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VT Study Finds Vending Sales Inched Up In '07; Coin-Op Amusements Tick Down

Posted On: 12/1/2008

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NEW YORK CITY -- The vending industry generated slightly higher dollar volume in 2007 than in the prior year, according to the annual VT Census of the Industry. Volume ticked up 1.4% to $47,499,000,000 from the 2006 total of $46,820,000,000.

Categories posting dollar volume increases included packaged cold beverages, milk, snacks (including confections and pastry), ice cream and bulk. These increases were almost entirely attributable to price increases forced on operators by higher product and operating costs, as well as a growing consumer preference for higher-priced items.

The two largest vendible product categories, packaged cold drinks (52.3% of industry volume) and snacks (22.3% of total dollar sales), saw dollar sales increase by 3.7% and 1.9%, respectively, despite respective unit sales declines of 1.2% and 0.7%, and the number of machines on location dipped. This reflected a market in which workplace populations were contracting slightly, and there were fewer large locations. Demand for vending remained strong, and patrons were more willing to pay a higher price for items of higher perceived value.

Other vendible product categories for which sales gains were reported include vended milk, which posted a 2.4% gain in dollar volume to $860 million from $840 million in 2006; food, which ticked up 0.6% from $3.32 billion to $3.34 billion despite a dip in machines on location; and ice cream, which registered a tenth of a percent dollar sales increase while machine placements inched down from 123,000 to 122,000. The slightly smaller installed bases for food and ice cream reflect the contraction of average workplace populations last year.

Operators reported a downtick in vended hot beverage sales in 2007, which appears to reflect the increased deployment of small brewers, both coin and noncoin, as a profitable alternative to full-size hot drink machines in lower-traffic workplaces. This also is demonstrated by the strong performance of coffee, with poundage purchases and the average number of accounts served both increasing. It became increasingly difficult to differentiate "coffee service" from "vending," as more operators offered combinations of both (plus pure water and other delivery services) to typically smaller workplaces.

Bulk and flat merchandise vending also saw reductions in the installed bases of most equipment types -- the exceptions were ball gum and "sticker" machines -- but there is reason to believe that some of this apparent shrinkage is attributable to the placement of larger prize merchandisers in place of traditional animated and "kinetic" toy-and-novelty venders often installed in higher-traffic sites. Conventional capsule machines did well as operators  maintained their steady effort to implement a modern price structure despite the nation's continued lack of a circulating high-denomination coin. The success of this effort is shown in the rise in dollar sales for capsule venders from $178,536,000 in 2006 to $181,733,000 last year, although machine placements inched down as operators responded to higher operating costs by dropping formerly marginal accounts that had become unprofitable.

The music and amusements business continued its long transformation last year. Among games, pool tables represented the largest sales category, accounting for 34.6% of total dollar volume; that volume ticked down 1.7% from the previous year. Prize-dispensing equipment sales inched up 1.1% as this increasingly popular category enjoyed wider placement and generated 16.3% of total dollar volume.

Jukebox operators accelerated their shift to digital downloading models, which represented 52% of equipment reported on location, a dramatic increase over the 38% reported for 2007. Average weekly income recovered slightly from 2006's decline, but did not regain the 2005 average. Today's consumers have unprecedented access to music, and no longer depend on jukeboxes for away-from-home listening. At the same time, contemporary designs feature extraordinary enhancements that are prized by music-lovers in social settings.

Overall, the VT Census for 2008 depicts a market for out-of-home refreshment and entertainment that remains strong, but that is effectively saturated for the operating model that has prevailed for the past two decades. This model has striven to offset the decline in the size of client-groups by increasing selectivity to increase per-capita sales. The glassfront snack machine (and, more recently, drink machines with similar merchandising appeal), compact-disc and digital downloading jukeboxes, and countertop games offering a menu of play choices have played the largest part in this shift in doctrine.

A saturated market always encourages innovators to seek methods for opening up new opportunities, either to recapture lost business by developing lower-cost, higher-profit service methods or to widen the potential customer base. Vending, foodservice, coffee service, amusement and music operators are pursuing those methods, which were widely discussed last year. A new doctrine is taking shape, based on modern communications and information processing technologies, but it had not yet gained traction last year.

Information on ordering the 2008 VT Census of the Industry may be found at our bookstore.