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Issue Date: Vol. 41, No. 6 / June 25, 2001 - July 24, 2001, Posted On: 7/25/2001


RGM Maintains Personal Touch, Satisfies Varied Customer Tastes While Expanding Coverage Of Diverse Suburban Vending Market


Emily Jed
Emily@vendingtimes.net

OLD TAPPAN, NJ - When customers call RGM Services, they don't get the runaround. Guaranteed.

That's because Roy Magnuson and Bill Anderson, the owners of the sizable full-line business based here on the outskirts of New York City, are likely to answer the phone. And it's not for lack of resources or business savvy that the owners take incoming calls themselves, but because they know that there's only one chance to make a good first impression, and they view each interaction with a customer as a valuable chance to prove themselves.

"People ask us why we don't have receptionists," Anderson told V/T. "If we did, they'd have to put our customers on hold and come to us anyway, because there are so many details that we know best.

"We prefer to be the first, and the last, people the customer speaks to because they are all busy and we can handle whatever the issue is with one call."

Magnuson was a vending customer long before he became an operator, so he knows firsthand about the values that are important to clients. A veteran of the service-station business, he owned his first gas station when he was 20 years old, and acquired several more throughout the late 1960s and early '70s. He still owns the first one, and it was there that he became interested in operating vending machines.

DISSATISFIED CUSTOMER

"It's a very busy service station on the Palisades Parkway, and I realized the vending company was cheating me," Magnuson told V/T. "The machines would be empty on weekends, so we were losing business and disappointing customers, and the vending company would give me practically no commission. I'd talk to the guy while he filled the machines and I made a list of what went into the machines and realized they were cutting my commission in half."

Magnuson took it upon himself to learn how to fill and service the machine by looking over the route driver's shoulder. He took the bull by the horns, purchased his own equipment and began servicing it himself.

Anderson, at the time, was employed by Crane National Vendors and had opened the vending machine manufacturer's first East Coast distribution center when he met Magnuson in 1969. The Crane veteran served as a valuable resource to the novice vending operator and the two struck up a friendship over the course of several years.

Anderson joined Magnuson as a business partner in 1980, when RGM had grown to three routes and Magnuson made the decision to pursue it as a full-time venture.

"I wear a lot of hats; that's what's great about this business," said Anderson, who spends the bulk of his time on the road canvassing new business, but also can be seen in the field repairing and moving equipment when necessary, and sharing his technical expertise with the staff.

Since becoming a vending operator, Magnuson sold all but one of his service stations to make vending a career. It's an occupation he enjoys and a business that has flourished since its inception.

Today, RGM services more than 575 machines on seven full-line routes spanning Westchester County, lower Connecticut, Putnam County, northern New Jersey, Rockland County and Manhattan. And business is growing almost daily.

"When I started in vending, I knew a lot of service station owners who wanted machines, and in a short time I had a lot of equipment out in very high-volume locations," recalled Magnuson. His first sizable account outside the service station market was Sterling Forest Gardens, a local recreational park and ski area; he got the location by word-of-mouth recommendation.

"We had ice cream, soda, snacks and candy, for thousands and thousands of people," he recalled. "On a 95·F day, people would go from one cold cup machine to the next and I'd be running around filling them. It was an unbelievable business. At first it was just me and one employee , we did it all, before Bill came along."

RGM's reputation continued to generate referral business, and the company soon was serving a broad base of customers, including offices, schools, factories, colleges and recreational facilities. As time passed, that diversification was the key to the company's survival.

"With the opening of convenience stores in service stations over the past 15 years, we lost that entire segment of our vending business," Magnuson told V/T. "Convenience stores and mini-marts have hurt vending, as an industry. We have lost a lot of sales to people who grab a soda and a bag of chips while they get gas on the way to or from work. There are as many convenience stores as there once were vending machines."

Just as the service station market for vending was overtaken by convenience stores, competition with major bottlers is the vending operation's latest hurdle, primarily impacting RGM's business in large educational facilities.

"Schools and colleges are some of our best accounts, but they are a problem because large bottlers can come in and give them scoreboards and computers," Magnuson observed. "But, to get those things, the school has to sign its future away. There are minimum volume requirements and other stipulations that can become very burdensome." Even so, such offers often are attractive to cash-strapped schools, and it is difficult for a "third-party" operator to compete. "We're the third largest soft-drink customer in our area, but they still go and knock on our clients' doors," he noted.

COMPETING ON SERVICE

The solution to this challenge is professional service, which a good vending operator is organized to provide. "We have found that, even when we lose a school to a bottler, the location will take us back for our service. The bottling company's main mission in taking on an account is to get its logo out there, but it's not easy for a bottler to give the service that we do."

The willingness and ability to provide contract foodservice is another offering that sets RGM apart from most of its competition in the university market. In addition to holding the vending contract at an area community college, RGM operates the college's cafeteria. RGM also has formed relationships with several large contract foodservice firms to provide full line vending at their manual feeding accounts within RGM's region, where the contractors do not offer vending service.

Providing quality vendible food also gives RGM leverage when bidding for accounts. RGM purchases freshly made sandwiches, salads and entrees from a local caterer, which are delivered to a cooler outside the company's facility early each morning. Frozen, branded products are also extremely popular because they are well recognized and provide ample variety for a demanding customer base, according to Magnuson.

"Customers know a brand like 'White Castle' or 'Pierre' because they buy it in the supermarket," commented Anderson. "Frozen-to-thaw sandwiches are a big help in our food machines, and enough variety is available to knock their socks off. In a closed environment, people get tired of eating the same thing constantly; that's something we always take into account when we merchandise our machines."

Portability is also a major factor of consideration when RGM's customers purchase food. "People eat lunch at their work spot and they eat on the run," said Magnuson. "Everything they eat has to be handheld, like a hot dog or hamburger. Tacos and burritos are bigger than ever; so are 'Hot Pockets.'"

Employees are putting in longer hours, and technology is tying them to their desks more than ever before , today, many workers need not leave their desks even to send a fax or make a copy. "People who use computers all day long are living out of vending machines. They can't get away when they're locked to the screen all day, so it's our job to bring them the products that they'll want to grab in that minute they take to run to the vending machine down the hall," said Anderson.

GAUGING PATRON TASTES

Ethnic foods are growing in popularity, as are kosher offerings in select locales. "At our community college location, we conform our menu to the desires of many different groups; for example, there's a large Muslim community that eats only kosher foods," Anderson instanced. "We meet periodically with students to find out what they like. We also have a machine on the New York State Thruway filled entirely with kosher products that serves a lot of observant Jews and other groups travelling through," said Anderson. "At our community college location, there are a lot of Caribbean students, so we sell Jamaican meat pies in the cafeteria. It's important to look at all groups of consumers and give them what they want. In vending, we offer 'Goya' juices where there are large Hispanic populations."

Non-perishable "just add water" products, including "Maruchan" soup cups and "Quaker" oatmeal cups are ideal additions to RGM's food machines, as they fill empty space with economical and appealing alternatives and generate no waste.

In the New York metropolitan area, RGM is finding a lucrative new niche in "extended stay" hotels that serve as temporary homes for a growing clientele of business professionals who are relocating, or whose careers keep them away from home for extended periods of time. "These people have no time to go out to eat, or they don't want to take time going out after a long workday," said Anderson. "We have frozen, branded 'Healthy Choice' and 'Lean Cuisine' dinners in the machine, ice cream, hamburgers, hot dogs, and the beauty is there's no waste. We also have milk in bottle-drop machines at those locations, for coffee or cereal, and it sells great."

The RGM operators are pleased with the pace at which sizable quantities of the new milk beverages in attractive, plastic resealable bottles are moving through the company's food machines in a wide variety of accounts. "They look great; the chocolate milk has a brown wrap that stands out, and they have a 10- to 12-day shelf life," commented Anderson.

The majority of RGM customers are attracted to the value and the convenience of larger size soft drink containers, and so tend to favor the 20-fl.-oz. bottle. "They like the resealable cap," added Anderson. "Most women don't want a 20-fl.-oz. soda because they can't drink it fast enough; it gets flat. But they like a 16-fl.-oz. 'Snapple' or water that can sit until they get around to drinking it."

At colleges and schools, the trend is clear to the vending operators. "Kids want the biggest and the sweetest," said Anderson. "Look at McDonald's; every year, their burgers get bigger; their drinks get bigger. Wendy's has the 'Big,' the 'Biggie' and the 'Biggest.' Where will we go after the 20-fl.-oz. bottle? I don't know, but the kids will probably buy it out of our machines if it exists."

THE CUSTOMERS DECIDE

RGM initially stocks the majority of its snack venders with five columns or so of "healthy" products to meet the expectations of a new account. "Everyone talks healthy; then we show them that most of the products have been sitting," said Magnuson. "We go from five columns, to four to three, and they usually end up with two 'healthy' columns."

Despite the overwhelming consumer preference for "sweet, salty and full of calories," the operator reports that pretzels are selling at a record pace for RGM, as customers seek lower-fat alternatives. And water is among the most popular beverages, even outpacing leading soft drinks in many workplace and recreational environments.

QUALITY COFFEE

Today's customers appreciate a gourmet cup of coffee, and RGM prides itself on exceeding their expectations, Anderson told V/T. The company's dual-cup, bean-grinding coffee vending machines have established a favorable reputation among customers, which Anderson attributes to using only premium coffee beans in well-serviced, state-of-the-art equipment. "It's the same 100% Colombian bean they'd get in fresh-brewed coffee from a convenience store," said Anderson. "People say they never had coffee that tasted so good in a vending machine. We show them how it works, the paper filters, and how we clean it. Many people see a vending machine and they think the worst, but it's a cleaner, fresher cup than they'd get at Dunkin' Donuts, and our customers know that because we take the time to show them."

RGM has also provided OCS for the past 15 years, primarily as an adjunct to its existing vending business. The coffee service side of the business is capably handled by OCS manager Phil DiPinto, and enables RGM to offer a menu of services to meet the needs of front-office personnel and other smaller workgroups in its vending locations.

According to Magnuson, his and Anderson's hands-on approach has enabled them to grow the business to its current size. "When you're in the business this long, customers move from company to company, and they bring us along with them. They know us personally, and they don't want to leave us behind," he said. "That's why we rarely lose an account, and it's how we gain new ones."

RGM has acquired a few smaller companies throughout the years, but the operators approach such acquisitions with extreme caution. "The problem with buying out a company is you take the little accounts with the big ones," said Anderson. "Small companies are small for a reason. Their equipment is old, and their prices are too low." RGM has a policy of replacing its equipment every five years.

Magnuson attributes much of the company's success to a skilled and dedicated staff consisting of a number of longtime employees. The team includes seven full-line route drivers, one OCS driver, eight manual foodservice employees at the community college location, two mechanics, two office/warehouse personnel, and a money room manager "Even in such a tight labor market, we haven't had a problem; we keep our people by treating them well," said Magnuson.

RGM's route drivers are compensated with a base salary plus commission, in addition to an end-of-month bonus. "The name of the game is to be neat, be clean and merchandise the machines properly," said Anderson.

He does not believe in dictating across-the-board planograms. "It's up to each driver to fill the machines to suit each location, and they don't let us down," Anderson reported.

Magnuson, having driven many a route himself, takes into account his drivers' safety and comfort, using Ford extended vans for route deliveries. "I was a carpenter, so I designed the interior of the truck so everything is secure and well organized," said Magnuson. "It's more efficient and safer to have route drivers on the ground when they load and unload cold beverages."

The company recently hired an additional route person who will train on one of RGM's smaller routes. "We know to hire and train in advance when we see new business coming. You can't just throw a guy out there and expect him to do a good job," commented Magnuson. "Other vending companies with seven routes probably don't do as much volume as we do. Our guys are really good, really motivated."

LONG-TERM GROWTH

The integrity with which RGM treats both its employees and its customers also extends to the way in which the operators relate to their competitors, according to Anderson. "I'm on the board of the Automatic Merchandising Council of New Jersey, and it can be ticklish, knowing all my competitors," he said. "But it's important that we work together for the good of the industry. A bid is a bid, and I'll let my competitor know if I get a call from one of their customers before I go after it. Unfortunately, we're having trouble getting new vendors involved in the association; too many people seem more concerned with cutting each others' throats than with working together."

And industry cooperation is more important than ever, Magnuson emphasized. The vending industry has many attractive new tools and opportunities, but it also faces new competition that gradually has transformed the business for the worse.

"Years ago, a location's cigarette machine paid for the route driver; the remaining vended sales were gravy," he recalled. "Now those cigarette machines are gone, and people are buying their cigarettes at convenience stores. While they're doing that, they're very likely to pick up a snack, and perhaps a beverage too." The effect of this is less pronounced in rural than in suburban markets, but it has had an adverse effect on overall industry profitability.

On the plus side, the new milk formats for vending are proving very popular, Magnuson added. "When we changed from half-pint cartons to wide-mouth plastic bottles, our milk sales quadrupled," he reported. "People like the resealable cap; and they'll buy a cup of black coffee, then buy a bottle of milk to use with it, putting the remainder in the refrigerator for their next cup, or to drink at their workstation." This is a product category that generates additional vended sales, he summed up.


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