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Issue Date: Vol. 41, No. 8 / July 25, 2001 - August 24, 2001, Posted On: 7/25/2001


Operators Find Today's Patrons Favor 'Better-For-You' Food Selections In Vending


Emily Jed
Emily@vendingtimes.net

U.S.A. - Is demand for healthy food and snacks in vending a cyclical trend, or is it continual? This is a question vending operators have been asking for decades and the answer for some is becoming clearer: machines stocked with "better-for-you" alternatives, when properly merchandised, draw a wider base of customers.

While many operators have historically stocked healthier alternatives at the request of clients or patrons, only to generate less-than-robust turns, others have found a niche for healthy options in their machines that's not only standing the test of time, but generating substantial incremental sales.

The demand for healthy food and snack alternatives has risen and fallen throughout the decades, reflecting an ever-changing consumer focus that can shift dramatically from dieting, exercise and health-consciousness to an attitude of pure indulgence, at least when standing in front of a vending machine.

Such attitudes can vary dramatically throughout the country, and from one account to another. Determining whether a specific customer base in a particular geographic locale truly craves healthy alternatives or is more likely to pass up the granola bar or salad in favor of a chocolate bar or cheeseburger is not always cut and dried for the vending operator. And formulating the most pleasing and profitable machine menu, with the best balance of health-oriented and conventional snacks or foods to suit each location, can be a tough task.

Many vending operators concur that, while "better-for-you" alternatives have been and always will be a "must" in both food and snack machines, the percentage of overall sales in this category is almost always rather small, and it's their conventional high-fat, sugar-rich counterparts that most patrons actually buy. Thus, stocking machines with enough of such product to offer substantial choice can produce a high level of "stales,"and lost potential sales from slots not stocked with popular conventional items.

However, there also are those who believe healthy lifestyles are here to stay, and that making an informed effort to satisfy the demand that accompanies this lifestyle not only benefits the consumer, but the operator as well.

When Kenneth Havlovick of Choice Vending (Medford, WI) instituted a "light and lean" food program five years ago in response to repeated customer requests, he never expected to see the enormous increase in incremental sales that he experienced. The boost was immediate, and has been consistent ever since.

The 36-year vending industry veteran is at the helm of the $5 million full-line vending company, which operates 100 food machines. When he set out to launch a healthy food program, he knew he had to do it the right way.

"We knew we needed some kind of identification on the machine so customers would fully understand and recognize the program," he recalled. "With vending, you can't have a salesperson stand there and talk to each customer every day and explain the program to them. We knew we needed 'light and lean' and 'low fat' to be very prominently displayed, and that the food needed to be certified by a dietician. Most vending companies don't have a dietician on staff."

Unsure just where to begin, Havlovick called some local medical clinics to get the advice of their dieticians and discovered the Gunderson Lutheran Medical Center in LaCrosse, WI, which administers the "500 Club." This is a "light and lean" program for a variety of foodservice markets, including vending, complete with a dietician's stamp of approval.

"They have a little green sticker for each shelf that says 'Your Choice For Healthy Eating' that the customer can relate to, as well as banners to hang across the machine and static clings," Havlovick explained. "They provide menus to hang in pockets on the outside of the machine; and they research new recipe ideas and update their menus constantly."

"500 Club" administrator Ruth Lahmayer is pleased with the response she's seen from vending operators involved in the program. "It all boils down to marketing, if you're going to get a healthy food or snack program to take off in vending," she said. "A lot of operators say they need to have a healthy eating program to keep a competitive edge, to present themselves as offering a well-rounded service."

LABEL AWARENESS

According to Lahmayer, consumers are becoming more diet and nutrition conscious, and they look at labels for nutritional analyses of the foods they eat. The "500 Club" program enables the vending operator to feature this information on commissary-prepared products.

Choice Vending methodically instituted the "500 Club" program five years ago by placing table tents and posters at all of its accounts for two months prior to stocking machines with the "light and lean" items, to fully orient its entire customer base about the "500 Club" concept. The point-of-sale material emphasized that "500 Club" items fall within U.S. government guidelines for fat: seven grams or less of fat in snack items, 15 grams or less in whole meals. These conform to the federal dietary guidelines for healthy eating.

"Customers who are sensitive to the fat content of food know how many grams of those things are allowed in their diet, and the menu breaks it down in detail," commented Havlovick.

After two full months of orientation, the operator stocked every food machine with the "light and lean" product, accompanied by static cling labels and the "500 Club" menus.

"I figured we'd spend the money to join the '500 Club' and it would satisfy many of our customers, but I didn't necessarily think we'd see an increase in food sales," recalled Havlovick. "But what happed as a result is that sales in every food machine increased by a minimum of 30%. Our investment in joining the '500 Club' program paid for itself in three months. We discovered that people who had been looking for healthy food were bringing it from home; they simply never used the vending machines. When they saw those table tents, and then found food that met their dietary needs in the machine, they bought it. So all of these sales are incremental!"

According to Havlovick, Choice Vending's participation in the "500 Club" attracts and retains a huge customer base. "Part of our sales brochure is a fold-out description of the '500 Club.' It has made us so competitive, that because we offer the program, our competitors have had to add low-fat, low-cholesterol food in order to retain their accounts. We periodically mail our literature to prospective accounts, and most of them call within six months, if not sooner, to ask us what it's all about," he added.

Choice Vending had such good results from its initial two-month orientation program that it continues to publicize the "500 Club" program with table tents and static clings in new accounts for two months.

"Our membership fee is incidental compared to how it has increased our business. Now we just buy marketing material and green stickers from the '500 Club'; all their services are included in our membership fee, if we need to consult with them."

POINT-OF-SALE AID

Havlovick holds that small green sticker in high regard. "It probably measures no more than half an inchsquare, with a little green fork and the '500 Club' logo, but it sparks recognition. The consumer buys with confidence that it's light, it's lean, and it's better quality. It's brand recognition," he emphasized.

According to Havlovick, 35% of his daily commissary production is devoted to "500 Club" items, "and it hasn't put a dent in the food business we used to do."

The "500 Club" sets guidelines specifying how a vending commissary is to prepare its menu items. "They pour new ideas at us constantly; some work, some don't, but there's always variety. And if we have a creative idea, we'll send them the recipe for approval. We'll tell them it's with 'Oscar Mayer' meat, for example, and they let us know if it complies, or they may change some ingredients so it meets the criteria," explained Havlovick.

He added that when Choice Vending joined the "500 Club," he submitted his existing commissary menu of 100 items, from which "500 Club" dieticians selected 30 items and detailed how the recipes could be modified to comply with "500 Club" dietary guidelines.

"We find if we offer a sandwich with 98% lean ham, and it says so on the label and it's '500 Club'-approved, it has been changed so that both groups , those on diets and those who always patronized the machine , can buy it. And, given the new ingredients, what has changed in the commissry? Only the label; otherwise, how is the patron going to know you use 98% lean ham?" commented Havlovick.

Every Choice Vending food machine, regardless of location, is stocked with a product selection comprised 30% of "light and lean" items. "I have not had it backfire yet. We've got iron and steel workers you'd think would never touch it; but we put it in, and it sells," emphasized Havlovick. "People are more cholesterol-conscious and fat-conscious today than they ever were. They just quit buying from our machines; and we didn't even know it. If we don't go after the market, we won't get the sales.

"We went from 12-fl.-oz. cans to 16-fl.-oz. and 20-fl.-oz. bottles and doubled our sales in juice; it's what customers wanted. We went from 75 to 80 per can to $1 or $1.25 , but many operators were hesitant! The vending industry sometimes lulls itself to sleep. We'd better change with the times or our sales will go flat," Havlovick warned. "Pretty soon we'll think no one will eat anything out of our vending machines, so we'll offer them nothing; and then what?"

Choice Vending's latest marketing approach is to feature brands on its food labels whenever possible. "If we use 'Oscar Mayer' bologna or 'Louis Rich' turkey, we say so on the label," he commented. "With brand recognition, people buy with greater confidence. If we, in vending, want to make money, we have to make sure our customers are buying with trust in us. Vending food is generally not perceived as top quality. With branding, the consumer buys at a different confidence level. They realize we're not just getting some product, throwing it in there and hoping it sells."

Havlovick emphasized that convenience stores provide vending operators with a sort of local test market in which to observe just what customers are buying. He does not believe enough operators use the c-stores in their market areas as an information resource.

SEEING WHAT SELLS

"Convenience stores are high priced, and they want to move product quickly; we should be studying what they do closely," he commented. "I go and look at what that glass case is full of, and I come back and institute the ideas in my machines. I used to follow employees after they left the factory. Do you know how many of them go to convenience stores? Do you know what they're buying? I'd watch and learn, and I'd put it in my machines. Convenience stores are excellent teachers."

Despite the demand for healthy options, hearty appetites prevail, and just as in convenience stores, Choice Vending's submarine sandwich sales are extremely strong. "With subs, it's 'the bigger, the better' and we sell them for $2.50 to $3.00; we also offer a 1/2-lb. burger for $2.25. Who thought these would sell? But they've become regular items," Havlovick observed. "Everyone said you can't charge that for a sandwich, but we've had no problem. If you throw something in there that looks like it's worth $1.25, who's going to pay more? But if you walk through the grocery deli or the convenience store, and see how they're presenting their food, if you do the same thing, people will pay."

Bolder ethnic flavors, especially Mexican items, are a strong trend and Choice Vending incorporates items such as enchiladas, burritos and spicy chicken and beef entrees into both its regular menu and its "500 Club" offerings. Havlovick plans to add some Asian-style items to further meet the growing demand for a more cosmopolitan menu.

Havlovick emphasized that by listening to what his customers wanted and significantly restructuring his operation to meet those desires, everyone has come out on top. Customers are happy, sales are up and waste is minimized.

"We look at food as a loss leader, but we don't operate it at a loss. We make money at food, but the margins are tighter than with other product because of the throw-aways," he said. "Our waste is minimized because we've keyed in to what it is our customers want, and healthy options are a big part of that."

Choice Vending places great emphasis on driver training; the way they fill the food machines, including the miscellaneous "filler" items, substantially impacts sales.

Such "filler" items include yogurt, which has always exhibited brisk sales, and milk, which is surging in popularity. "The 16-oz. PET bottle has taken off very strongly. The soft drink companies did a great job marketing 16-oz. bottles, and then 20-oz. bottles, so consumers are very receptive to milk in the new containers," he said.

Schools like the idea of milk as a healthy alternative to soft drinks and Havlovick is looking forward to capitalizing on its newfound appeal. "We're in 25 schools, and the flavored milks are extremely popular with younger kids. If you shut down the pop machines, milk sales are astronomical; we have to fill the machines twice a day. If you leave the pop machines running, you sell a lot less milk, but there are still huge incremental sales," he shared.

With the new school year approaching, Havlovick is looking into placing Automated Merchandising Systems' combo machines at his school accounts, with the top shelves filled with snacks and cookies, complemented by 18 columns of milk. Not only does milk appeal as a healthier beverage option, but it's a natural fit with sweet snacks.

CLIENT-PLEASER

Clyde Knupp of A.M. Vending (Fort Dodge, IA) is another "500 Club" member who operates eight full-line routes in north-central Iowa. He finds the "500 Club" to be an invaluable marketing tool when selling new accounts on the benefits of his company's services. "We pitch ourselves as being concerned about good health and offering healthy items as an alternative," he told V/T. "We provide a planogram and point out the healthy items to prospects; they like to see that."

To cater to healthier diets, A.M. Vending's food machines are always stocked with fruit and veggie plates, which are in high demand. Knupp added that bagels, which are favored for their low fat content, are also extremely popular in his food machines. Yogurt, a longtime staple for the diet-conscious, is not an especially strong seller in Knupp's Iowa market.

Knupp, like Havlovick, has seen a recent surge in milk sales, although he has yet to stock the plastic containers with all the novel flavor varieties available. "I think people like milk as a wholesome drink; we find that people these days only want 2% and skim , we don't even sell whole milk anymore," Knupp commented.

So strong are milk sales that Knupp can see the merits of placing dedicated milk machines sometime in the future, now that new packaging is available and equipment manufacturers are addressing the unique needs of milk vending. "We go through a lot of milk cartons and we don't even have a good machine to sell them; we simply use our food machines," he commented. "The only issue is that there is not a lot of space in many locations today, and with the growth of soft drink sales, it's tough to find the space for milk. But milk sales continue to increase and it's something worth addressing."

According to Knupp, A.M. Vending's non-carbonated beverage sales have grown tremendously in the past year. In particular, water and "Powerade" sales are through the roof, indicating a consumer preference for health-oriented beverage alternatives.

A.M. Vending maintains a "healthy" column in all its snack machines, dedicated to low-fat alternatives such as pretzels and popcorn, granola bars and cereal bars, all of which are strong sellers. Other "500 Club"-approved snack items include low-fat animal crackers and "Kellogg's Rice Krispies Treats." Lahmayer suggests that all snack machines feature three to five healthier alternatives.

"There's no signage that says these items are 'healthy,' but they're all grouped together, so if customers want healthier alternatives to chips and candy, they know where look," he said.

Knupp added that most operators to whom he's spoken in his market agree that pretzel sales have been increasing steadily, and are higher this year than ever because consumers favor their low fat content. "Even in predominantly blue-collar accounts with hard workers, we sell a substantial amount of pretzels to people who are looking for a lighter, low-fat snack; all around, pretzels are one of our best selling snacks," he said.

Certain non-chocolate candies, such as licorice "Nips" have also risen in popularity because of their low fat content.

WELLNESS THRUST

Thomas Smith, Sodexho's national vice-president, vending services, corporate services division, told V/T that the company is planning an unprecedented push in vending, and that healthy options will play a big part in the new program.

Currently, Sodexho planograms both its snack and food machines, and its "Wellness and You" items are marked with shelf stickers, and that campaign will soon be "refreshed" in a major way.

"Demographics play a big role when it comes to healthy foods. The 'techies' tend to be more health conscious; and you find lots of demand on the West Coast, and in pockets of the East Coast," he said. "And the X, Y, and Z generations support healthy options; it's something we are paying close attention to."

Smith said that catering to health-conscious consumers is most straightforward in frozen food vending machines because of the built-in brand recognition; customers readily purchase frozen entrees such as "Weight Watchers" and "Lean Cuisine," with which they are familiar in supermarkets and convenience stores.

In refrigerated food machines, Smith reported that current offerings such as yogurts, fresh fruits and salad are appealing alternatives, and that sales of these items do demonstrate the demand for better-for-you alternatives.

In Sodexho's current snack planograms, several low-fat and nutrition-oriented alternatives are grouped together, including the ever-popular pretzels, Nabisco's "SnackWell's," "Nutri-Grain" bars, "Fig Newtons," and "Austin Zoo Crackers." "We stretch the 'healthy' envelope with low-fat candies like 'Twizzlers,' because people search the machines for low-fat items," he added. The company also rotates promotional wellness-focused items through its machines, and supports the line with static clings and signage.

BEVERAGES, TOO

The Sodexho executive added that juices, waters and non-carbonated beverages are fast-growing categories, further indicating the appeal of healthier alternatives.

"We are planning, more than ever, to address healthy options every time we menu a snack, frozen food, refrigerated food or beverage machine," said Smith.

Despite his success with light and lean foods, Choice Vending's Havlovick has not seen equivalent interest in his snack machines. "In the snack category, we've done everything we can do with every 'light' and 'healthy' program from Hershey, Frito-Lay, M&M/Mars; you name it, we've tried it. We've offered healthy snacks, light snacks, baked chips, all without success; and this is true in white-collar and blue-collar accounts, corporate offices, factories and schools," said Havlovick. "People don't even tease themselves by walking up to a candy vending machine to shop the selections, if they're on a low-cholesterol or low-fat diet; they just don't visit the machines. We offer a percentage in all our machines of 'Lay's' baked chips, pretzels, 'Milky Way Lite' and granola bars, and we won't discontinue them, but the sales are nothing to rave about. People have to have lunch, but they don't have to have a snack. Especially if they're on a diet, they don't snack and they don't go to the machine. We even tried putting yogurt bars in our ice cream machines, and they failed."

Alex Winston of Healthvend Inc. (Boston, MA) has the opposite view on snack vending.

Winston founded Healthvend a year ago, and has since placed 30 snack vending machines in the Boston area, stocked entirely with all-natural snacks with no artificial colors, flavors or preservatives. The product line includes "Balance Bars," "Luna Bars," "Clif Bars" and "Hi-Honey Nut Bars" nutrition bars, and an assortment of kettle potato chips, organic pretzels, organic animal crackers, all-natural cheese puffs and pita chips.

"In 10 years, I think almost no one will eat 'junk food' and there will be even more of a need for dedicated healthy snack venders," Winston said. "An influx of healthy food has taken over. The percentage of natural, healthy foods on the market has gone up every year. There are complete sections in supermarkets, and entire grocery stores dedicated to whole foods. And it's not just 'health food geeks' who want this food. It's all the people on low-fat, low-cholesterol and low-sugar diets; it's people who work out; today's consumers are extremely tuned in to keeping healthy and fit."

Healthvend places its machines in fitness centers and upscale offices, including advertising agencies, computer companies and law firms. Some of Winston's machines are situated in a bank alongside conventional snack vending machines operated by another vending operator, in which case the client maintains one contract with Healthvend and another with the other operator. Other machines stand beside Healthvend's beverage vending equipment, which is stocked with fruit juices, organic spritzers, flavored waters and sports drinks priced between $1 and $1.50.

"Before I started Healthvend, I was in the florist business and we had a vending machine in the cafeteria full of conventional snacks," commented Winston. "Being health-conscious, I wondered why there weren't healthy snacks available , and I don't mean just low-fat items like 'Twizzlers' or 'Sour Patch Kids' that are still full of sugar."

FILLING THE NICHE

Healthvend has accounts ranging in size from 50 to 300 people, and like more conventional vending operations, there's no formula for predicting where a better-for-you vender will thrive. "Some accounts with 50 people do better than others with 300; it all depends on the type of people, their attitude, and where the location is," he noted.

Healthvend's healthier snacks cost Winston more, and so require a higher price point than their mainstream counterparts. While traditional snacks might vend for 60 to 75, Healthvend snacks are sold at $1 for bagged snacks and $1 to $2 for energy bars. According to Winston, price is not an issue for customers who see the value of these products.

"People buy quality in upscale businesses," he said. "It's not like it's the same product for a higher price. It's a better product, and to most of them, the cost is insignificant. They have a healthy lifestyle and are just happy to see their vending machine answering their needs."


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