming more hot drinks than ever."

While college and university decision-makers are no less interested in commissions than is the typical business and industry account, they usually recognize added value when they see it, Batchelor observed. "One way we offer that is by using planograms to increase velocity, which can increase real-world commission revenues," he instanced.

The company has developed a special planogram for college and university clients, built around large single serving formats and branded products. "LSS is what college kids want, and their wants are not modest," the All Seasons executive observed. "Offering LSS snacks benefits all parties: the patrons get better value, we net more on each sale, and the college gets more commission dollars."

Eberly also has found that Purdue students prefer larger portions and favor brands, and he is looking forward to testing a "Frito-Lay" branded vender selling larger bag sizes.

Batchelor reported that All Seasons snack machines on college campuses always contain two or three items for patrons concerned about fat content, such as pretzels and animal crackers. Kellogg's "Pop-Tarts" and "Act II" microwave popcorn are perennial dorm vending machine favorites, he added, since today's college students usually have microwave ovens (and, increasingly, a new appliance that combines a microwave oven and a small refrigerator into a single "Microfridge"). However, on balance, salty snacks like "Doritos" and "Lay's" continue to be the sales-drivers.

Refrigerated food machines have a role on campus, but in most cases it is a limited one. Purdue's Eberly noted that fresh-food venders, versatile and reliable though they be, are not easy to convert into "destinations." He runs them when necessary to provide food that cannot be furnished manually, and they are successful because they are accepted as meeting that need.

All Seasons' Batchelor explained that the company is prepared to provide refrigerated food venders, but the demand for them is less than in other types of location because most colleges and universities have their own foodservice programs in place. In such cases, food venders may be requested to provide food when the manual facilities are closed.

"Many schools have fantastic dining services, with bakeries and carry-out stores," he said. "But, if everything closes at 6:00 PM, a food machine may be justified." Waste always is a concern; All Seasons watches the performance of new food machine installations carefully for three or four months. If it is not profitable, the company sits down with the institution to discuss alternatives to pulling it. A machine that meets a real need may be subsidized, usually through reduced commissions on faster-moving product types.

One exception to the alternative nature of fresh food vending in the academic world is the institution with a very large proportion of commuters among its students, the All Seasons executive pointed out. This is especially true of those that offer extensive instruction during the evening. Community colleges thus can be prime locations for refrigerated machines.

While many educational institutions elect to self-operate their vending programs, usually in conjunction with a bottling company that does the cold drink vending, Batchelor noted, there are excellent reasons for contracting with a capable full-line vendor. "Colleges and universities choose All Seasons because we offer seven-day service, and the bottlers don't," he instanced. And a professional operating company provides a high level of maintenance and technical support. "They don't want machines going down, and they don't want dirty equipment; they want 'clean, filled and working.'"

Moreover, an independent operator can provide not only both best-selling soft drink lines, but also other branded equipment that may not be available from one bottling company, the All Seasons executive summed up.

Purdue's Eberly strongly agrees about the importance of excellent service. "The magic is the ability of the operator to keep the equipment functioning properly" , not only clean, filled and working, but with inventory adequately rotated to keep sales up.


Topic: Vending Features

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