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Could USDA Oversight Of School Vending Benefit The Operator?

Posted On: 10/24/2010

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vending, vending industry news, vending machine, vending machine business, school vending machines, healthy vending, Healthy Hunger-Free Kids Act, Michele Obama's Let's Move, Child Nutrition Act, National Automatic Merchandising Association, NAMA, Ned Monroe, Institute of Medicine, Alliance for a Healthier Generation guidelines, 2005 Dietary Guidelines for Americans, Mars, Generation Max, Hank Izzo, Marc Whitener, Refreshment Solutions, Fresh Healthy Vending, Jolly Backer

Unified standard would simplify compliance and abolish 'junk food' image, industry experts predict

The federal government is moving closer to dictating what can be sold in school vending machines. Operators and product suppliers who have been struggling to navigate the fast-changing patchwork of nutritional requirements, which can vary widely from state to state, district to district and even school to school, increasingly say that complying with a single standard would be a welcome change. Not only would it eliminate confusion over which products may be sold, it would allow the industry to demonstrate that every machine, in every school across the nation, is a positive contributor to the fight against childhood obesity.

The Healthy Hunger-Free Kids Act, one of the most substantial elements of first lady Michele Obama's Let's Move initiative to combat obesity, was passed by the Senate in August and has stalled in the House of Representatives. A provision in the bill would extend the U.S. Department of Agriculture's authority to regulate nutrition standards beyond the lunchroom to vending machines, á la carte offerings in the lunchroom and products sold through school stores in K-12 schools nationwide.

As VT goes to press, the House and Senate have adjourned without a vote on the bill and will not reconvene until after Election Day. Passage of the Healthy Hunger-Free Kids Act is a priority for consideration when Congress reconvenes, since it reauthorizes the Child Nutrition Act that expired on Sept. 30.

The Senate's $4.5 billion version of the nutrition bill would increase the reimbursement rate for school lunches for the first time in nearly three decades and impose mandatory nutrition standards for school meals. It's bogged down in the House because it is funded, in part, by $2.2 billion in cuts to the federal food stamp program. Opponents argue that this is not a viable solution, since it takes money from one much-needed nutrition program to pay for another.

National Automatic Merchandising Association senior vice-president of government affairs Ned Monroe said that, with "obesity" squarely in the media spotlight and a top priority of the Obama administration, a version of the bill will likely be passed by the end of the year. Its passage would then be followed by a year of rule-writing and preparation for compliance.

"The good news is that vending will be absolutely allowed, and is not being removed from school settings," observed Monroe. "And clarifying one national standard will eliminate a lot of confusion for the operator."

Another positive, the government affairs expert pointed out, is that the same rules will apply everywhere food is served or purchased throughout school buildings. "Schools won't be able to sell items that don't comply with the standards at a vending machine at the onsite store, or place it on a plate with a hot dog. This levels the playing field for the operator," he noted.

Monroe said the USDA standards will likely be drafted based on Institute of Medicine recommendations, which mirror the Alliance for a Healthier Generation guidelines, and the 2005 Dietary Guidelines for Americans.

One of the most significant changes from the current patchwork of rules, according to Monroe, is that under federal guidelines, all vended products will have to comply with established limits on calories, fat, sugar and sodium. Currently, some states, like Alabama, mandate compliance with "better-for-you" guidelines by all vended products, while others, like Texas, require that only 50% of items meet the established criteria.

"Every vending machine in every school would be considered 'healthy,' which would put more pressure on operators to find healthier foods and drinks that kids like, but also would do wonders for the industry's image, since nothing can be considered 'junk,'" Monroe observed.

He added that many astute operators have already risen to the challenge of meeting increasingly stringent school regulations to maintain accounts and secure new business. Those committed to serving the K-12 sector report that the effort to provide a school-specific product range is worthwhile, despite the consensus that the shift away from traditional candy, snacks and beverages to alternatives presently considered more wholesome generally results in a dip in sales.

Five years ago, only six states had set standards for competitive foods sold in schools. Today, 28 states and the District of Columbia have established guidelines, and many of them vary widely. The ranks of school districts that impose restrictions on vended snacks and beverages also continue to grow. Included among them is New York City, the nation's largest school system, which made headlines with the kickoff of a citywide healthy vending program this fall through exclusive contracts with Answer Vending (Bellerose, NY) and CC Vending (Bronx, NY).

"The more unified the standards, the more clarity there will be not only for operators, but for suppliers to formulate healthier product," emphasized Monroe, adding that last spring's NAMA OneShow demonstrated that suppliers are hard at work, with the greatest breadth of products yet on the show floor formulated to appeal to schoolchildren and comply with most standards.

One such company is Mars, which took the lead several years ago when it rolled out the Generation Max snack line formulated specifically for schools. "Mars believes that schools are a unique environment, and we strongly support a new national school nutrition standard that will ensure children have access to high-quality nutritious snacks at school," said Hank Izzo, Ph.D., vice-president of research and development at Mars Chocolate US (Hackettstown, NJ). "Mars supports a new national school nutrition standard that will make it easier for schools and food manufacturers to work together to ensure children make smart decisions about the foods they consume."

Izzo testified last year on behalf of Mars before the Senate Agriculture Committee in support of legislation to revise school food nutrition standards.

One of the best resources available for operators serving the complex school market, according to Monroe, is NAMA's Balanced for Life Fit Pick program, which generally meets the strictest of the wide-ranging standards and has been widely adopted by the educational sector.

The basic Fit Pick program follows the "35-10-35" standard, allowing only snacks and drinks with less than 35% of calories from fat, less than 10% of calories from saturated fat and less than 35% total weight in sugar. The more stringent Alliance for a Healthier Generation standard adds caps on sodium and calories. Currently, 83 schools are directly registered in the Fit Pick program, and hundreds of operators make use of it in the schools they serve. The turnkey program includes point-of-sale signage along with an online database of products that meet the guidelines.

Monroe emphasized that, whether they participate in Balanced for Life or create their own programs, the operators who are on course to succeed in schools are those who are proactive in talking to school administrators about their programs and the products they can provide.

"This will become even more critical with the move toward a unified standard," he stressed. "We need to be seen as a solution and an expert. School administrators often don't have time to completely research and understand the regulations inside and out. We should take it upon ourselves to educate them on what is allowed and what's available, and how we can bring it to them."

He added that operators have reported great success with taste-testing and distributing product samples to students, and emphasized that such efforts will be even more important as the industry introduces schoolchildren to a product range presently regarded as more healthful.

Marc Whitener of Refreshment Solutions (Norco, LA) says that serving schools in today's climate is far less lucrative than it once was, but changing his business model has ensured continued profitability in the highly regulated market segment. By making use of Cantaloupe's wireless Seed remote monitoring technology to capture real-time sales data, the Louisiana operator is able to ensure that he stocks the fastest-moving products and that his drivers service machines only when they need to.

"When Louisiana passed legislation in 2005 restricting school vending, per-location sales were negatively impacted and a lot of operators lost all interest in schools," he recalled. "They got out -- and that gave us an opportunity to grow our share, because we could do it efficiently with Cantaloupe's technology."

Whitener said he is selling less product in schools than he did before the regulations, but, thanks to the wireless platform, his average collection per service is much higher. In fact, Whitener credits the installation of the technology on all of his New Orleans-area machines with allowing him to reduce his 35 routes to 16 without affecting his throughput.

"I understand that operators are disappointed by the regulations, and no one wants them, but they are here to stay and are not going to be removed or reduced," Whitener pointed out. "And they'll become even more substantive when federal legislation passes. As operators, our challenge is to figure out how to live in this climate, and how to be profitable. Consumers are demanding healthier items anyway, in schools and outside of them. To be successful, we have to find a way to meet that challenge by figuring out what consumers want to buy, and changing our business models to bring it to them profitably."

Whitener told VT that he has had to carry a far wider selection of products to meet "healthier" demand in the 100 or so schools he serves than in the days when the then-permissible big brand chips and candy bars pleased nearly everyone. Heightened demand for "healthier" products in the workplace market has also increased the number of SKUs in the Refreshment Solutions warehouse. This trend, Whitener pointed out, makes it more crucial than ever to use wireless data retrieval to identify the top sellers, and also to prekit every machine.

"When our driver gets there, he has the product he needs," explained the operator. "This allows a much deeper selection because you're not constrained by what the truck can hold, but by what the warehouse can hold."

Refreshment Solutions' efficient service model helped the vending company win the coveted beverage business in dozens of schools as a subcontractor for a local bottler. All drinks meet the beverage industry's voluntary guidelines established in conformity with the Alliance for a Healthier Generation, a joint venture between the American Heart Association and the Clinton Foundation.

Whitener said Refreshment Solutions and its bottler partner generate excitement around healthier drinks like juices and water with contests, including a recent instant-win promotion that awarded students codes for music downloads and iPods as the grand prizes. Through another promotion, the bottler donated several cents per case back to schools over a specified time period, to help fund school sports and activities.

The Louisiana vendor emphasized that operators should take their cue from Coke and Pepsi's continued movement to acquire "healthy" beverage brands as carbonated soft drink sales soften. "Water and flavored water are growing; soda is declining," he emphasized "It's a trend the industry can choose to engage in or not, but we can't change it. And in schools, it's no longer our choice."

NAMA's Monroe credited the beverage industry for voluntarily taking the initiative to serve schools exclusively with products considered to be healthier. The nation's leading beverage companies reported at the beginning of the 2009-10 school year that 98.8% of schools they served were in conformity with Alliance for a Healthier Generation guidelines. Published in 2004, these specified replacing full-calorie soft drinks with lower-calorie, smaller-portion beverages in schools across the country.

"The beverage industry is high profile, and it has done wonders in letting the public know it is doing the right thing, providing healthy vending in schools," Monroe commented. "The best thing is that it's shown progress and, as a result, there is no longer the discussion there once was about banning vending in schools. The rhetoric now is: 'Let's get healthy items in vending.' If we can keep machines in schools and provide healthy, appealing items, it will be good for the operator and continue to provide a revenue stream for the schools."

The good news is that there is no shortage of appealing new snacks and drinks that address current perceptions about nutrition, and these are making their way steadily into vending. Monroe also pointed out that many operators serving schools are investing in refrigerated venders that can hold everything from dairy products to fresh-cut produce, to diversify the variety they offer young consumers beyond conventional packaged snacks.

School vending is at the center of the first-ever national marketing campaign for baby carrots. The alliance of carrot farmers that launched the campaign has placed vending machines filled exclusively with baby carrots in splashy packaging in high schools in Cincinnati, OH, and Syracuse, NY. This is part of a two-month test of a campaign to encourage consumers to "Eat 'Em Like Junk Food." While the campaign takes aim at traditional vending fare as "junk food," it is also casting a positive media spotlight on the role vending can play as a solution to delivering wholesome food to schoolchildren. And judging by reports of early results, it's demonstrating the appeal exerted on youngsters by the crunchy orange snack.

Fresh fruit and vegetables, yogurt and smoothies are on the menu at many of the schools served by Fresh Healthy Vending, which is garnering plenty of press for the industry with its all-natural and organic lineup. The San Diego, CA-based company is one of many healthy vending specialists and franchisors that have started up in recent years expressly to meet the demands of the school market.

FHV chief executive Jolly Backer says that demand has been spurred by schools eager to show their support for Michelle Obama's "Let's Move!" initiative, and the buzz surrounding the expected passage of the Healthy Hunger-Free Kids Act of 2010.

"Principals are telling me that this year is the first time that they have ever had parents calling in and asking what kinds of food they stock in their vending machines," Backer said. "It's been such an issue in the news, 'junk food vending in schools.' It's nice when the locations where our machines are placed are able to tell them that 'yes, we have a vending machine and no, there is no junk food in it.'"