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Issue Date: Vol. 45, No. 10, October 2005, Posted On: 10/27/2005


Vending Industry Keeps Pace With Wider Consumer Preferences For Cold Drinks


Emily Jed
Emily@vendingtimes.net

— The variety of packaged cold beverages available to on-the-go consumers through vending machines continues to expand and shift, keeping pace with today’s kaleidoscope of taste and dietary preferences. Cold drink machines have found their way into a wide range of locations populated by just about every identifiable demographic group. And many of these groups continue to move away from the traditional model, under which the majority of customers would be satisfied by a limited selection of soft drinks.

Beverage producers of all sizes, and vending operators, have responded to this market evolution by increasing the pace of new-product development and making better use of sales analysis to tailor cold-drink menus to a wide spectrum of tastes. From new carbonated soft drinks and new flavored and diet twists on the originals, to a rapidly growing breed of energy drinks and a dizzying array of bottled water options, vending operators are following the lead of their customers to provide a machine mix that satisfies the masses.

For many operators, despite the staggering number of SKUs available, the formula for satisfying beverage consumers is straightforward and has changed little over the decades. William Bradford of Drink-O-Mat (Topeka, KS) stays on the cutting edge when it comes to offering his customers the latest cold drinks, but he observed that the Midwest beverage vending market is lagging behind both coasts by a decade.

“We’re still getting 50¢ for a can of pop, and it’s still the basics that our customers want,” he told VT. “Like everyone else, we introduced bottles four or five years ago and they’ve grown but they really haven’t taken off. When you’re limited to cans, you’re limited in variety” The exception is accounts where the commission structure is such that cans sell for 55¢ to 60¢, and in those locations, bottles are taking off. When customers recognize the value per ounce of a bottle compared with a can, sales climb.”

Bradford remarked that while there seems to be a new beverage coming to market every week and many of them spark momentary interest, five selections consistently comprise 75% of his beverage machine sales: “Coke,” “Diet Coke,” “Pepsi,” “Mountain Dew” and “Dr Pepper.” “Everyone wants variety but in the end, three out of four drinks they choose are those core items,” he reported.

Kansas is on trend with both coasts in experiencing a continued increase bottled water volume, and this category has come to represent a significant portion of Drink-O-Mat’s beverage sales. “We laughed a few years ago that people would ever pay for water when they could get it out of the fountain or the sink, and now all of our can and bottle venders carry bottled water,” Bradford told VT. The Drink-O-Mat owner has found that 12-fl.oz. “Dasani” bottles vend well through his can machines. “The package circumference is the same, but the bottles cut machine capacity in half. It’s worth the reduced capacity to be able to offer water, because it’s become a necessity and we have so many can machines,” he said.

To Bradford, the value of installing glassfront venders is not their much greater selectivity, but the interest that new products generate. “We would never run 40 varieties, but with a glassfront machine, we can rotate new items in and out to maintain customer interest. And the glassfronts allow us to accommodate requests easily, even though it’s still always the core items that will sell the most.”

Last year, Bradford added Automated Merchandising Systems’ combination food/beverage machines in some of his accounts and has been pleased with the results. “We have found they work real well to display beverages, the way we merchandise the products in a snack machine, so people can see what they purchase.”

A surprising exception to Drink-O-Mat’s customers’ price resistance to larger beverage package formats has been milk. Bradford said milk volume has doubled since the operation made the switch to the new “plastic pints” from the classic gable-top carton. This astonished Bradford, because his market generally has a keen sense of value for money, and the new package is less cost-effective. “A half-pint carton was 50¢ and the new ‘plastic pints’ cost $1.25. We thought our volume would drop – but it doubled, and it’s more profitable for us at the same time,” he said. “Customer receptivity to bottled milk has been surprising, and demand for it is uniform in all account types – industrial, governmental and schools.”

The operator added that in locations where he has conventional food machines, there has been a natural migration towards larger bottles by featuring them in the food vender, which always has been a useful vehicle for vending premium cold drinks. By offering sports drinks, energy drinks and flavored milks in its cold food machines, Drink-O-Mat expands beverage offerings beyond the eight to nine slots offered in the can vender and draws consumers seeking these additional beverage categories.

“Vending never stays in place; it’s a fun time to be in the industry,” Bradford commented. He serves on the Mid-America Automatic Merchandising Association’s board of governors, and remarked that while the economy has presented a challenge for the past several years, the consensus is that vending in the Kansas-Missouri area is emerging from the recession..

“The innovations in equipment have made us more competitive with convenience stores, which are our true competitor,” said Bradford. “Today’s machines are better in terms of their merchandising ability and dependability, and that’s been positive for our industry.”

Catherine Franklin of Vending R Us (Detroit, MI) operates three routes in metropolitan Detroit and, in contrast to Drink-O-Mat, has found that offering the greatest possible variety is what drives her beverage business.

Branded glassfront machines from Franklin’s Pepsi-Cola and Coca-Cola bottlers enable her to merchandise everything from water and soft drinks to juices and ready-to-drink teas. Energy drinks, including Pepsi’s “Mountain Dew Amp” have hit the ground running, Franklin said, and represent a significant portion of beverage sales. The operator merchandises “Starbucks Frappuccino” alongside the energy drinks in many machines and finds that the coffee-based chilled beverages command a strong enough following to justify their presence on the machine menu.

Franklin told VT that her customers’ focus on health has become more pronounced over the past year, and that Vending R Us receives a steady stream of requests for vitamin-enhanced water and sports drinks such as “Propel” fitness water and “Gatorade.”

While Pepsi-Cola is the beverage of choice in her market area, Franklin has the flexibility to offer equipment from her bottlers dedicated to Pepsi products or to Coke beverages, or both side by side, and said she has an ample product selection from which to choose.

Franklin estimates that glassfronts represent 33% of the beverage machines she has on location, and that as she places new machines, this percentage is increasing. Driving the trend is the demand for variety, which is becoming more pronounced in response to the ever-widening spectrum of options on the market.

In locations where Vending R Us has food machines, the company menus cold canned drinks not offered in its dedicated beverage venders including “Florida’s Natural” and “Welch’s” juices and “Nesquik” flavored milk, thus providing customers even more of the variety they crave.

Demand for an extensive selection of beverages is highest in white-collar offices, apartment building lobbies and fitness facilities, while Franklin finds that industrial accounts primarily request carbonated soft drinks and water, and so are satisfied with the core selections offered by a conventional beverage vender.

Bottles are overwhelmingly the beverage package of choice for Vending R Us consumers, who appreciate the portability of a resealable container. Location management that favors canned beverage venders does so primarily because consumers are more apt to consume the contents of the can in one sitting, which reduces the use of cups furnished by the location.

John Amend of Kool Drink & Snack Co. (Bensalem, PA) has run his vending route solo for the past decade, bringing a personal touch to the car dealerships, offices, factories and hotels he serves. He purchases all of his own beverage equipment outright, so he has the flexibility to merchandise it with whatever brands his customers want.

Like most operators around the country, Amend reported that water sales are very strong; every bottled beverage machine on location has at least one column dedicated to bottled water. In one hotel, demand is so strong that Kool Drink & Snack Co. stocks two columns of water in the machines on each floor.

Another notable trend, pointing to the growing focus on health in the Philadelphia market, is that diet and regular beverage sales are now running neck-and-neck. The popularity of the diet varieties has grown significantly in recent years, and is continuing to increase.

Like Drink-O-Mat’s Bradford, Amend finds that a basic selection of core items including “Coke,” “Pepsi” and their diet versions tends to satisfy the great majority of customers at the offices and factories he serves. In public sites, including hotels, a mix that includes the top-selling soft drinks, along with lemonade, fruit punch and iced tea has proven popular – and water plays a starring role.

Amend sells about the same percentage of cans and bottles, all through conventional beverage venders. “My customers don’t ask for the variety that glassfront machines are designed for, and that works well for me because I don’t have to carry much inventory,” Amend told VT. “I don’t rent a warehouse; I pick up product at my local wholesale club when I know the machines are going to turn, since I run my route alone.”

In the Sunshine State, Jerry Jacobs of Snack Time Vending (Longwood, FL) said that the area’s landmark warm weather has contributed to a steep, steady rise in bottled water sales over the past few years. It has not leveled off yet, he reported.

Diet soft drink sales also have been ticking up over the past few years, Jacobs concurred, as consumers become more focused on their waistlines. Likewise, demand for juice has reached new heights, but still lags far behind carbonated beverage consumption.

Snack Time Vending’s sales of energy drinks have been on the rise, with “Red Bull” in the lead, commanding $2 and higher across all types of locations from white-collar offices to blue-collar industrial plants.

Snack Time Vending takes a wait-and-see approach to the constant stream of flavored line extensions to popular soft drink brands. Jacobs offers them when he finds substantial customer demand. One such variety that has built a loyal following is “Diet Coke with Lime,” which has established a sufficiently strong market presence that Snack Time Vending features it on some machine menus on a regular basis.

While vending machines often are regarded as self-service general stores, a more apt comparison might be the mass-market retailer, which inventories only those items that turn most rapidly in its market area. Operators who are alert to new-product introductions and in touch with their customers are making use of the ever-wider variety of cold beverages to assemble machine menus that maximize sales from every column by meeting the evolving demands of their patrons.


Topic: Vending Features

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