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Issue Date: Vol. 42, No. 13 / November 25, 2002 - December 24, 2002 , Posted On: 11/25/2002


Whose Ox Is Being Gored?


Tim Sanford
Editor@vendingtimes.net

The present economic situation would seem a good deal more puzzling if we had not been as bewildered by the conditions that prevailed in the late '60s, the mid-'70s, the early and late '80s, and the start of the last decade. All of those periods could be described by Dickens's phrase, "It was the best of times, it was the worst of times." In fact, most of them were so described, sometimes by us.

To hear some knowledgeable industry observers tell it, the vending industry as we have known it is in terminal decline. Consolidation has tilted competitive advantage toward the large players; the cost of necessary new technology is forcing the small operator out of the market; and so on.

Of course, knowledgeable industry observers were saying that almost four decades ago. Companies that had built profitable businesses on inexpensive soluble coffee machines and mechanical drop-shelf candy venders were facing stiff competition from innovators, large and small, who were offering fresh-brew coffee and electrical first-in, first-out snack machines. Fuel prices were increasing and product costs were moving up, as the inflation that would dominate the 1970s began to rear its ugly head. It was getting harder to find honest route drivers...

Each subsequent downturn, or correction, or recession provoked similar prophecies of doom. Could vending survive the adoption of automation by the manufacturing segment? Could vending survive the shift from an industrial-based to a service-based economy?

Somehow or other, not only did we survive, but independent operators continued to play a major role. They could finance new equipment if it were proven to generate higher sales and win new business. Improved management techniques, increasingly backed by computer technology, were developed, to tighten control and improve productivity. Again, financing could be found for these improvements if they delivered more revenue to the bottom line. Vending broadened its appeal to attract new sorts of location (most of which were not really new, but which had been forgotten during the boom in high-volume industrial vending).

We have the feeling that much of the current despondency is being spread by people who might have sold their operations two years ago, but waited too long; and, in a complementary way, by people seeking to buy companies from others who fear that there is no future in vending. To be sure, some market areas have been hard-hit by the present downturn; but others have not been. By historical standards, the present unemployment rate of about 5.7% does not betoken a weak economy; and the demand for vending and office refreshment service remains robust.

Periods of technological transition are never easy, and we certainly don't mean to make light of the distress they cause to operators whose circumstances do not permit them to adjust. However, we must point out that vended sales volume has continued to increase, year by year. Some of this increase is due to higher prices; but people certainly are not making fewer purchases from vending machines.

The vending industry has been characterized by cyclical entrepreneurship and consolidation. The 1990s were fruitful of both. The wave of acquisitions that marked the turn of the century was the most dramatic since the late '50s and early '60s.

At the same time, economic conditions favored the formation of new companies. This has left a temporary hole in the middle; there are fewer mid-sized firms. But this creates the opportunity for the startup enterprise. Not all of them want to grow, but those that do are able to find enough business to make a go of it. And the well-managed startup company, unshackled to a large installed base of "legacy" equipment, enjoys the freedom of maneuver that always has been the strength of the aggressive independent.

It's easy to forget that, when an operation is acquired, its customer base does not disappear. Most of it is taken over by the acquiring company, and the rest, by its smaller competitors. Total vending sales remain the same, or grow; all that changes is the uniform of the route driver.

So, while some operators loudly lament the end of the boom years, others quietly are meeting the new needs that have arisen and taking advantage of new market opportunities. And the future belongs to them.


Topic: Editorial: Vending

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  • We Need To Talk, And Listen
  • Perils Of Infighting Outweigh The Fun

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