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QUESTIONS & ANSWERS - OK Manufacturing's Kurt Ostler Takes On Equipment Diversification

Posted On: 3/26/2006

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SALT LAKE CITY -- Few manufacturers of bulk vending equipment have kept up with industry trends as effectively as OK Manufacturing. The company, which started out producing "giant" and "spiral" bulk venders, has consistently remained in the vanguard of equipment trends by either offering enhancements to its popular line or expanding into market segments such as prize redemption and interactive machines.

Today, as bulk vending operators face increased competition and an ever-growing number of equipment options, they are expanding their equipment portfolios in a way that is redefining the industry. To gain some perspective on what is happening in the equipment marketplace, VT sat down with OK's vice-president, Kurt Ostler, to explore his view of the current equipment marketplace.

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VT: What trends are you seeing in equipment design?

OSTLER: One of the major things that's going on is that locations are looking for a single operator for everything. Years ago, you'd have two, maybe even three operators in the same location. A restaurant location, for instance, might have an operator running the crane and one operating bulk vending equipment, and another could be operating a jukebox and arcade games. Now, you have one operator running all of them. I can name five large restaurant chains that have gone this way in the last few years.

Is this trend of "one-stop shops" filtering down to non-chain locations as well?

Yes, it is filtering down to the independents. But one of the biggest obstacles is the bulk vending person who likes to do a four- to eight-week service schedule when cranes and arcade games may require a once-a-week cycle. So, the music and games guys have been moving aggressively into bulk vending.

However, a bulk vending operator, generally speaking, is better at merchandising for cranes than a music and games guy. Bulk vending operators watch trends, so they have the potential to become very adept at operating crane or redemption games. A bulk vendor looks at what products move in the location, while the music and games guys would buy a standard mix and dump it in. But even that's changing; they're getting better. Over just the last five years the music and games operators have learned to merchandise in cranes and even bulk vending.

What advice would you offer bulk operators when it comes to cranes and other non-traditional bulk vending equipment?

If I was a bulk vendor, what I would do is create a strategy for a wide range of equipment. For instance, I'd first secure the location with bulk vending. It's easier to get a location presenting bulk compared to a crane or redemption piece. The machines take up very little space; there are no electrical power issues; it's non-threatening. Then, six months later, after I've built a relationship with the location, I'd go back with a crane. But I would only do this with close to home accounts, because you have to service cranes weekly.

We've been hearing a lot about diversification of equipment. Does this mean that the bulk operator who only offers bulk equipment is a thing of the past?

If the traditional bulk vendor is going to stick with only bulk vending in national chains, he's going to get pushed out. That's also true for even some independent locations. You have operators coming in and saying, "We'll handle your bulk rack and your cranes." It simplifies things for the location.

The one place a bulk vender can succeed with only bulk equipment is where a crane can't go in because of space, or it doesn't generate enough money. That means a lot of restaurants and mom-and-pops and also dollar stores, because they have competing items. But if a bulk vending operator is interested in getting into high-traffic locations such as bowling alleys, big box stores or grocery chains, they're going to have to offer more than just bulk. My recommendation for the bulk vending guy is to look at cranes. I would say that right now, 40% of bulk vending operators are operating some cranes -- at least one or two.

Are there any advantages to this for the bulk vending operator, other than securing a location?

A crane will almost always earn more money than the bulk rack. However, you need both in a lot of locations. There was a national big box store that for a long time was taking out bulk vending and putting in just cranes and redemption. They've changed that strategy and now they want both. They came to realize the cranes attract one type of customer and the bulk rack attracts a different type. A mother may not let a four-year-old play a crane, but will give him or her money for a bulk rack.

Will the current pricing pressure on merchandise effect the kinds of machines we will be seeing in the future?

The jewelry recall really hurt operators. They know there's a market for these items, but are having a hard time finding products they can vend at 50¢. Naturally, if there is no lead, it costs more money. So we've seen is a lot more pressure on the 50¢ vend. A lot of bulk operators are moving to 75¢ and we're also seeing a lot of inquiries for $1 machines.

As a machine manufacturer, how has OK responded?

We believe what these operators want is something cost effective that will take a dollar. Right now, we plan to introduce a dollar bill machine that will dispense a 2-in. capsule. We believe this will be the first cost-effective machine with a bill acceptor for the bulk vending market. When I say cost effective, I mean under $1,000.

When will the machine come out?

We plan to debut it at the NBVA convention in Las Vegas. That's when operators will get their first look at it.