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Branded Products, Astute Drivers Are Key To Food Vending Success

Posted On: 9/23/2005

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This article is written by Ronald F. Cichy, Ph.D., NCE, CHA, CHE, director and professor in the School of Hospitality Business at Michigan State University; Jeffery D. Elsworth, Ph.D., assistant professor in the School of Hospitality Business at MSU; and Larry Eils, senior director, technical services of the National Automatic Merchandising Association

U.S.A. - Much has changed in the 103 years since the invention of the automat in 1902, and 55 years ago when the first refrigerated sandwich vending machine introduced fresh food vending to the public.

The 2004 Vending Times Census of the Industry reported total sales from vending in the United States in 2003 as $42.15 billion. Eliminating coffee services, bulk vended items, manual foodservices and cigarette sales leaves fresh food representing $3.055 billion out of $35.535 billion in sales, or 8.6% of all of these vended sales.

The National Automatic Merchandising Association has promoted healthy food choices through its "Balanced for Life" campaign, designed to educate and inform the users of vending services that the answer to obesity issues is for consumers to make healthy choices and for operators to offer healthier selections.

Central to offering more healthy foods is the market for vended fresh foods. Some believe that the public needs to be provided with more choices when it comes to fresh foods. Vending operators continue to look at vending of fresh foods as a means to gain a competitive advantage.

In early 2004, the Technical Services Department of NAMA and The School of Hospitality Business at Michigan State University conducted a fresh food vending survey designed to obtain information from operators of vending commissary operations about their fresh food vending operations.

The most popular trend in fresh food vending is the use of branded food items. Branded items help the operator sell more vended fresh foods due to the increased credibility the brand gives to the product in the mind of the consumer. There is also the possibility that consumers will be more likely to pay a little more for branded items than for generic items, although the higher product cost may cut into the operators' profits.

Consumers are also following trends seen in the restaurant industry with preferences toward more ethnic foods and healthier food choices. Some vending operators have begun to specialize in Hispanic and Asian food items, while others are trying to capitalize on the low-carb and Atkins diet trend with vended foods that meet the criteria for these diets.

Fresh food is primarily vended in manufacturing industry facilities and business and office buildings, with lower availability in hospital facilities and on college and university campuses, particularly commuter campuses. The number of machines available in the market has fallen in the past several years. This could be because of the high cost of operating fresh food machines or possibly that newer, larger machines are replacing older machines in more targeted locations.

A concern with fresh food vending is the need and responsibility for food safety. There have been efforts toward educating route drivers and commissary workers on the need for safe food handling procedures. NAMA has developed a training video called "Transporting Perishable Food: Guidelines for Route Drivers" that informs the drivers of the important role they play in delivery of safe foods to the vending machines. Another issue of concern is that different states have varying policies on how vended foods are regulated.

When asked who prepared the fresh food, 80% of the operators indicated that preparation took place in their own commissary, while 20% said that the fresh food was prepared by a third party. Operators were asked which fresh foods they sold in their vending machines. The types of fresh foods vended were fairly evenly mixed with sandwiches topping the list at 17% (see Table 1).

Ninety three percent of operators indicated that they used pre-cooked products and 88% indicated that they used branded products. Most (62%) said that they use manufacturer-branded products, followed by self-branded products (25%) and restaurant-branded products (13%). One might argue that branded products have more name recognition and, therefore, are more likely to be selected from a vending machine when a purchase decision is made relatively quickly.

One of the more interesting results was the response regarding the use of branded products. A survey of operators in December 2000 reported only about 20% of the respondents thought branded food items were important in fresh food vending. Our survey revealed that 88% of the respondents indicated they use branded products. This may represent a direct reversal of thought and practice in less than four years.

Likely the most important observation to come from this study was the importance of the route driver's responsibilities in the fresh food vending operations. According to the majority of operators, the route driver is responsible for machine-level ordering. Because of this, the driver can be considered the "sole proprietor" of the vending machine, and as such is in charge of fresh food rotation and for the safe handling of the food products. This is an important fact since the majority of operators reported waste and leftover food as their greatest problem related to fresh food vending.

Fresh food vending represents $3.055 billion in sales per year in the United States. Assuming an average vending transaction of $2.50, that translates into about 1.22 billion fresh food products sold through vending each year. The implications for a better understanding of fresh food vending are significant in terms of profitability and improved market share for vending operators. Of equal importance is a better understanding of the significance of the route driver on the overall fresh food vending operation. Developing a better understanding will help vending operators increase profits and provide better product choices to consumers.


Table 1: Fresh Food Items Vended