BROCKTON, MA - The postwar vending industry has undergone periodic cycles of consolidation, in which strong local independent operations are assembled into regional or national organizations. It became evident in the last decade that a new cycle is under way; and All Seasons Services here has been a prime mover in this one.
All Seasons' purchase of USRefresh last summer (see V/T, August 2001) was the 30th, and largest, transaction in a four-year series of acquisitions that has kept the company on the leading edge. The USRefresh accord added eight regional offices serving 12 states and generating some $82.5 million in annual sales.
In less than five years, All Seasons has expanded into an 18-state market area, serving some 10,000 accounts with a total volume estimated at $250 million this year.
The Howard Johnson hotel chain formed All Seasons in 1960 as its in-house full-line vending operation. It acquired a strong local vending business, Brun-O-Matic, in 1984. Mark A. Bruno, whose family had founded Brun-O-Matic, remained with the organization. Howard Johnson was acquired by Marriott Corp. in 1985, and Bruno became a district manager, then vice-president, for Marriott's business and industry operations.
Bruno led a group of senior managers who bought All Seasons from Marriott in 1986, and the company took advantage of the strong economy to bolster its position in the Northeast over the next decade. Growing internally and through selective acquisitions, it expanded its coverage to the upper mid-Atlantic states, and volume grew to $83 million annually.
GROWTH BY DESIGN
In 1997, James S. Gladney, who had built and sold a very successful real estate development company, joined Bruno to organize a buyout of the company and its conversion into an employee-owned enterprise. Gladney became chairman and chief executive officer, and Bruno serves as president and chief operating officer.
The new management team embarked on an ambitious growth program built around three basic objectives. The first has been to create an organizational structure that can accommodate new acquisitions comfortably, keeping key personnel in place and minimizing the difficulty of transition to a new management system.
The second objective is to become the purchaser of choice for strong, well-managed operations run by people who are proud of their work and eager to see the business continue to prosper and grow.
The third is to maintain and refine a sophisticated communications structure that provides timely and accurate information to headquarters while preserving the maximum possible local autonomy.
"Reputation is everything. Five years ago, if you said 'All Seasons,' people would most likely shrug their shoulders; we had no reputation," Gladney told V/T. "We work hard to do things right, to earn respect in the industry. We've never believed in cutting corners; while it may give a company short-term advantages, in the long term, it's not how you build a business and a reputation."
At the top of All Seasons' list of most valuable assets is its people, whom Gladney credits for the company's ability to take continued rapid expansion in stride.
"Our scarcest resource is not capital; we have plenty of that. It's not opportunity; there's no shortage of that, either. It's talented people. We treasure them," emphasized Gladney.
"One of our biggest questions when we look to acquire a company is how successful we'll be at keeping good people," he explained. "Employees are always worried about losing their jobs in an acquisition. We're worried that we'll lose them! We can't acquire a company and then have all the people leave."
Gladney cited the company's acquisition of Great American Vending (Miramar, FL), which took place immediately after the USRefresh transaction, and added another $15 million in business (see V/T, September 2001).
KNOWING THE TERRITORY
"We weren't even in the Florida market, so how feasible would it have been for us to send 50 people down there to start from scratch? Part of our 'due diligence' research is to make sure that the people on board want to stay. We have a lot of communication with employees, one on one, to make sure the team will remain intact before we move ahead with an acquisition."
A primary goal is to keep the owner on board, at least through the transition period. In the case of Great American Vending, the owner opted to pursue another business, but contracted with All Seasons to serve as a consultant. "He gives us great advice on keeping the customers and the employees happy; who knows the secrets better than he does? We begged him to stay, but he had set his sights on his other business," Gladney explained.
"Of course, there's the operator selling his business who has his heart set on the golf course, too," the All Seasons chairman added. "But it's rare that we lose talented owners and managers in an acquisition."
In fact, All Seasons retains 95% of the employees of the businesses it acquires. Of the ones who leave, Gladney estimates that 4% do so of their own free will.
"A great many operators stay on and run big pieces of All Seasons' business. They're the kind of entrepreneurs who want to grow with the resources of a bigger company, and they're the best managers to get on board because they've run and built a successful business. A lot of our senior operating management came from acquisitions," he explained.
All Seasons provides its valued workforce with stock options, an excellent health insurance plan, highly competitive compensation and numerous other benefits, giving employees little reason to look elsewhere.
Creating best practices, implementing them and instituting uniform policies and procedures is, of course, essential to a successful strategy of growth by acquisition. It also is the key to All Seasons' ability to live up to its reputation. And with 35 acquisitions under its belt and more on the way, the process is ongoing.
Technology provides the backbone for the flow of sales data between districts, now in 18 states, and corporate headquarters. It also underlies rigorous financial controls, and expedites the free flow of information throughout the company, according to Gladney. All Seasons' heavy investment in technology has paid for itself tenfold, the company's principals emphasized.
"The first thing we did is build a 'pipeline'; then we determined just what we wanted to send through it," explained Gladney. That communications "pipeline" takes the form of a corporate "intranet" that ties together the local-area networks in its district offices. The district LANs feed information through the wide-area network to headquarters, and receive information from headquarters in return.
"We bought bandwidth," Gladney said. "Now, along with all the information that flows back and forth, we also send our long distance calls through those 'pipes.' We implemented the wide area network with the idea of learning all the things we can do with it; and now we see the results, with the flow of information, the convenience and the cost savings."
Bill Popeo, All Seasons' senior vice-president and chief financial officer, added that an enormous amount of data streams in from each district. When it arrives at the corporate headquarters, software condenses it into one-page summaries for each district, in easily readable and comprehensible form, and sends those back along the "pipe."
Popeo emphasized that All Seasons is very rigorous on the financial side of the business, and makes use of the best data collection and analysis tools it can find to help "watch the store." Technology has improved dramatically in this regard, Popeo explained.
"We have great systems; we run the business by the numbers, not blindly. We're quick to terminate any business we deem unprofitable," he said. "But on a district level, I'm always amazed at the detail that's understood about each customer. This helps keep it personal; the districts know the 'whys' behind the numbers."
Collections are reconciled daily at the district level and weekly at corporate headquarters; monthly reports are compiled for the company's bank and other investment partners.
All Seasons' information technology team has been extremely busy for the past several months, integrating the USRefresh operations into its own. Converting the new branch offices to the EMS management software system that All Seasons has used for 15 years is a big part of the process.
The procedure takes one month, district by district, for conversion and training. "We take each district through a full cycle, to closing at the end of the month," explained Gladney. "With 35 acquisitions in five years, we know the right approach to getting everyone up to speed as quickly as possible on our uniform procedures."
The company has eight IT professionals on staff, as well as a number of consultants, to oversee the task of integration. This team is also responsible for keeping All Seasons' wide area network functioning dependably, as well as providing ongoing training, upgrading equipment and software and troubleshooting.
Popeo explained that a "cross-functional" team composed of operations, IT, accounting and corporate professionals has been working in concert to bring USRefresh's software and hardware into conformity with All Seasons'. Of course, USRefresh brought its own seasoned professionals into the operation, and they have helped coordinate the transition.
"We have top-notch operations people gathering the data and funneling the information to us, as we convert our database," said Popeo. "Everyone wears their own hats, but there's a lot of cross-pollination. That's how we run every facet of our business; we have experts in each area, but they can step back and look at the big picture."
"You don't want the IT team not to understand the operations team," added Gladney. "It's critical to their mission to get out in the field and communicate with the people on the front lines and to fully understand the problems , not just from an IT perspective. Operations is the key that drives profit, over the long term, so everyone in our organization has to understand what happens in the arena where sales actually are being made."
All Seasons invests in state-of-the-art vending equipment and peripherals for its locations, and is keenly aware of technological advance , but cautious. The company presently is testing machine-level automated data collection and upload by means of the Vending Industry Data Transfer Standard, the vending machine implementation of DEX/UCS. While most of All Seasons' equipment is DEX-capable, the company is proceeding with great deliberation.
NO EASY SOLUTIONS
Gladney observed that automatic data collection often is touted as a panacea, and the concept certainly is attractive. So far, however, the devil has been in the details, he noted. Most of the stories he has heard of attempts to convert a route to DEX data upload have emphasized the difficulty of getting everything to work together, in the same way, to produce usable results in an efficient and timely manner. The benefit has to exceed the cost, he emphasized; "We will test the system on our routes, and only implement it when we like what we see," he explained.
"We always ask, 'Does it work?' and 'Will it pay for itself?" added Popeo. "With the amount of data we need to collect, we find it better to rely on route tickets to gather machine-level data, for now."
"We will go to handhelds and DEX when we are confident the technology will work well enough and be cost-effective enough to implement it company-wide; we won't be a guinea pig," Gladney summed up. "Too many operators spend too much time and money, only to end up back where they began."
Despite the company's tight controls, accountability remains a major issue and All Seasons has not found the sovereign remedy that will resolve all the issues. "Our accountability is as good as any we've seen, but it still needs work," Gladney reported. "It's tough when you're dealing with cash and inventory. I don't think we'll rest until we know we are getting every penny. Our goal remains to eliminate all losses, and make it perfect. We're very idealistic about that."
Handhelds with DEX data capture may someday lead to tighter controls, but Gladney is still skeptical. "There are three big 'ifs' with handhelds. They're great if they work, if they're cost-effective, and if they are integrated into the company system," said Gladney. "People always look for the Holy Grail, but for complicated problems like internal and external theft, it's seldom easy to find a simple solution."
He added that All Seasons is at an advantage because it has teams of technology experts in-house who can intelligently evaluate hardware and software solutions as they enter the market.
"We're not easily persuaded," he commented. "Smaller operators who are wearing many hats turn to the handheld computer, hoping that it can be 'eyes in the back of their head', but it takes a lot more than just installing the system to reap the full benefits of it."
Loss prevention also extends beyond cash and inventory in vending machines. All Seasons also has implemented an Internet-based program that tracks fuel usage by user, to the gallon, to make sure that company resources are being used productively, routes are well-structured and vehicles are kept in good working order.
Data collection, too, has uses beyond auditing and cash-to-inventory reconciliation. It increasingly plays a role in maximizing sales by continually adjusting machine menus to patron preferences.
All Seasons relies heavily on planograms, coupled with the expertise of its field operators, to satisfy consumers who are spread across a diverse geographical and demographic landscape, and thus ensure the fastest possible turn rate and most remunerative use of selling-space.
Headquarters determines 80% of each machine's load plan, leaving field operators latitude to customize the remaining 20% according to client requests and regional preferences.
All Seasons has developed multiple planograms to accommodate variations in region and account type, and these are updated continually to reflect new products and changes in demand. "Districts still can make choices to satisfy regional preferences and to customize the brand set to satisfy specific needs, or they can use their discretion to double up on high-volume products that prove to have tremendous turns in certain locations," noted president Mark Bruno.
All Seasons further leverages its purchasing power by striving to consolidate the number of suppliers with which it does business, and the quantity of stock-keeping units it purchases from each.
"We drive more volume through fewer suppliers and SKUs, lowering the cost of goods and handling, and allowing us to turn inventory more frequently; it's an ongoing work in progress," explained Popeo.
Each district places its orders, online, to All Seasons' two primary suppliers, VSA and Anpesil Distribution Services. Customized electronic order forms limit the SKUs to those approved at All Seasons headquarters. "Items that we do not approve are blocked, but if employees have a need to order any of those items, they can offer a reason for an exception. All the orders come to headquarters first, so if operations notes that the CEO at XYZ Co. really wants an oddball product in the machine, when the order comes to corporate, they'll allow the order for that item," explained Gladney.
"We attempt to have fairly rigorous controls and systems in place to manage at a detailed level, while giving enough autonomy to each district to fulfill customer needs. There's also a lot of comparison between districts to make sure we're satisfying customers and maximizing returns as best we can," said Bruno.
He added that, while its unit costs may be lower than what a smaller operating company would pay, All Seasons' overall cost of goods is higher than most of its competitors', because of its "convenience store philosophy" of offering a top-shelf brand set in every category.
"We have a very flat organizational structure. We are not bureaucratic, and many people are empowered to make very quick decisions," explained Gladney. "Most decision-making is based on common sense; there really is no recipe for magic, and our people are extremely capable of using their best judgment."
"We push responsibility down, rather than up, through workgroups," added Popeo. "It's not just about solving problems today, but making the right decisions for five years from now. We over-invest in our people, and in technology, with an eye toward five years from now. Our people are all involved, every step of the way, in the company's growth; and they value knowing that they count."
The easy transmission of information up and down the chain of command provides the foundation for quick decision-making, and the ongoing information revolution makes it all possible.
"We love e-mail; it allows us to communicate very quickly and effectively. We make instantaneous decisions by e-mail, and then 'cc' anyone who needs to know. We can make a change in accounting procedure, and just broadcast an e-mail to all our districts," said Gladney.
An e-mail that originates on the front line can be copied up the chain until the issue is resolved, generally within hours. "No one in our organization is stunted by a bureaucracy; everyone is very agile," noted Gladney. "We do all the things a big company does, but we're employee-owned, entrepreneurial in spirit and very quick to act."
Gladney explained that the structure of the organization lends itself to effective decision-making, most often at the field level.
Reporting to Gladney are Popeo; vice-president and general counsel Jim Trulow V, and Bruno. Reporting to Bruno are the vice-president of vending, vice-president of dining, vice-president of sales and marketing and director of purchasing.
Reporting to the vending vice-president are six regional vending directors, each of whom manages three to six branches ranging from $30 million to $60 million in annual sales. At present, vending directors also are responsible for administration and reporting of coffee service operations, although these increasingly are conducted and supervised by specialists in the field.
Four district dining directors oversee $10 million each in manual foodservice business. The dining directors also run all of All Seasons' commissaries, but work hand in hand with vending directors to ensure clients' needs are met.
"Dining experts know how to develop menus, and how to purchase, store and handle food better than most vending people. I think we mitigate a lot of the waste issues that many vending operators have with food by doing it so well, and putting it in the hands of the experts," said Bruno.
"As we acquire companies with commissaries, we immediately put dining people in charge," he explained. "It's proven to work extremely well."
The company has six strategically located commissaries, three of which it built from the ground up. The other three were taken on intact as the result of acquisitions.
All Seasons complements its premium fresh foods and top-name branded food items with KRh Thermal Systems "Hot Choice" machines, and is refining its approach to how it operates the venders. These novel "automated fast-food restaurants" hold up to five selections frozen, and reheat them during the vending cycle.
"We're revisiting our initial strategy because we believe we've missed some opportunity with the 'Hot Choice' machines," Bruno observed. "We originally placed them at conventional margins alongside conventional cold food machines. We now realize that if we use them as standalone 24-hour food delivery systems, there are many great product offerings , more than ever , and we can get a lot of 'drag-along' business from adjacent machines as a result."
All Seasons customers in certain test markets will soon be part of a striking change in the company's approach to cold beverage vending. Bruno told V/T that All Seasons is planning to test a new concept, a "mobile beverage convenience store," within 60 days.
"At present, we offer 30% of the brand offerings of a convenience store , including, juices, isotonics, water and iced tea. What we're going to add is the 'high-niche' products like flavored waters, coffee drinks, energy drinks, milk beverages, high-caffeine drinks and exotic 'new age' beverages. Customers will be able to walk up to the machine and get a ginseng diet iced tea," Bruno said.
All Seasons has been involved in the milk industry's extensive tests of milk in vending, and milk vending in combination with sweet snacks; and Bruno is certain there's a large niche for flavored milks, alongside other innovative drinks.
WHAT CUSTOMERS WANT
The company expects good patron response to its "beverage convenience store" vending concept. "Mark [Bruno] pioneered this program, as consumer demand for variety in beverages has risen to new heights," Gladney told V/T. "The vending industry is slow to respond in the same fashion as the convenience stores. We, as a vending company, can meet the needs of the consumer by working with beverage suppliers to widen our product offerings; we already have the equipment [Dixie-Narco's 45-select 'BeverageMax']."
"We have the advantage of being able to test concepts, products and equipment on a small scale, then expanding until we feel comfortable about offering it to all our districts," said Bruno. This approach also is working well with premium ice cream vending, which is being readied for full-scale rollout after the logistics have been fine-tuned.
OCS currently represents about 10% of All Seasons' business, but Gladney expects that figure to rise to 20% to 25% before long. The company picked up sizable OCS business with its USRefresh acquisition, which has provided good momentum for the rapidly growing segment.
"We're doing all we can to enhance our ability to service the accounts we have, and to add new business; and we're in the market to acquire more OCS companies," commented Gladney. "The financial dynamics of OCS are attractive, because you have high margins and low capital requirements."
Bruno added that the overhead for the growing OCS business folds comfortably into All Seasons' existing operations.
Moving forward, he explained, All Seasons' focus, as it is with vending, is to reduce the number of SKUs it offers, enabling its sales and operations personnel to go to market with a manageably consistent program that optimizes profitability.
With a sharp eye on the specialty coffee boom and new demands from customers, Bruno recently spearheaded All Seasons' "Caffè Via" private-label program, which replaces its original private-label line. "We had the same grinds and blends for 10 years, and we knew we had to change. Our new coffee is stronger, deeper, and more exotic," he reported. "We set out to find the most appealing blend to our clients and employees as the basis of our new line."
All Seasons gathered coffee packages representing the top picks among its customers and staff and sent the assortment to a lab for analysis. "From that, we developed a signature blend that reflected what people really wanted, with attractive packaging, and brought it into our existing customer base. We are getting word out that it's an upscale product." The line consists of six blends, including 100% Colombian decaf and several varieties of "deeper, darker, richer" 100% arabica coffees.
All Seasons' 40-plus sales professionals are trained to cross-sell all of the company's services, a logical strategy when they are in front of the decision-maker. Acquisitions aside, All Seasons will add $30 million in new business this year alone.
"Operations is very involved in selling dining, vending and OCS. We don't make decisions about new business that operations in that region hasn't approved. Operations has to sign off on it, and believe in the business; it must be a team effort if it's going to be a success," emphasized Gladney. "We're big on not promising the customer what we can't deliver , and who knows better than operations what they can deliver?"
All Seasons' customer ranks continue to grow, not only through acquisitions, but because the company sells itself on its ability to provide more than most independent operators, with less red tape than a national company.
"We believe we offer the best of both worlds. We do all that the larger players do, in terms of serving a broad geographic area and investing in state-of-the-art equipment and technology; yet we're employee-owned, with a very entrepreneurial spirit that gives the customer the feeling of doing business with a local independent," remarked Gladney.
ADVANTAGES OF VOLUME
All Seasons also reaps the benefits of economies of scale through centralized purchasing, and its routes are more efficient than those of many local operators because the company blankets much of the Eastern half of the country with a very high volume of business.
"We've led a lot of the consolidation in the industry, and one of the unfortunate realities is it's harder and harder for the independents to stay in business because of the economies of scale that larger businesses have," Gladney pointed out. "Smaller independent operators wear 10 hats, while we have whole departments to maximize the cost and quality of all areas of business. And local operators don't have the purchasing leverage that we have. Entrepreneurs in this industry are hardy souls competing in today's environment."
Customers also choose All Seasons because its internal structure and business philosophy of empowering its employees enable the company to be more responsive and less bureaucratic than national firms are reputed to be.
Bruno added that All Seasons, in large part through its numerous acquisitions of top-line companies, is able to employ experts in each facet of the business; and the company encourages a steady exchange of information that creates a pooled wealth of skill and experience. "If you're not an expert at something, but you work closely with your counterpart, you become very diverse," he said. "Having people on board who can think through various challenges and fill in any gaps by interacting with a team of industry leaders who are their peers gives us a real advantage over many companies."
From a financial standpoint, All Seasons provides its clients with detailed third-party auditing, conducted by Arthur Andersen for the past 15 years for its investors, that inspires additional confidence. "Our books are immaculate, and our clients take a great deal of comfort in knowing there is no funny business going on," noted Gladney.
All Seasons has also established an excellent reputation with vending management companies, and this has won the company coveted chain retail accounts spanning its market territory, including a contract to provide vending service at half the Home Depot stores in the markets it serves.
The company also broadened its market opportunity substantially following an agreement it formalized with Sodexho in October to provide vending services to Sodexho's contract foodservice clients in the markets All Seasons serves. "We've been putting on millions of dollars a month with Sodexho, and we're very thrilled and excited about expanding our relationship," Gladney commented.
He added that it is rare that Sodexho, or any of the big national players competes with All Seasons for manual foodservice accounts, which makes the partnership a perfect fit. "Our largest dining account would be their smallest, if it even made their list. We have 160-plus dining accounts, and there are very few instances in which we cross paths with Sodexho in a competitive way," said Gladney.
STAYING ON COURSE
The strategy of growth by well-thought-out acquisition has proven very successful for All Seasons, and so this will remain a major component of its growth plan. During its first 21/2 years on the acquisition trail, All Seasons relied on cold calling to find candidates for acquisition. "For the last year or so, most people have called