PepsiCo's Hello Goodness Vending Initiative Delivers 'Healthy' Snacks And Drinks At Scale

Posted On: 10/7/2016

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TAGS: PepsiCo, vending, Hello Goodness, Anne Fink, David Lothian, healthy vending machine, Frito Lay, Fit Pick, PepsiCo Hello Goodness, Crane Media vending machines, Crane BevMax, Seaga LV2018 Lean

WHITE PLAINS, NY -- PepsiCo says its Hello Goodness branded snack and cold-drink machines have hit the bullseye in targeting a new base of health-conscious consumers that had dismissed vending as a source of better-for-you refreshments. Since the program's nationwide rollout in December 2015, PepsiCo reports that data show a sizable base of customers patronizing the machines in locations of all types and sizes, and spending a premium over traditional vending fare for the higher-specification items inside. And they keep coming back.

The vending industry is united in its quest to reach those health-minded consumers, and an increasing number of operators are ramping up their efforts by deploying machines exclusively merchandised with "better for you" products and finding locations that support them. Some are leveraging the National Automatic Merchandising Association's turnkey Fit Pick program, which provides a catalogue of thousands of products that meet the program's widely accepted nutritional criteria, as well as machine graphics and point-of-sale materials. The widespread interest in "healthier" vending is apparent from the number of business-opportunity promoters offering themed machines and business plans to would-be operators. Hello Goodness can provide established vendors a straightforward solution to protecting their locations and approaching new ones.

PepsiCo, vending, Hello Goodness, Anne Fink, David Lothian
PHOTO: PepsiCo's Anne Fink and David Lothian

"PepsiCo has been on a transformative journey for decades to broaden our product portfolio and offer consumers the foods and beverages they want. Today, as macro consumer trends and behaviors shift further toward 'wellness,' we know that healthier, grab-and-go options are in demand -- at an airport, on a university campus and at the workplace. With Hello Goodness, we have joined the power of PepsiCo's offerings and technology, and elevated design capability to deliver an unparalleled vending experience." --Anne Fink, President of Global Foodservice at PepsiCo

What's groundbreaking about Hello Goodness is that PepsiCo stakes its claim as the first "scale player" supplier to roll out a program that includes machines filled only with products that conform to specified nutritional criteria, branded to communicate that to consumers. The beverage and snack powerhouse attributes Hello Goodness's getting off to a running start to its portfolio of trusted, nationally branded products across all categories that meet contemporary consumers' changing nutritional expectations. Also contributing to its speedy success is the research PepsiCo has put behind understanding the experience consumers want from vending, and the R&D resources to deliver it.

The Hello Goodness program is at the center of PepsiCo's broader objective of revitalizing its vending business, a segment that has been stagnant for decades. David Lothian, PepsiCo's senior director of global vending sales and strategy, took on his newly created role a year and a half ago to lead the charge. The 26-year PepsiCo veteran says new technology and the company's growing portfolio of healthy snacks are helping the industry rebound.

"My role was added so someone would wake up and think about vending every day," Lothian told VT. "Our read is that healthier choices in vending are the potential gateway to reinvigorate growth in the industry. A lot of the things that are part of Hello Goodness will move into other parts of vending."

Hello Goodness is part of a wider push by PepsiCo chief executive Indra Nooyi to deliver consumers healthier snacks and beverages amid a backlash against the sodas and chips that have long been the company's mainstays (and vending's). The U.S. Department of Agriculture's federal Smart Snacks in School regulations that went into effect in July 2014, limiting the amount of sugar, sodium and calories in foods and beverages sold in school vending machines, have also prompted the push.

Lothian cited Mintel data from 2012 indicating that 62% of consumers rarely or never used vending machines, which prompted PepsiCo to conduct its own research to understand why. By working with both consumers and vending operators for insight, PepsiCo found that people wanted healthier choices and would pay more for them. Consumers also said they wanted cleaner, more contemporary-looking machines, with technology supporting a more engaging experience. That included more payment options from a generation that increasingly does not carry cash.

PepsiCo's findings echoed trends cited in research by the National Automatic Merchandising Association and by operators, along with the efforts of machine manufacturers who have tailored their technology to engage the new generation of consumers.

Plug And Play

PepsiCo's turnkey solution is a pair of Hello Goodness venders: a dual-temperature, six-wide Crane Media machine that features a portfolio of PepsiCo's instantly recognizable better-for-you snack and drink brands, and a BevMax Media dedicated drink machine. When banked as a pair, an eye-catching header unifies them. The Media touchscreen display allows consumers to view nutritional information prior to making a purchase. They can pay with cash, credit cards or smartphones, and have the convenience of bundling items in a shopping basket for the ease of a single checkout. A health switch disables the vend of perishable products in the event of a fault causing the internal temperature to rise.

The striking, bright white machine presents the fresh contemporary look consumers requested. It's emblazoned with the Hello Goodness banner and stylized logos of the brands it sells. The design came to life at PepsiCo's New York City-based design center, home to the R&D team behind snack and beverage giant's equipment innovations.

Baltimore-based Black Tie Services' piloted the initial four dozen Hello Goodness machines beginning in April 2015 and was instrumental in providing data, an operator's perspective and consumer feedback to help tweak the product range and refine the look of the machine before the national launch seven months later.SEE STORY

The "Hello Goodness" brand was narrowed down from an initial 20,000 possible names. The first rendition of the test machine was branded "Goodness Inside," framed with gray and white graphics.

PepsiCo Hello Goodness, Crane Media vending machines, Crane BevMax, Seaga LV2018 Lean
LOOKING GOOD: PepsiCo Hello Goodness program features two themed Crane Media machines and header. The Media Merchant dual-temperature combo and companion BevMax feature touchscreen patron interface and Media Navigator remote monitoring. Joining the program is new LV2018 Lean vender from Seaga (r.), vending a variety of package formats in a small footprint. Using eye-catching backlit "flavor cards," it can offer 18 selections from 20 columns and hold as many as 360 packages.

"The end result based on that feedback is a kinder, gentler way to invite consumers in for healthier choices, without pushing too hard," Lothian said. "With the Crane Media machine providing the foundation for the experience consumers seek, we have created a turnkey solution with products, equipment, technology and visual design. They are attracted to the machine and can relate to using Hello Goodness; it's like their iPhone."

And there's more Hello Goodness equipment innovation coming soon. Joining the Crane Media snack/drink combo and BevMax venders in October will be a first-of-its kind closed-front Seaga Galaxy stacker machine with 18 selections. Finished in bright green for the Hello Goodness program, the boldly branded vender reportedly tested "off the charts" in PepsiCo's Florida pilot. Backlit product inserts on the machine front vividly illustrate the bottles inside.

Essentially two machines in one, the Galaxy allows vending operators to accommodate more of the varieties of drinks in PepsiCo's wide-ranging better-for-you categories, and rotate them to keep interest up.

What's Inside

The Hello Goodness portfolio encompasses some 300 PepsiCo products, both shelf-stable and refrigerated, that meet the program's nutritional criteria, including Naked Juice, Lay's Oven Baked chips and Sabra hummus cups.

"We have a wide spectrum of healthier choices. In vending, health-focused people are pragmatic and don't expect a salad or apple," Lothian said. "The middle ground is a premium, trusted brand that is good tasting that they feel good purchasing, and we have a large portfolio that addresses what the customer is looking for. We found they want healthy, or they will never engage with vending. We also found we could increase the frequency of purchase by balancing more traditional snacks that qualify and healthier choices."

PepsiCo healthy vending machine products
THE TABLE IS SET: PepsiCo spent several years developing better-for-you snacks and drinks in packaging designed for on-the-go consumption for its Hello Goodness portfolio.

If a new product qualifies, PepsiCo adds it to the Hello Goodness menu. And the company is constantly researching to identify missed opportunities in the better-for-you sector, and innovating to fill any gaps.

To qualify for a slot in a Hello Goodness machine, a snack item must have no more than 200 calories per package, less than 200mg. sodium and less than 10% of calories from saturated fat. Products can also be made with 100% whole grains. Beverages must contain less than 48 calories per 8-fl.oz. serving or 100% juice.

Lothian emphasized that the guidelines served only as a starting-point, or "science," to help PepsiCo narrow down the products that qualify for Hello Goodness. But the multinational food company also relies on the "art" of using consumer insight to add and subtract products, allowing for exceptions that don't strictly adhere to the criteria. However, PepsiCo can provide specific planograms to operators who need to adhere to strict criteria, such as those who serve schools.

"We pushed all our products through for the food and beverage nutrition criteria, and were left with a subset," Lothian explained. "We didn't want just to be tied to the nutritional guidelines, if consumers felt that an item like diet soda was not 'healthy.' Likewise, Gatorade sports drinks fall slightly outside the guidelines for beverage calories per [fluid] ounce, but consumers said they wanted them in the mix."

The nutritional panel for each product is displayed on the machine's touchscreen prior to purchase. The venders also come with suggested "combo" ads, pairing a drink and a snack tailored to the morning, afternoon or evening dayparts. These are preprogrammed by Pepsi and ready to go.

Line item sales data are sent from the machines to PepsiCo, over the Internet, and to the operator's vending management system through Crane's Navigator telemeter installed in Media machines.

"We analyze the data and keep improving," Lothian said. "We need to do the best we can with constant menu updating, to continue to be great for the operators and their clients."

Operator Partnerships

To harness Hello Goodness's full potential, PepsiCo is establishing long-term partnerships with vending operators. To get started, the operator must sign on for a five-year partnership and buy a lead-in package that includes three dual-temperature machines, the cost of which Pepsi subsidizes, and merchandise them exclusively with approved Hello Goodness products. Pepsi provides two Hello Goodness beverage machines with the package. Most operators initially buy 15 to 25 of the packages, Lothian reported.

So far, PepsiCo has partnered primarily with established operators in deploying Hello Goodness. To sign on, the operator must possess the capability to handle perishable inventory, and serve enough locations to turn that inventory with sufficient velocity to keep it fresh.

"This program is not for an operator with a couple of machines working out of a garage," Lothian observed. "They have to have core competency in technology. It's for fairly sophisticated operators. One machine and two cases of Naked Juice won't generate the throughput they need."

The equipment arrives ready to install, right out of the box. Prior to taking delivery, the operator must have (or establish) a relationship with a merchant of record to support cashless payment. The product image library is preloaded into the Media screen and the basic national planogram is set as the default, so operators have only to place and fill the machines -- and they're in business.

"Since we get the data feed from all the machines through the Navigator, we help make sure, machine by machine, that it's the right mix across all categories, and we make recommended planogram changes based on performance," Lothian said. "We commit to bringing in innovation and monitoring how items are selling, and to updating information, planograms and the library of products that qualify."

Hello Goodness vending operators continue to source product from their existing PepsiCo suppliers.