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Issue Date: Vol. 41, No. 8 / July 25, 2001 - August 24, 2001, Posted On: 6/25/2001


Vendors Explore Opportunities For Higher-Value Snacks


Tim Sanford
Editor@vendingtimes.net

U.S.A. - The advent of multi-price candy and snack machines more than three decades ago encouraged some operators to experiment with larger items, principally confections oriented toward the theater and concession channels. They were pioneers, grappling with unexpected difficulty in obtaining products designed for another class of trade. Even so, there were locations in which their experiments proved very successful , and others in which they failed completely.

In the late 1980s, marketers became aware that the American public was consuming larger portions of just about everything, including snacks. Frito-Lay, which responded to this trend at retail with a "Big Grab" program, saw an opportunity to extend the success of that initiative by introducing the "Large Single Serving" (often called "Large Size Snack") into vending. This involved not only a new, larger portion and bag to match, but also persuading operators to modify one shelf of their glassfront machines to accommodate the "LSS" line. There was a learning curve involved, for both parties, but the concept caught on.

The logic behind "LSS," and "Big Grab" before it, was that there is a certain fixed cost in producing a package and preparing a product, whether large or small. Thus, a bigger package of greater weight can represent a real gain in value, and consumers recognize this.

Ed Dooley of A&B Vend (Wakefield, MA) reports that he was one of the first operators to get aboard the "LSS" bandwagon, just as he had been among the first to vend 20-fl.-oz. cold drinks. "The reason is simple: they bring in more dollars," he told V/T. If the gross profit on a larger item is twice that of its smaller counterpart, it does not require a background in rocket science to know what to do, Dooley emphasized.

Of course, people have to buy the larger packages; and indeed they are. "We're doing very well," the Massachusetts vendor reported. "We've gone from four selections to five, then seven, and we're now approaching 10." Thus, the number of smaller 1-oz. selections is dwindling toward five.

The A&B Vend principal notes that consumers' desire for larger portions works in parallel to their recognition of value when they see it, and this drives the sale of "LSS" items. He believes that the value recognition, and the desire for indulgence, might extend beyond larger portions to items recognized as premium. A&B Vending is running some "Altoids" and some concession size confections, Dooley told V/T. These are selling well, and he considers that there is definitely a role for them in today's market , "but I wouldn't flood my machines with them," he added. Still, there is an enduring demand for premium confections, and vendors will do well to recognize it.

MELTING POT

And there is a growing market for "ethnic" snacks, especially those popular with the Hispanic population. Goya Foods makes excellent products of this sort, Dooley said, and they are worth tracking down. "We're always trying to find Goya items," he noted.

All of these approaches are designed to have one essential result: to give people more reasons to visit the vending bank, the vending veteran emphasized. It always is worth trying something new if it seems at all likely to have this effect.

Also enjoying good results with larger package sizes is Jim Roselando, Sr. of American Food & Vend (Waltham, MA). "We were among the last operating companies to start using 'LSS,' but once we started, it just went crazy," he recalled. "I was thinking about not doing it , but we did it. Things were quiet for awhile, and then it went ballistic." The popularity of the larger size has increased sales volume and profits simultaneously, Roselando reported.

Following location demand, American Food & Vend has been adding to its original five LSS facings, and now stocks only two or three of the traditional vending size in most of its glassfront machines. "We've just about stopped using the smaller bags; we'll put them in if people ask for them, and some do," Roselando observed. Those who request the traditional size usually cite price as their reason, and the veteran operator believes there may be some psychological value to offering a range of items at a variety of prices.

He believes that the real issue is the change, not price as such; the consumer who buys several items at a convenience store hands a banknote to the cashier and pockets the change without thinking twice. A vending transaction, at present, is for a single item, forcing the patron to think about it. For this reason, the eventual advent of cashless vending should have a very positive impact, Roselando predicted.

MAKING PROGRESS

Given the choice, most patrons do prefer the larger size, he said; and this has prompted him to think about the potential for other higher-priced, higher-value selections in glassfront machines.

One historical objection to strategic price improvement in Massachusetts was that state tax law exempted vending machines selling items for less than a dollar; once the vend price exceeded that, the machine became taxable, Roselando explained. This was a real disincentive to experimentation. However, the law now exempts vended sales of less than $3.50, "and I want to give higher-value merchandise a try; I think it can work," he told V/T. "I walk through the local CVS discount pharmacy, and I see shelves stuffed with $3 bags of candy. I ask myself, 'Why can't I do that?' I try to learn from the big chain retailers," he said.

Roselando reports good results from offering gum and mint selections in two price tiers, marketing premium items at a higher price. And the vending market has moved toward larger cold beverage packages, too, which has improved gross profits, but which also has required operators to increase service frequency and acquire heavier-duty trucks. That logistical difficulty is not present with LSS snacks, he pointed out.

"I'm an old-school type of vendor; I learn from my mistakes," the Massachusetts operator said. "I was slow to start with LSS, and I wish I'd done it faster."

Not all operators have adopted LSS snacks. One who has not is Steve Geltzer, G&G Vend-O-Matic (New London, CT). He reported that he has tried larger package sizes, and the response in his market has not been sufficiently positive to warrant adopting the program. "I think a one-ounce portion is as much as most people want as a snack, or to go with lunch," he said.

Gloria Lathrop, Lathrop Vending (Norwich, CT) also has found patron resistance to the larger package. This may be a response specific to her market area, she suggested; areas with higher income levels might be more responsive to LSS items.

But customer resistance is very real in her region, she observed. "We've taken over accounts that had been served by vendors who provided larger bags exclusively, and who would not respond to client requests for smaller ones," Lathrop said. "In this area, at least, people think the price of the larger snack is too high, and the portion size is too big, especially for female patrons." The concept makes sense, and there well may be a role for other items of higher perceived value in glassfront machines; but package upsizing has not worked for Lathrop Vending.

Bob Kelley of Canteen Vending Services (Middletown, CT) reported that LSS snacks certainly have worked for him. "As an industry, we've tended to underprice our product," he said. "This really isn't a difficult business. Walk into a convenience store and see what people are buying. If something isn't available in a C-store, why would we sell it?"

The larger package clearly is perceived as a better value by patrons, Kelley said, and the LSS format has made steady progress. "The only 'pushback' we had was from people who had gotten used to the traditional vending package," he reported. "For some people, change is always bad, at first. But our customers like LSS snacks, and our clients do, too." At present, he reported, about 80% of Canteen's unit snack sales are LSS.

CALL FOR INNOVATION

Kelley agrees that other high-perceived-value items should be vendible, but he has looked for these items and not found them. "We tried 'Altoids,' and some customers got very excited; but, overall, the brand just didn't turn rapidly enough," he told V/T.

To command a high price in a snack machine, he said, a product must possess strong brand identity, and must be seen as offering the same value to a vending patron as its equivalent offers a customer buying through another retail channel. Some otherwise excellent items have failed in vending after an initial successful run, when they turned up in mass-market discount outlets at half the vend price.

"I say, let's challenge our suppliers to to show us an item with strong retail presence that we can sell for $1 or $1.50," Kelley emphasized.

The vending industry cannot succeed unless it realizes that there is no future in being the lowest-cost provider, he said. "Anybody can sell bad business. What we have to do is give value and ask for a fair price."


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