Next Generation Vending and Food Service, Canteen, Compass Group, David Mac Isaac, John Ioannou, Vending, Vending Machine, Coin-Op, Automatic Retailing, Robotic Retailing, Foodservice, Office Coffee Service, Information Technology, Cashless Vending, Wireless Technology Telemetry, VendWise, Vitalities, GreenVend, Balanced for Life, Healthy Eating, USOP, USRefresh, Emily Jed
CANTON, MA -- Next Generation Vending and Food Service Inc. is blazing a trail with a high-tech, high-touch approach that its founders believe can serve as a model for the industry in a time of swift transition, and transform the image of robotic retailing as the new millennium takes shape. Chairman and chief executive officer David Mac Isaac observed that the industry today is the beneficiary of more than three decades' development of communications and data processing technology. From ever-more-powerful management software through DEX audit and sales data capture to wireless networking for telemetry and cashless transaction processing, the tools are available to overcome the traditional limitations of vending.
Many operators have made good use of this remarkable information technology toolbox to meet the industry's traditional challenges: route accountability, sales forecasting, inventory control, service scheduling and other knotty operational tasks, he added. However, the software and hardware now available to vendors also has the power to bridge a historic information gap that always has limited what the industry could deliver -- and what consumers have expected from vending service. This is the opportunity that Next Generation is pursuing.
The company, organized by two information technology experts, is using its extensive resources to collect, organize and analyze the mass of knowledge that modern machines collect to cater to its customers and clients in a way Mac Isaac is confident no vending business has accomplished before.
With $120 million in annual revenue and 900 employees, the Canton, MA-based operation has established itself in just two years as one of the largest vending and foodservice companies in the Northeast and, for that matter, the U.S. Growing rapidly through acquisitions and eager for more, the company currently serves more than 7,000 clients throughout New York, Connecticut, Rhode Island, Massachusetts and northern Pennsylvania.
In the past few months, through its latest round of acquisitions and its new affiliation as a Canteen franchisee, Next Generation doubled its customer base and revenue and deepened its geographic footprint, establishing substantial density in key markets in the Northeast. The company recently purchased the assets of Canteen's operations based in Albany, NY, and Middletown, CT; Loose Ends Vending (Batavia, NY), a leading operator in western New York; and the Massachusetts and Rhode Island assets of Wakefield, MA-based A&B Vending Co.
Growth by acquisition in the workplace services industry is a familiar story for Mac Isaac. He grew up in the commercial office products business, and sold his family's company to Staples in 1994. His experience then led him to US Office Products, a fast-growing enterprise that had consolidated several leading office supply operations, then expanded into OCS and vending in an attempt to provide one-stop shopping for all of a workplace's needs. Mac Isaac joined USOP as president and chief executive officer of USRefresh, the division set up for the purpose. Under his leadership, USRefresh acquired 30 coffee service and vending companies that totaled some $130 million in sales.
"At USRefresh, I embraced the service component of OCS and vending," he recalled. "We were very successful, as a very large organization, at making it personal and consistent, no matter who a client or customer dealt with. We made the customer experience better and our business more profitable with a high-tech, high-service model. Wireless technology was just taking hold and I was an early adopter; I saw huge possibilities for having remote access to what was happening at the machine."
USOP dissolved in 2002, selling off its many divisions piece by piece. Canadian roasting giant Van Houtte purchased most of its coffee service operations and integrated them into its Filterfresh unit; and Canton, MA-based All Seasons Services acquired much of its vending business.
Mac Isaac returned to the office products industry, serving as president and chief executive officer of Clarity Imaging Technologies (Waltham, MA), a manufacturer of laser toner cartridges, for the next five years. In 2007, his vending career came full circle when he took advantage of the opportunity to acquire selected assets from All Seasons Services.
"I looked at whether the technology had taken hold in the industry in the years since I left," he told VT. "I still saw the value of technology providing real-time information about what's going on in the machine to make the model more sustainable. And I was confident that the tools were there to dramatically change the old model of vending."
He partnered with John Ioannou, an experienced senior executive with a background in foodservice and expertise in the high-tech and private-equity arenas, and Joe Rogan, former CFO of USRefresh, to purchase the All Seasons assets and launch Next Generation Vending and Food Service. Their vision was to transform vending into a proactive technology, logistics and information-based business with a focus on the customer that would revolutionize the industry.
Ioannou, who serves as president of Next Generation, explained that growing up in the foodservice business and then working in information technology taught him that the keys to retail success are "have the right products, and never sell out." The vending industry has long been aware of the desirability of those goals, but has not made as much progress as it might have in attaining them.
"Getting data in real time is the key to offering what sells, at the right price-point," Ioannou emphasized. "The industry has barely scratched the surface of what you can do with actionable, real-time information.
"Making full use of intelligence that emanates from the machine is a change that must occur in our industry," he said. "What you can do -- if you have the information -- is not only cater to the demographics of the location, but to the population patronizing each machine in that location, which brings customer satisfaction and sell-through to a whole new level."
Mac Isaac noted that at USRefresh, some of his routes had upgraded to wireless remote monitoring more than seven years ago. Thus, when Next Generation set out to assemble the best mix of technology and begin the massive task of re-equipping its machines for telemetry, it had a good deal of practical experience which to draw on.
Through a grouping of technologies the company has trademarked as VendWise, it will be able to analyze line-item sales data captured by each machine, not only in relation to the demographics of the user base, but also to overall retail consumption trends, and then recommend a custom menu optimized for users' interests, lifestyles and tastes.
Alert vending operators have attempted to approximate this degree of conformity to consumers' tastes with planograms, Ioannou observed. These can help, but almost never are continually adjusted to the sales performance of each machine.
"The hope of the average company is to create a planogram to make sure the top sellers in each category are represented, but that's only the beginning," he noted. "Merchandising to the needs of each machine takes more effort, but transforms the vending experience for the customer, which ultimately means more sales and repeat business.
HITTING THE TARGET
"We will be able to look at each machine the way a grocery store studies how consumers walk through the store," Ioannou told VT. "We will have the data to determine the products that sell to the individual needs of the location. It's certainly an obstacle for a competitive operator when almost all 500 people are happy at an account we serve because our machine is stocked with what they want."
Sampling sessions, professional surveys and comment cards help Next Generation identify location preferences, but line-item sales information ensures that the company hits the bullseye, with the best-selling facings at each machine from day to day and week to week. "We'll merchandise the machines based on what people say they want, but then we look at the data," Mac Isaac reported. "Maybe we need four Doritos and four Snickers; we can only know that by looking at the data.
"Another advantage of real-time information is that you can tell the supplier what the initial sell-through looks like; it allows you to modulate supply and demand more effectively all the way up the supply chain," he added.
Immediate access to sales data also establishes a high level of trust between Next Generation and the clients it serves, the company chairman continued. "Transparency is key; we demand it and our customers demand it. We don't just give them a percent of commissions; they know exactly what happens at the machine. They can see what happens at the end of each day, if they want that level of detail."
The tech-savvy vending company also uses the information streaming from its 25,000 machines to deliver an exceptionally high level of customer service. The great majority of vending machines in the field today, even very recent designs, do not fully implement the latest standards for event monitoring and alarms.
While this shortcoming is being rectified, one machine at a time, operators are dependent on service calls from clients in many locations, Ioannou noted. "We have 25,000 machines out there, and we have to monitor all of them until we fully refit. What do we do until then? What happens when someone calls our toll-free number?
"Our software checks how long it takes to answer the call, how the call is handled, when the technician is dispatched, and whether what needed to be done was done -- making a refund, for example," he explained.
Whether it's a jammed product or a lost quarter, when the machine has been upgraded to detect the fault, it will send a malfunction alarm to the Care Center computers, whose terminals are manned around the clock. A representative will immediately dispatch field personnel, then puts a human voice behind the machine by telephoning the client to report that Next Generation is aware of the issue and to specify the timeframe in which they can expect it to be resolved. "We will call to tell them a technician has been dispatched or a refund is on the way before they even know there was an issue," said Ioannou.
In many cases, though, a service call must be received before the technician can be dispatched. And the interaction between caller and customer service representative is monitored by the Care Center software too.
Patrons who call that toll-free number, which is posted on every Next Generation machine, are immediately connected to a Care Center representative committed to timely resolution of the callers' concerns.
"The software tracks how long it takes for a representative to dispatch a technician, from the time the call was placed, and the length of time required to resolve the issue," Ioannou explained. Once the ticket is closed, the location contact receives a follow-up call from Next Generation to ensure everything is to their satisfaction.
"I look at the report generated by that software every week, to make sure service is timely and to identify repetitive issues that we can address easily to ensure a great customer experience," he continued. "For example, we might see that it's the third time we've dispatched someone to a particular machine, and we can take measures to make sure there isn't a fourth time. Vending machines are not perfect, but because we have a professional, customer-focused team dedicated to service -- and the technology that allows us to act immediately, we can promise hyper-responsiveness."
Mac Isaac added that having a live, up-to-the-minute view of every machine in the field will allow the company to deploy route and service personnel just in time, with the right product or tools in hand, dramatically reducing "windshield time" and boosting route averages far above the industry norm.
A much-discussed benefit to making the vending machines "nodes in a network" is that the investment in technology can be recovered in a variety of ways, all benefiting the patrons.
"Once you're wired, there are several things you can do to add dollars to the bottom line. Credit cards are one of those things," Ioannou noted. "Cashless is the key in today's public sites, and among more and more B&I clients too. For students, cashless is a way of life; they mandate it. There's a whole demographic you can't serve if you don't take credit cards; they don't carry cash."
Beyond cashless vending, the placement of vending machines in specific geographic areas among populations with identifiable demographic characteristics can tap an additional revenue stream. As digital media grow more and more ubiquitous, "wired" vending machines capable of receiving and broadcasting remotely transmitted advertising content allow operators to help the advertisers reach their target audiences with great precision. Next Generation is seizing this opportunity, and investing heavily in other forms of interactive innovation at the point of sale to make vending more engaging, relevant and fun.
"With 25,000 machines and 500,000 customer experiences a day, multiplied by the weeks and months, just think of the morale effect we have on organizations," Mac Isaac said. "The last thing they want is a bad experience at the vending machine. We always keep that in mind, and so we're thinking out of the box to make it more exciting and inviting."
The vending industry has been aware of the potential benefits of wireless connectivity for at least a quarter of a century, but has been deterred by the cost. Despite the ever-clearer advantages of networking today, Mac Isaac said, many smaller operators simply lack the resources to take the leap. But he hopes that Next Generation will serve as inspiration to the many companies in a position to invest in the technology that are still taking a wait-and-see approach.
"Technology is not taking off only because of the cost that operators have to invest in each machine. That's a big number, but it is definable," observed Mac Isaac. "It's the bigger picture, the ongoing costs and the changes in procedure, that mystify many operators. They're wondering whose system to run, what the cost per machine per month will be, what the connectivity cost is, whether to go cellular or Ethernet, if they can link machines together to reduce costs -- and, overall, just how to forecast their return on investment."
Adoption of line-item sales reporting technology also necessitates a shift from a route-based rolling inventory approach to a "pick-and-pack" demand-based model. "You have to change the entire structure of how things happen in the warehouse, truck, office and machine," he pointed out. "And then you have to use the data to make it all worthwhile on an ongoing basis. If you don't keep analyzing and modifying, you're not reaping the full rewards. Few smaller operations have the financial resources and the long-range vision to make that commitment."
In Mac Isaac's view, wireless technology has gone from "nice to do" to "must do," and it is a key differentiator that sets Next Generation apart from its competitors in the eyes of a sophisticated and information-savvy clientele.
"Only those who go wireless will survive," Ioannou emphasized. "We are clearly the 'next generation' of vending and it's at the core of all that makes us unique." To spotlight that difference, the company uses its information-organizing skills to prepare an 80-page proposal for vending prospects -- and a 150-page proposal for dining services.
"We talk extensively about our Care Center and the knowledge we gain and apply through technology," the company president observed. "Prospects recognize that we're offering a substantially different experience. We're training our clients to expect more and demand more from vending."
The public discourse about "healthier" eating now requires operating companies to offer a more varied menu that includes items perceived as having some wellness benefit. For this reason, an integral component of Next Generation's vending service is its trademarked Vitalities program. Developed with a registered dietician, Vitalities brings an appealing array of better-for-you selections to snack and beverage machines. Point-of-sale signage, in an easy-to-understand format, identifies beverages with lower fat, calorie and caffeine content and higher nutrient content, and snacks that are lower in carbohydrates, fat and sugar, as well as those that provide a higher source of energy. The company is in the process of extending Vitalities to its contract foodservice program.
"Today, the operator has to balance health concerns against sell-through," Ioannou pointed out. This, again, is a strong argument for detailed, ongoing sales analysis and fast response. In addition to its own Vitalities program, the company makes some use of the National Automatic Merchandising Association's attractive Balanced for Life materials as a supplementary marketing tool.
Also addressing contemporary market concerns is Next Generation's trademarked GreenVend initiative, which speaks to the increased environmental awareness exhibited by clients and patrons, while contributing to its own goal of finding "greener" ways to do business. These efforts include purchasing Energy Star-rated machines and installing energy-saving technology, including LED illumination, in legacy equipment. The company also communicates to its customers how its use of wireless technology provides efficient, real-time remote management of machines, thus reducing time on the road and, therefore, consumption of fuel. It is currently exploring the use of biodiesel fuel in its trucks.
Next Generation has attained a substantial competitive advantage by becoming a Canteen franchise. "No matter how big and successful you are, it's good to be surrounded by smart people," Ioannou remarked. "Compass Group is a global company with intellectual capital and purchasing power, brands and national accounts that we are able to leverage. Yet we still keep our identity and unique vision, so we have the best of both worlds."
The Next Generation management team is continually on the lookout for customer-focused operating companies in areas within and contiguous to those their company currently serves. "In this recession, there are fewer people at each location, stops are going away, and there are shift reductions. It makes it all harder, and only the strong survive," concluded Mac Isaac. "Small businesses who are smart will sell while their business is worth something, and not hold on too long. We've been very successful at acquiring companies that align with our culture and integrating them into our operation."
"A cultural fit is just as important to us as a financial fit when we look at buying a company," added Ioannou. "I learned from my days at IBM never to lose your way when it comes to the customers. Our culture -- which is at the core of everything we do -- is to give our all to the customer. Promises made are promises kept. This isn't just rhetoric; our customers see it in the way we execute and deliver. We make the rhetoric match reality, and as big as we grow, we have the tools, the values and the vision to keep delivering that promise."