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Give Them What They Want: Operators Leverage Frozen Vending To Hone Competitive Edge

Posted On: 11/15/2012

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TAGS: vending, vending machine, frozen food vending, ice cream vending, vending machine route, vending operator, Fastcorp, Wal-Mart, micromarkets, frozen convenience foods, frozen venders, Greg Greenwell, VendsWell, Chuck Olson, CNC Vending, White Castle hamburgers, U-Select-It, Crane Co., Crane National Vendors, Seaga

Differentiating a vending company is no easy feat in today's high-tech, fast-changing market. Most operators are centering their focus on deploying cashless payment technologies and expanding into micromarkets to keep a leg up on the competition. But in their quest for that "wow" factor, many overlook a not-so-new category that locations still clamor for -- frozen food vending -- which can play a pivotal role in landing and retaining accounts.

Operators who provide the service say decision-makers at all types of businesses and public sites are enamored with the novel appeal of ice cream vending and seek them out, especially since fewer competitors offer it. And when they offer to add frozen convenience foods to the mix, it often seals the deal, not only for the frozen venders, but also for snack and drink machines.

Vending veteran Greg Greenwell of VendsWell of Burlington, NC, had no intention of pursuing the frozen segment when he ventured into his own business three years ago, but the decision was made for him since the acquisition included some 100 of Fastcorp's robotic ice cream machines.

Greg Greenwald

photo | HOT AND COLD: VendsWell's Greg Greenwell saw sales volume double when he broadened the selection in his dedicated ice cream venders to include microwaveable convenience foods. The North Carolina vending company has some 70 Fastcorp venders on location in blue- and white-collar workplaces, hotels, airports and a military base.

Prior to purchasing VendsWell -- which includes three-plus routes serving central North Carolina -- the operator spent 15 years as a senior associate with vending and OCS industry consulting and research firm Bachtelle & Associates (Tustin, CA). Earlier in his career, he served for 10 years as chief operating officer of Classic Foods (Durham, NC).

"I had planned to focus on snacks and drinks but I found myself operating frozen machines from the beginning when I ventured into running my own business, with some in good locations, some not," he recalled. Most were in public sites, including hotels, airports and a military base, and all were merchandised exclusively with 16 to 18 selections of ice cream.

The operator's immediate concern was the relatively low machine volume, compounded by the seasonal nature of ice cream. So he relocated many of the machines to workplaces -- both blue- and white-collar -- and reduced the ice cream selections to six or eight, making room to add convenience foods to the mix. He also added premium Haagen Daz ice cream to the menu. These changes doubled sales volume through the frozen venders, with no additional cost or effort.

"Locations are very happy with ice cream and then when we give them food, they see it as a huge plus," he said. "Adding food has also made the machines more appealing to a wider market demographic and given me an advantage from a competitive standpoint."

VendsWell's frozen menu includes microwaveable meals suited for every daypart, ranging from ham and cheese Hot Pockets and sausage and biscuit sandwiches to White Castle hamburgers, Nathan's hot dogs and Schwan's Tony's pizza. Prices range from $1 to $2 in most machines, and with a high end of $2.50 in public locations with higher commissions. None of the machines is equipped with credit card readers, but Greenwell said adding the payment capability is in his short-term plans, with the potential to boost sales and price points.

"Food sales are not seasonal, so it helps maintain steady sales year-round," Greenwell noted. "We have a good selection of ice cream facings, which customers love, and food offsets off-season sales, with makes it a viable proposition in the four or five months when the weather is cooler."

He said frozen vending provides an especially well-suited foodservice solution for the many locations in remote areas which Vends­Well serves which lack access to other options, but don't have a large enough population to support a fresh food machine.

VendsWell currently has 60 to 70 Fastcorp machines in the field and a couple dozen in the warehouse, which Greenwell continues to deploy to meet growing demand.

Servicing the frozen machines puts no major burden on VendsWell's route drivers, according to the operator, since the trucks he acquired with the business are all equipped with frozen compartments, ensuring product integrity during transport; and his warehouse has ample frozen storage capacity.

VendsWell currently provides fresh food in refrigerated machines on a very limited basis, but customer demand may change that. "One problem we have is with customers wanting fresh food because it takes longer during a limited lunch period to process frozen food," Greenwell told VT. "That also limits the variety we can offer. Technically, there are a lot of frozen foods available, but they can't be heated fast enough with the time limitations of a 30-minute break."

Looking ahead, Greenwell said he would consider expanding his fresh food offerings if he could find a machine, priced economically, that could vend both refrigerated and frozen food.

"I think a combo fresh/frozen machine makes sense for the industry. I know they exist, but many are too big and very expensive," he said. "What I'm looking for is a little frozen 'slave' unit that attaches to a refrigerated machine and works with one controller board and payment system to keep the cost down. You basically need the frozen machine to be an insulated cabinet with a compressor."

Ideal, in Greenwell's opinion, would be a satellite with no more than four shelves, and two or three items on each. "This would allow me to sell sandwiches and salads in the refrigerated machine, along with quality ice creams like Haagen Daz in the frozen satellite," the operator told VT. "I'll be looking around at NAMA's next OneShow to see what strides factories have made."

Several machines on the market provide for a combined frozen and fresh vending solution. They include U-Select-It's glassfront Alpine Combination Satellite frozen module, which is typically controlled by an adjacent Alpine 3000 glassfront snack machine. It could, however, with minor modifications, be controlled by USI's Alpine Combi 3000 dual-zone vender. It can merchandise refrigerated food on top and frozen selections on the bottom or be fully frozen or refrigerated by removing the barrier tray that separates the zones and motor that blows air up back of unit, along with reconfiguring the control system.

Another option is to connect the satellite to a standalone control tower that contains the payment system and selection pad.

Additionally, Crane Merchandising Systems acquired the A La Carte line with its purchase of Automatic Products International, which by design is a satellite machine. It is offered in three configurations: refrigerated, frozen and frozen novelty (ice cream). The only difference between them is the shelf and spiral configurations to accommodate the difference in products.

The A La Carte can be controlled by a number of different devices, including a stand-alone control module that can operate two of the frozen or refrigerated cabinets. It can also be connected to an AP130 or 930 Series glassfront snack vender, or Ultraflex/Fusion combo snack-food-beverage machine, but only one of these can be attached to the host.

Only legacy 930 Series machines can be used for this application, since Crane ceased production of the snack vender in November 2009 when it consolidated its North American manufacturing operations into the Dixie-Narco facility in South Carolina. Crane also discontinued its standalone Frozen Gourmet at the same time.

Seaga offers the VC1100, a refrigerated and frozen solution. Automated Merchandising Systems recently discontinued production of its glassfront frozen food machine, citing sluggish demand.

Chuck Olson of CNC Vending in Houston, TX, is another operator who has seen an upswing in demand for frozen vending. Like Greenwell, he leverages it as a selling point, especially since he is one of few operators in his market to offer the service.

"Ice cream is requested a lot. It's not something we actively seek, but it's something people really want in Houston where it's warm," said the vendor. "Even the ice cream guy who delivers to us told us that a lot of operators are getting out of the frozen business, which gives us a competitive advantage. The good news is margins are excellent and there's no waste so it pays for itself, but the bad news is the machines are expensive."

Chuck Olsen

photo | THEY ALL SCREAM FOR ICE CREAM: Chuck Olson says CNC Vending's willingness to provide frozen novelties in the hot Houston climate helps secure accounts. He recently ordered a dozen frozen machines to satisfy ramped up demand and anticipates he'll need another shipment soon.

Of the company's 600 machines, 25 are Fastcorp's frozen Evolution venders. And given the current trend, Olson anticipates further growth in the segment. "We purchased 12 of those frozen machines over the past 30 days and I anticipate we will have to put in another order for five or so soon," he told VT. "Customers are asking for them and if we get the right volume, I would love to get more. Ice cream and frozen food help us retain accounts and get new ones."

Most of CNC's frozen machines are in business and industry locations, which typically favor a mix of ice cream and convenience foods, which also tends to drive more volume. At workplaces large enough to support a refrigerated food vender, CNC sometimes complements the offerings with a dedicated ice cream vender. And on the few college campuses it serves, where food choices are abundant, CNC Vending merchandises its frozen machines exclusively with ice cream.

Top-selling novelties include Blue Bell's Fudge Bombstick, and Snickers and Twix ice cream bars. Food favorites are similar to VendsWell's menu, ranging from White Castle hamburgers and Tony's pizza to Mexican finger foods like Jose Ole mini tacos.

A dedicated driver spends a day per week serving frozen machines and the rest of his time supplying fresh foods to CNC's refrigerated food venders and six micromarkets.

"This way, food is not a burden to the route drivers servicing the snack and soda machines," he said. "For the frozen food, he just takes our freezer chest from the warehouse and puts in on the truck; he might add dry ice if needed. It's very simple. Many operators think it's so complex, but it doesn't have to be."

The Texas vending company installed its first micromarket eight months ago and, like many operators expanding into the up-and-coming self-checkout format, has been impressed with the expanded product variety it allows for fresh food and ice cream and the uptick in volume versus vending.

He emphasized, however, that micromarkets are only suited for certain location types that fit very specific parameters. By the same token, refrigerated and frozen vending each deliver different solutions to serve unique population bases.

"Micromarkets are a growth area we're focusing on, but by no means are we turning away vending accounts," the operator told VT. "We're very competitively positioned because whether it's fresh, refrigerated or frozen, we have it. The sales volume on frozen is generally not high, unless it's a very high-traffic location. It's not something I expect to make much money from on its own, but it meets a need many other operators don't to help secure the rest of the account."