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Issue Date: Vol. 51, No. 8, August 2011, Posted On: 8/30/2011


Changing The Game: Missouri's Dynamic Vending Sustains Growth With A Fresh Food Emphasis


Emily Jed
Emily@vendingtimes.net
vending, vending machine, vending machine business, vending machine operator, Dynamic Vending, Josh Koritz, Hazelwood Missouri, office coffee service, OCS, office refreshments, food vending, food commissary, vending machine food, food vending machine, fresh food, fresh vending food, sandwich vender, vending machine sandwiches, gourmet vending machine foods, Godfather hoagie, healthy vending, FDA vending machine rule, Kevin Highley, Tony Accardi, Lightspeed Automation, vending warehouse, cashless vending

Josh Koritz Dynamic Vending's Josh Koritz recalls having an epiphany five years ago while standing in front of one his food machines. There was nothing he would consider eating, and little about the array of prepackaged foods inside seemed to make his machines a destination. He was convinced that his customers deserved freshly made foods and that, whatever the investment, he would provide it to them.

"If I was providing food that didn't excite me, how could I expect it to excite my customers at the vending machine?" asked the operator, whose company is based in Hazelwood, MO. "And from a competitive standpoint, if we're all selling the same prepackaged sandwich and candy bar and bag of chips, then we can only sell on service and commission. I knew that, in this competitive market, we had to be different from other companies, and fresh food would separate us from where we were and where we needed to be."

The exploding health movement was another market force that motivated Koritz to add fresh food. "We, as an industry, need to get people back in front of the vending machine. Their demands are different than they once were, so we have to be different," he observed. "Fresh food gives you a lot of things to offer, like salads and home-cooked entrées, that aren't available prepackaged. Once we get people back to machines with healthy, tasty, fresh foods, they see that food venders are not 'the spinning wheel of death,' but a great destination for a meal."

Dynamic_Fresh

GETTING FRESH
Koritz opened his commissary in 2006. He worked with local foodservice industry suppliers to determine the most suitable equipment and where to situate each piece in the kitchen.

"Equipment is very expensive, but we bought nothing used -- all new," Koritz told VT. "Then we hired a chef locally who understood what I was trying to accomplish. This was a bigger task than it seems, since most chefs do not understand the items we are looking to provide, product date-coding and the basic price-points in vending."

Once he found the right person for the job, Koritz had the winning formula for producing the high caliber of food that has been a door-opener ever since.

"My competitors lay their stuff out in the prospect's conference room, and then I lay mine out," he told VT. "Nine times out of 10, just based on that, they're ready to go with mine. It's a no-brainer. Some bigger customers demand fresh food. We not only deliver it to them, but we're flexible; we work with our clients to personalize their menus."

Customers can select their favorites from a list of best-sellers, along with rotating weekly specials. They also have the option of allowing Dynamic Vending to menu the machine, based on location demographics, sampling and its long-proven expertise at determining what patrons want.

Dynamic Vending's most popular menu item is its protein platter, which features hardboiled eggs, a package of peanut butter and grapes. Koritz said he got the idea at a takeout restaurant, where he snapped a picture of the spread. He makes it a habit of paying close attention to menus and observing what people eat when he dines out. Fresh-cut vegetables with dip and cheese and fruit plates are other fast sellers.

Another Dynamic food vender favorite is its Godfather hoagie, a mix of pepperoni, salami, pepperjack cheese, black olives and banana peppers, which Koritz says puts an authentic Italian spin on the humdrum sandwich options many consumers have come to expect from vending machines. Entrées like baked chicken with homestyle fixings and hearty soups, especially during the cold-weather months, also make the machines destinations.

"We like to constantly come up with new ideas for the machines," Koritz said. "It must be fresh, priced right, and appealing to the customer; then we will try it."

Dynamic's drivers order from a two-week "floating" menu. Top sellers -- fruit trays, cheeseburgers, protein platters and ham and cheese sandwiches -- are available during both weeks, while weekly specials like nachos and specialty burritos, for example, are rotated through to maximize variety. With entrée salads in high demand, the commissary produces a different one each day of the week; chef's, grilled chicken and Santa Fe salads are among the customer favorites.

Drivers turn in their food orders on Friday and receive them for delivery a week from the following Monday. "This gives us time to adjust them, if necessary, and to order product from our suppliers," Koritz explained. "So we are usually two weeks out. However, if we find that something is not moving very well in the machines, we may not wait until the two weeks are up; we'll just substitute something else immediately.

"We are extremely versatile," the operator summed up. "What sells at one account may not sell at another; or it may, but very slowly. So we give our drivers flexibility."

One factor limiting, to a degree, the full breadth of dishes Koritz would like to offer his customers is the difficulty he -- and the industry as a whole -- has had breaking the $3 price ceiling. "Customers don't fully understand the labor and expense required to produce food and put it in the machine, and then to have to discard it if it's not selling," he observed. "I try to keep food at a price that they're willing to pay, even though it's worth more, to at least move product. I'd rather sell it for a little less than throw it out."

Dynamic's salads and fresh fruit cups are limited to a three- or four-day shelf life, but are fast sellers; most sandwiches and entrées last five days. By paying close attention to what sells, Koritz says he has weeks with virtually no waste. But despite the best of planning, there are inevitably weeks when he is forced to toss 20% to 25% of his fresh foods.

Food route drivers record information on their handheld computers, and scan UPC barcodes on all items placed in the food machines. They also scan the labels of all returns. This data is uploaded to Dynamic's central servers, allowing the company to analyze what's selling and what's not, account by account.

"We are very strict when it comes to health codes," said Koritz. "We are proactive; we don't wait for health officials to tell us what to do. We research, and constantly check to make sure we are doing things correctly, including not only sanitation and the temperature of the coolers, but also temperatures while the food is being prepared, proper wrapping of products and employee hygiene." The vending company transports its food in dedicated temperature-controlled trucks to ensure the integrity of its food items and accommodate a wide product variety.

Prepackaged foods with long shelf-lives supplement the vending company's fresh foods in most machines, and many have their followings, but Koritz says it's the homemade selections that tend to move fastest and are in the highest demand. Some of the company's largest accounts have the volume to support food machines merchandised entirely with foods made in Dynamic's commissary.

WELLNESS MOVEMENT
"A big reason for the popularity of the foods we make is that we like to offer healthy alternatives in fresh food; our salads just fly out of the machines," Koritz remarked. "Anything we can get our hands on that is different and fresh, we want in our vending machines. It's important to me, personally, that everyone has options for what they want to buy. This is no different in a cold food machine from the variety in a snack vender."

Koritz sees the new federal law requiring vending companies with 20 or more machines to post the caloric contents of the foods and beverages they sell as a mixed blessing, in terms of consumer perception and motivation for the industry to adapt.

"With the 'healthy' mandates that are coming through the pipeline, vending will not be unscathed," he predicted. "People will look at items they get out of the vending machine, and they might say, 'Whoa, it has how many calories?' But still, people want that piece of chocolate or bag of chips. I think it all comes down to moderation, and definitely to other healthy alternatives in the machines. That will continue to bring people back, and the suppliers will have to work closely with vending companies to see what will work."

Koritz anticipates that some product manufacturers will experiment by offering certain items in smaller portion sizes, with an eye to addressing consumers' dietary concerns. "If you have a bowl with 8 oz. of biscuits and gravy, with two biscuits, it might be shrunk down to 6 oz. of gravy and one biscuit," he instanced. "That could knock off 120 calories, right off the bat."

Once the FDA issues its final calorie-labeling rules, Koritz said Dynamic Vending will retain a dietician to determine the nutritional breakdowns of its freshly prepared foods and develop labeling that complies. "When it comes to the new regulations and guidelines that are approaching, as soon as they can clarify exactly what they want on all vendible items, we will have a clearer picture," said the operator. "We are in it for the long run, so we adhere to every government mandate, and we do it very quickly. I have a great team behind me that I can count on; they have helped me along the way with so many transitions, from the smallest to the largest."

TEAM APPROACH
Dynamic_Top Guns Dynamic Vending has grown substantially over the past two decades, from a one-man operation struggling to make ends meet, to a 47-route enterprise supported by a staff of 90. "Probably the best part of my job is the people I work with and around, from my general manager, to the sales department, to my drivers, cooks, office staff, all wonderful people," Koritz told VT. "And many of my clients have become true friends."

Koritz says that his confidence in his team's competency and professionalism has allowed him to gradually take a step back from his daily duties and focus his efforts on continuing to move the company forward. "I have learned to delegate, but also to keep my eye on the ball," said Koritz. "I can do almost any job because I've done them all. I can walk into a site and say, 'take that machine and switch it out,' just based on the sense I've developed from being in the business when it was on square one."


PHOTO: Josh Koritz (right), joined by general manager Kevin Highley (left) and senior executive Tony Accardi, says empowering his key employees has allowed him to take a step back from day-to-day operations and focus more on the big picture.p>

The operator also makes it a practice to cross-train his key employees. "It keeps people on their toes, and I'm not held hostage by only having one person who can do a job so, if they leave, I'm in trouble," he said.

Wireless technology is one of the latest initiatives on which Koritz has been focusing his efforts, and he says that it has played a big role in allowing the Dynamic team to work at peak efficiency. Six months after installing Cantaloupe's remote machine monitoring system, Koritz reports that he has been able to eliminate several routes by taking advantage of up-to-the-minute sales data to pre-kit daily orders for Dynamic's soda, snack and coffee vending machines.

For the company's food machines, Koritz uses the wireless technology only to monitor if a machine goes down or if the temperature is too high, and to send automatic alerts for these alarm conditions.

"There's a lot to be said for wireless," he told VT. "It's the wave of the future; and I can speak to its merits, after many years doing things the 'old-fashioned' way."

THE BACKSTORY
Koritz got his feet wet in the industry midway through college when he worked for a small vending company. Over the course of a year, he learned the basics of equipment service and repair. Then the company went out of business.

Koritz spent the next few years driving a tow truck while pondering what he wanted to do for a long-term career. The future operator found the answer in 1986 when he came upon an old beverage machine for sale for $250 outside a small retail store.

"I gave the owner the $60 I had in my pocket, which was all I had to my name, and made her a deal. I said I'd clean the machine, put in new light bulbs, stock it with soda, leave it right in front of her store and pay her every week from my collections until we were squared away," he recalled. "I paid her off within a month and -- boom -- I was in business. I began searching for old, broken-down machines to buy, and paid for them from my collections."

Koritz worked any part-time jobs he could find to support his fledgling venture, from making pizza and bartending to odd jobs as a laborer. "The early days were desperate times. I never made enough money to make a living from vending," he recalled. "I wasn't sure if I would make it, or where it would take me. If a mistake could be made, I made it -- some of them two or three times. But I eventually learned from it; it was just all a test."

TOUGH DECISIONS
A major crossroads came when Koritz was faced with the decision of whether to pay $1,200 for two months back rent or risk eviction, and invest that money in his business. "My Veryfine distributor had offered me a brand-new machine, which was like a Mercedes compared with what I had. They would stock it full, and all I needed was $1,200 down," Koritz remembered. "It was either the roof over my head, or a business that could feed me the rest of my life, so I told the landlord I couldn't pay and I was evicted."

An acquaintance rented Koritz warehouse space in an old building for $60 a month. He slept on the floor for six months, not only keeping his vending business afloat, but continuing to grow it.

He found a new source of revenue, and of equipment for his own route, by refurbishing machines for other operators. "I would take two or three machines other guys threw out, and make one," he said. "That gave me more money to keep a few machines and put them on location. I always got the junky stops no one wanted, in the bad neighborhoods, but by doing so, I found some gold mines."

Before long, Koritz had the cashflow to move into an apartment and to afford a larger warehouse. By 1996, he had grown Dynamic Vending substantially, with four drivers on staff, but was still struggling to make ends meet. Just as he was considering folding the business, a multi-location corporate account put out a bid for its vending service and he was determined to catch his first big break.

"I went up against the big boys," Koritz said. "The account told me it had all its bids in, but I threw mine on the desk and told them to consider me, because I was right down the block and could give them a level of personalized service that the other guys couldn't."

The account's decision-makers criticized the lack of detail in Koritz's one-page bid, but they gave him pointers on how it should be done and allowed him to resubmit it. In doing so, they did him one of the biggest favors he has received in his career.

"I kept revising it, and they'd tell me what was still wrong with it. In the end, it was between me and one other company," recalled Koritz. "I was sure my big break had come. But after all that, the other company won the business and I was floored; I just thought, 'look at all this wasted time.' And I didn't know if it was time to just throw it all in."

P.E.T. PIONEER
With his spirits crushed, Koritz decided to make a go of the only opportunity left to turn around his business that he thought was worth exploring: soft drinks in 20-fl.oz. PET bottles. The new packages were just hitting his market, and he had not seen them in any vending machines throughout St. Louis, so he ordered 40 cases.

"I decided if I was going under, I was going to take one last breath," recalled the operator. So he loaded up his Jeep Cherokee and left the sodas on the doorsteps of prospective clients, along with his business card. Calls started coming in, and Koritz landed better accounts than he had ever secured before.

"I bid against companies in business 25 years, and I killed them," recalled Koritz. "I wrote a nice, clean, perfect proposal, including one whole page on the commission structure, just like the multi-unit corporate account had taught me; and I picked up more business that year than since I had started out."

Building on that momentum, one year after the big account had rejected Koritz's bid, officials there called to say they were unhappy with the vending company with which they had contracted. They wanted to turn the business over to Dynamic Vending.

Koritz stretched his company thin to fulfill the contract, paying 18% for equipment financing. The client also demanded a hefty commission. "That gave me the stepping-stone to buy product in pallet loads, and from there, I didn't walk: I ran," he said.

By 2004, business was booming. Dynamic had outgrown its 10,000-sq.ft. warehouse. The company moved into its current 50,000-sq.ft. Hazelwood, MO, headquarters.

Dynamic still has that client's vending contract, 13 years later, and the company's owner has come a long way from settling for the accounts that his larger competitors didn't want. "I love bigger clients, corporations, because you don't have to offer the lowest price; you have to be true and fair," the vendor remarked. "If you're the cheapest guy, they're not sure what level of service they're going to get, or what shape the machines are in. Larger companies see the value in maybe a little less commission, or pricing product a little higher, to know they're with a reputable company."

The company's growing OCS division also has been instrumental in attracting and retaining key business. "We try to make it a 'one-stop shop' for the customer," Koritz told VT. "We supply canned drinks, small-package bottle waters, juices and teas, along with paper goods and even cleaning supplies, if the account needs them. We have a profit margin we must make with the coffee side of the business, and we try to adhere to it."

One service Dynamic does not provide its customers is five-gallon bulk water bottles and coolers. "The workers' compensation insurance and the liability of handling the product is just too much for us to make it work," he explained.

TIGHT SHIP
In spite of his success, Koritz runs his company with the frugal mindset he had when he started the business, which he says has helped keep Dynamic Vending in a strong financial position in the midst of the tough economic environment of the past few years.

For one thing, Dynamic secures the best pricing by buying product by the tractor- trailer load. For another, Koritz employs a full-time mechanic to oversee vehicle maintenance and repairs.

"We fix our own trucks," he told VT. "If a truck breaks down, we can put a new starter in, right there in the street. We'll even pull an engine on vehicles that are worth keeping."

Dynamic Vending has also realized significant savings by "going green." The local electric company offered businesses an incentive to switch to energy-efficient lighting, which has amounted to a 25% reduction in the operation's monthly bill. Dynamic has also instituted a new policy of separating its plastic and cardboard trash, and selling the cardboard. The has dramatically reduced its waste disposal costs.

At the same time, Koritz is a big believer in reinvesting in his business. "I go by the slogan, 'If you want more heat in the fireplace, throw in more firewood,'" he remarked. "The competition is tough, the margins are thin. Companies that are not investing in themselves should turn in their keys. They won't make it."

He reported that his investment in handhelds and DEX technology systemwide has enabled the company to be 90% paperless. Dynamic has also streamlined its operations by using the Lightspeed Automation (Alpharetta, GA) "pick-to-light" route order fulfillment system in its warehouse.

Koritz said he spent $2 million last year on new equipment and technology, and plans to do the same this year to "run stronger, faster and more efficiently."Along with investing in remote monitoring technology, he has been selectively installing card-reader payment systems.

GOING CASHLESS
Colleges and universities have proven to be among the prime high-traffic sites for cashless payments. "The younger generation relies on debit and credit cards," the operator observed. "And credit cards definitely help customers to be less apprehensive about throwing $5 or $10 into a vending machine. We definitely see incremental sales at the accounts where we put it."

Koritz's main gripe with cashless vending is the $9.99 monthly processing fee he is required to pay per machine. "That adds up when you have a lot of machines, and then on top of that, you pay the card companies a percentage of every transaction," he pointed out. "The fee structure is holding back the industry. If we could figure it out, the business would explode."

Dynamic has installed cashless readers at some locations that requested the technology, but found that they didn't have the volume to support it. "If that happens, we'll take the reader out in three to six months, after giving it a try," he said. "We try to make the customer happy, but if it's not making money, we'll move it to somewhere that it is. Some accounts choose to keep it, and we'll take $30 a month off commissions to offset the monthly cost if there are three card readers."

Overall, Koritz is excited about cashless, and is convinced that many vending machines will come with cashless readers as standard equipment within five years, as the payment systems become as mainstream as bill validators. He also is sure that a more viable fee structure will emerge. The industry has made many great strides in a number of areas during his two decades in the business, the operator emphasized, and there always are growing pains while new technologies are perfected, and until the cost of investing in them makes financial sense.

"I still have the same passion as I did years ago for this business, and it's exciting that there always is change," he said. "I love vending technology, I love my kitchen, and I guess I am a people-pleaser of sorts. I feel like I haven't worked in 20 years plus, but I guess that what happens when you love what you do.

"I don't take anything for granted," Koritz summed up. "As my mother always told me, 'Keep your feet on the ground, stay humble and keep working and striving.'"

Dynamic Photo Composite

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