Vending Operator Of The Year: Georgia's Southern Refreshment Services Innovates To Address New Customer Needs

Posted On: 6/28/2012

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Dan Hart, NAMA's Vending Operator of the Year, Southern Refreshment Services, vending business, vending machine, office coffee service, OCS, micromarket, self-checkout retail, National Automatic Merchandising Association, Alan Plaisted, vending route, snack vending, Cantaloupe Systems, cashless vending, LightSpeed prekit, Canteen Vending

TUCKER, GA -- Dan Hart has established Southern Refreshment Services as a dominant player in the Atlanta market by embracing technology, adding new services and conceiving new approaches. He was honored for his accomplishments and contributions to the industry over the past three decades with this year's Vending Operator of the Year award from the National Automatic Merchandising Association at its 2012 OneShow annual convention in Las Vegas.

Hart has grown the Georgia-based company he founded with the late Alan Plaisted in 1979 from a single account to 42 vending routes and five coffee service routes, serving almost half a million people a day. He says new technologies have been pivotal to keeping his company profitable and competitive in a tough economic environment, and will continue to be vital moving forward.

Dan Hart, vending operator
Photo | High Honor: Dan Hart was recognized as Vending Operator of the Year at the National Automatic Merchandising Association's OneShow in Las Vegas. Hart's forward-thinking, customer-centric approach over three decades has made Southern Refreshment Services the vending and OCS leader in its market.

"Four years ago, I referred to vending as being behind on technology," Hart commented. "In the last four years, there has been tremendous progress, from DEXing, to warehouse automation systems like LightSpeed, to remote data monitoring. All the technology is great if we can utilize and manage it."

With the company's tech-savvy second generation by his side and the support of a seasoned team, the operator said Southern Refreshment is well-positioned to continue to leverage vending's innovations to remain on the industry's cutting edge.

Hart explained that the company was impelled to adopt new levels of technology-enabled controls when it was hit by the onset of the recession in 2008. "Accounts called for us to pick up equipment because they were closing their doors," he recalled. "At some, our drivers showed up and the doors were just closed, with no cars in the lot. We couldn't control businesses closing and cutting staff, but one thing we could do was apply the technology available to us to take charge of our profitability by tightening controls and running a more efficient company."

Southern Refreshment's first step was to invest in handheld computers and train its drivers to use them on their routes. Once the drivers were recording sales and audit data digitally, rather than on paper route tickets, the stage was set for the company to upgrade the thousands of machines it had in the field to capture data automatically in DEX format. Hart said this process has been ongoing, since Southern Refreshment Services has acquired many companies and has had to upgrade the machines it inherited along the way to accommodate DEX reporting.

The ability to electronically record DEX sales and audit data has helped the operation analyze line-item sales and the profitability of each location, improve cash accountability and optimize route scheduling.

Once most of its machines were capturing and storing DEX data, Southern Refreshment Services invested in Cantaloupe's Seed remote machine monitoring technology a year and a half ago, to gain up-to-the-minute access to sales data and service alerts to more quickly address the needs of its locations, especially the more distant ones. It now has Seed technology on 400 of its venders.

Hart recalled visiting the Cantaloupe Systems exhibit at a National Automatic Merchandising Association show several years ago, and learning about the software. "We talked to several users, and visited their operation to watch them use Seed," he explained. "We then purchased 400 units for the northwest side of our Atlanta market; our office is located on the northeast side. Driving to those Seed accounts takes more than an hour, in good Atlanta traffic."

By installing the Cantaloupe Seed units on equipment that took Southern Refreshment's drivers the most time to reach, the company was able to streamline its route scheduling; "We took four routes down to three after placing the Seed units," Hart reported.

"The advantage is that it remotely gives you the exact product you need for the machine on the next fill," he summed up. "The disadvantage is the cost of the units and the monthly fees. We still have not made a decision on whether or not we will implement the technology systemwide."

Southern Refreshments Team Photo | EXPERT GUIDANCE: A passionate top management team leads Southern Refreshment Services' 100-person staff. From left are general manager Dave Carroll; sales manager Jim Mosley (l.), joined by sales associates Linda Saldana and Al Palombo; and lead supervisor Greg Sams (standing) and operations manager Tom Beals. The Tucker, GA-based vending company was founded 33 years ago by Dan Hart and the late Alan Plaisted.

A year ago, the company took its item-level sales data to the next level by using it to pre-pack (prekit) route orders in the warehouse, based on the inventory level of each machine. Southern Refreshments has since converted 32 routes to the new model, with only 10 left to go.

"It's a hard process to change peoples' way of thinking, and it's an expense, but it's worth the investment to have a more profitable way to run a vending business," said Hart. "We've consolidated routes; there's less weight on our trucks, which means more miles per gallon. We have fewer repair costs. These are just some of the residuals you get from prekitting."

Further automating and streamlining the process, Hart invested in LightSpeed Automation's "pick-to-light" warehouse automation system, which uses computer-controlled light signals to direct the warehouse personnel to the exact shelf position of each product they need to pull.

Southern Refreshments Staff
Photo | BEHIND THE SCENES: Ensuring tight controls and delivering top-rate customer care at Southern Refreshment Services, from left, are controller Stewart Moss and office staff Debbie Duncan, Barbara Range, Denise Carroll, Leota Westbrook and Chrystle Ricks.

Hart's son, Chris, who joined his father in the family business last year after graduating from college, has taken the lead with implementing LightSpeed and, with the guidance of the company's operations manager, is overseeing a team of five full-time employees devoted to prekitting.

Southern Refreshment Services was an early adopter of cashless vending in 2005, and currently has 750 USA Technologies ePort card readers in the field, generating $1.7 million annually in cashless sales.

"In the right locations, we see a good lift in sales with cashless," Hart told VT. "People are more inclined to make multiple purchases if they can swipe a debit or credit card. Especially in public locations, they'll swipe their card and buy two or three drinks and two or three snacks."

The operator said he typically sees a 7% to 10% increase in sales in white-collar locations and a 15% to 20% upswing in transient locations like hospitals, convention centers, airports and train and bus stations, after cashless payment is added. For the most part, blue-collar sites have not produced high usage.

"Not all readers start off in the best locations, so we are always ready to redeploy them if we don't see that they are generating extra sales to justify the cost of the transaction fees," Hart told VT.

The company has also instituted a new commission formula for cashless accounts to offset processing fees. Like most vending operations, when Southern Refreshment calculates commission, gross sales less sales tax equals net sales, and the company pays on net sales.

"Now we're considering processing fees as part of the calculation, because the Durbin Amendment increased our fees and we have to pass some of it on to our customers to remain profitable," Hart said.

At some locations, the vending company has accomplished this by introducing a 10¢ price differential that offers patrons the choice of saving money by using cash, or enjoying the convenience of paying by card. A sign above the card reader explains the offer, he explained, "and we have felt no pushback at all."

Micromarkets are the newest venture for Southern Refreshments, and Hart is optimistic about the up-and-coming unattended retail model, based on early results. The company, a Canteen franchise, has three 365 Retail Markets self-checkout stores under the "Avenue C" Canteen brand on location in white-collar sites, and has just deployed its first one to a factory. It has several more lined up for installation, and has dedicated a route to servicing them.

"Customers love having the product variety of a 'mini c-store' in their building, from salads and bananas to over-the-counter medicine and magazines," Hart reported. "And instead of a small bag of Hershey Kisses, they can buy a large one. We have seen a substantial lift in sales when we replace vending with a micromarket, because it allows us to sell so many more things."

Hart praised his vendible product distributors for responding to the growth of micromarkets by broadening their offerings with larger candy bars and bagged snacks and confections, as well as items not traditionally sold through vending machines. He also works with suppliers outside the industry to source some of the non-food items he sells through his self-checkout markets.

The vending veteran said he prices products in line with c-stores, typically higher than vending. Customers are willing to pay more for the expanded offerings and the ability to see and touch the product as they would in a manual retail outlet. Higher pricing is also necessary to help offset the costs associated with licensing fees and credit card processing, Hart said.

He added that one big plus to micromarkets is that he does not pay locations commission. "It's a whole different avenue than conventional vending," he said. "So far, it seems promising, but we're still trying to get a handle on the fees, so we're treading lightly and cautiously."

Hart was initially concerned that shrinkage might be a bigger issue with micromarkets than with vending, but said he has seen only a 2% to 3% shrinkage rate. "You need the location's support to enforce the rule that employees can't steal, and to let them know it's not worth losing their job over a candy bar," he said. "But we've had one or two accounts that we've approached that don't want HR to be involved in firing for theft, and they've chosen to keep conventional vending."

When Southern Refreshment opens a micromarket, one of its employees stays onsite for several days to walk customers through the self-checkout process and answer their questions. "We also show them the camera and let them know if we see a theft, we will find the person online in the camera footage," Hart said.

Chris Hart, Darrell Sims
Photo | CUTTING EDGE: Second-generation operator Chris Hart (left) heads up the company's prekitting operations, which are streamlined by LightSpeed Automation's "pick-to-light" warehouse automation system. He works hand in hand with warehouse manager Darrell Sims (right) to minimize inventory and optimize productivity.

Heading up the new micromarkets division with support from the company's operations manager is Scott Plaisted who has been with the company for 11 years. He is the son of the company's cofounder and Hart's partner of 29 years, the late Alan Plaisted, who died in 2009.

Hart began his vending career in 1976 at Tom's Foods in Atlanta, where he met his future business partner. In 1979, the duo decided to pool their industry know-how to start their own vending company, originally called North Atlanta Vending. They began by placing two Coke machines in their first account.

"We grew account by account, working out of our homes and servicing machines out of our station wagons in the morning, selling in the afternoon and installing in the evening," Hart recalled.

The business and its team grew rapidly and the partners accelerated their expansion by purchasing several vending companies over the next two decades. By 1988, they had built 11 routes and moved into their current 55,000 sq.ft. building.

A major milestone came in 2001 when Southern Refreshment acquired Canteen Vending's 15 Atlanta routes, doubling its size to 30 routes and becoming a Canteen franchise. That was when Hart and Plaisted renamed their operation Southern Refreshment Services.

"This was a key acquisition, since it allowed us to be a part of a national team of vending and foodservice experts, along with tremendous purchasing power," Hart recalled.

The company made its next largest acquisition in 2008 when it added 15 routes from Five Star Food Service (Chattanooga, TN).

Southern Refreshment began providing office coffee service to its vending accounts in the 1980s, and in 1995 committed to pursuing the segment as a separate profit center when it purchased Marietta Coffee Service, a two-route operation. In 1999, it further strengthened its OCS foothold with its acquisition of six Atlanta routes from Standard Coffee Service Inc. (New Orleans).

The company offers a wide variety of allied products to its OCS customers, from peanut butter through dishwashing soap to paper products. And, while the two businesses are run as distinct operations, "we sell a lot of vending items to our coffee accounts," Hart added.

Today, the coffee service segment is robust and growing, he noted, and this recently prompted Southern Refreshment to purchase a 35,000 sq.ft. building devoted to its OCS business. "It's more than we need, but it's a good time to buy and hopefully we will grow into it, like we did with our vending facility," Hart commented. "As the economy recovers, we're seeing good growth in OCS in Atlanta."

Single-cup continues to be the predominant trend as consumers' growing use of portion-packs at home is spurring demand at the office, Hart said. In addition to brew-by-pack systems like Keurig and Flavia, pod brewers are starting to take hold.

"Pod machines are reliable, more coffee roasters are manufacturing pods, and they give us another price-point to present," said Hart. "We have to really educate the customer on what a pod is and how it works, but once we do, we're finding a lot of acceptance." Southern Refreshment has some 50 Newco Fresh Cup pod brewers in the field, most of which it has placed within the past 12 months.

The company has also seen an upswing in demand for point-of-use water coolers, and, more recently, for standalone icemakers. "People prefer icemakers that dispense a portion, rather than having to reach into the bin for ice that everyone else is touching," Hart pointed out. "And more of them are using it in their coffee and tea to make iced beverages."

He added that tea -- black, green and herbal -- is a growing segment in office refreshment accounts, as customers move away from carbonated and sugared beverages and seek alternatives they perceive as healthier.

"In vending, one of the biggest trends is toward health and wellness, as people are trending away from regular colas to diet sodas and lower-calorie choices, and alternatives to traditional chips and candy," Hart noted. "We're seeing more and more companies want wellness programs for their machines."

A growing number of these wellness-focused clients has begun to subsidize better-for-you items, so they can be priced lower to encourage employees to choose them. "We have at least 10 accounts doing that," Hart told VT. "In all cases, it's something they brought to us, that they will pay 25¢ to 50¢ a vend to keep the price-point lower on more nutritional selections. Some clients ask us to increase the price of chips or candy bars to discourage employees from buying them; it's almost a self-imposed snack tax. Some ask for lower or no commissions on healthy items, to keep the prices lower on those products."

Southern Refreshment created its own healthy vending program using the National Automatic Merchandising Association's Fit Pick criteria as the starting-point and customizing it to each account.

"In some hospitals, their nutritional guidelines are stricter than NAMA's," Hart instanced. "And they may want 35 selections to be 'healthier' and 10 to be traditional candy and snacks."

The vending company identifies better-for-you selections with a green clip on the spiral and merchandises them together on the right side of the machine. Static clings and signage on the machine detail the products' nutritional criteria.

Hart said he and Plaisted built the business by continually striving to meet the unique tastes and demands of each account they served. And as big as the company has grown, and as diverse as customer demands have become, its team of 100 employees has helped maintain that personal, customer-centric touch. They're guided in doing this by a passionate top management team, each member of which has at least 20 years with the company.

Looking ahead, NAMA's Operator of the Year sees an industry on a renewed upswing, boosted by new technologies and innovations, as well as hopeful signs of an economic upturn.

"I see a lot of great things that people are talking about," he said. "Economically, using some of the more recent innovations remains a big challenge, since margins are so thin. But I think vending has new tools to position it for growth, and there are exciting times ahead."

MicroMarket, Plaisted Photo | SELF-CHECKOUT DEPLOYMENT: Scott Plaisted walks client facilities manager Howard Newmark through newly installed Avenue C micromarket (l.). At right is the vending bank that the self-checkout market replaced. Plaisted, son of the company's late cofounder, is spearheading Southern Refreshment's micromarket segment. Surrounding photos illustrate the micromarket concept.