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Workplace Foodservice: Better Tools Keep Robotic Retailing Competitive

Posted On: 9/6/2012

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TAGS: vending, vending machine, food service, food vending, micromarket, self-service micro market, vending operator, automated retailing, Hanes Distribution Center, workplace feeding, Keith Kahn, Complete Food Service, Jay Moulton, World Dining Services, Paul Pfister, Alco Vending, convenience food, mobile food, sandwiches, prepared food, fresh food, ready to eat food, factory food, Crane 432 Shopper, White Castle

Smaller workforces, tighter budgets and increased focus on the primary mission are leading many businesses that once subsidized onsite cafeterias for their employees to take a second look at vending. This has happened before, of course; it was the driver of the full-line revolution more than half a century ago. But today's downsized client populations represent a new challenge to contract service providers.

The silver lining to the downsizing trend is that vending is gaining new favor -- and operators are winning new business -- by delivering cost-effective, automated solutions with menus that rival or surpass the quality, variety and contemporary appeal of traditional foodservice.

Also working in vending's favor is that contemporary clients are increasingly focused on keeping their employees onsite to boost the productivity of today's smaller teams. Fast, easy access to convenient, affordable dining at the touch of a button is an essential part of the solution.

Complete Food Service Machine
photo | DINING IN: Employee at Hanes Distribution Center in Perris, CA, takes advantage of convenient access to wide menu of commissary-prepared and branded convenience foods at Complete Food Service machine. Vending is finding new favor as a foodservice solution amid shrinking workplace populations and employers' increased focus on keeping their teams in-house and productive.

Vending companies that operate their own commissaries are leveraging their ability to produce on-trend sandwiches, salads and entrées for a workforce that is skewing more toward white-collar employees. Others find that an ever-growing variety of packaged convenience foods has widespread appeal and, coupled with the added benefit of longer shelf life, allows them to provide attractive, varied options for today's smaller locations.

As diverse as operators are in their approaches to feeding today's workforce, most agree that the emergence of the micromarket self-serve checkout model couldn't have come at a better time and they predict that it will play a prominent role in the future of workplace feeding.

Keith Kahn of Mira Loma, CA-based Complete Food Service told VT that his company's fresh food expertise and flexible approach to meeting workplace feeding requirements has helped drive and sustain business amid some turbulent times.

"We lead with our ability to provide fresh foodservice solutions for business and industry, and we can meet the varied needs of accounts of all sizes and types, whether by providing vending, mobile catering, corporate catering or manual cafeterias," said the second-generation operator.

Complete Food Service's roots are in mobile catering, but Kahn said the company's steady shift toward vending has helped sustain it through two recessions and positioned it for growth in the vastly different market that has emerged over the past two decades.

Kahn's parents founded their mobile catering operation in Los Angeles in 1950. The family relocated in 1983 to southern California's Inland Empire, with its purchase of a 10-route mobile catering business and central kitchen.

Manufacturing was booming in the region, situated two hours north of San Diego and 45 minutes east of Los Angeles. Employees lined up to patronize what eventually grew to be a fleet of 120 food trucks. The company's well-established reputation for its freshly prepared foods led it to broaden its service offering, installing its first vending account in 1986 and contracting to manage its first onsite cafeteria in 1991.

The business made $1 million in annual sales in its first year. Last year, sales were $8.5 million, nearing the company's peak performance before it was hit by two recessions.

"Mobile catering for a long time represented 75% of our business and vending represented the rest of it, but now that's completely reversed," Kahn told VT. "Vending really began growing in 1996, and has continued to do well despite the economy while mobile catering has taken a huge hit. Luckily, we offer both, or we would have been out of business."

Complete Food Service currently has 900 vending machines in the field. As vending has grown, the 120 mobile catering routes it operated in its heyday have decreased to 40. Of those, the company owns 10; the others are supplied by its kitchen but run by independent contractors.

Kahn recalled that when the early 1990s recession hit southern California, companies looked to cut costs -- and subsidies for employee cafeterias were one of the first targets. Workforce reductions also made many manual foodservice operations no longer viable. Complete Food Service, which once ran eight B&I cafeterias, felt the impact; it only operates two such installations today.

Complete Food Service Products

photo | GETTING FRESH: Complete Food Services' fresh-cut fruit salads are a top seller in the summer months, when customers gravitate toward lighter fare. Yogurt parfait, favored by white-collar clientele, is a solid year-round seller. Complete's salad sales triple in the summer months, with grilled chicken, chef and garden varieties leading the lineup. Sandwiches with lean meats on whole-grain bread appeal to a growing number of health-focused customers.

"Since that first recession, manufacturing in our area has continued to decline year after year," noted the operator. "Housing construction and motor home production were major staples in the Inland Empire until 2007, when the last of an industry that employed 20,000 to 30,000 was literally gone." Industrial plants were replaced by distribution centers, which now represent the bulk of Complete Food Services' business. As the business landscape changed, the operation and its clients have found vending to be a more practical and profitable solution.

"We have 10 customers in the area that all break at 9:00 a.m. With 120 trucks on the road, we always had one to send," said Kahn. "Now we have so few on the road, and accounts have gotten so small, we have to pick and choose which to serve, and let the independent operators focus on mobile catering. Vending is much easier. We don't have to be there at any specific time; as long as the machines are filled with an appealing, fresh mix of food, the customers are happy."

Kahn said distribution centers, even more than the manufacturing plants he served for years, strive to keep their employees on premises during their breaks. For that reason, he estimates, 90% sign on exclusively for vending, while the remainder add mobile catering as a secondary option.

Keith Kahn

photo | DEPENDING ON VENDING: Complete Food Service's Keith Kahn says his company's migration from mobile catering to vending has made it feasible to continue to cost-effectively deliver quality meals to a downsized workforce.

Among the many new challenges to feeding today's Inland Empire workforce is that employees in the distribution sector average 18 to 34 years old and make $10 to $12 per hour, said Kahn. That's substantially less than the hourly wage ($15 to $18) and older demographic that characterized the era in which manufacturing was dominant, 15 years ago.

"A big challenge has been raising prices," he said. "Salaries are lower, and it has been the worst two-year stretch as far as price increases from suppliers. But when our prices hit $3, sales decline. Our No. 1 challenge from a fresh food standpoint has been hand-developing foods that are hearty enough and provide value while maintaining taste and quality."

Complete Food Service's commissary produces the majority of the food merchandised in its refrigerated machines. In the current slower summer months, that amounts to 3,000 to 3,500 units a day. Its extensive menu includes 150 products, from authentic handmade Mexican favorites like burritos and enchiladas to hearty comfort foods like lasagna and meatloaf.

"There's something new every day in the machine. If we have a chicken enchilada one day, we'll have a beef the next," said Kahn. "If it's turkey with Swiss today, it will be with provolone tomorrow, and on a different bread." A cycle menu further ensures fresh variety by replacing 20% of the menu every quarter with new sandwiches, salads and hot meals.

The company's No. 1 seller from early spring through October is its fresh fruit salad. Salads of all kinds are fast movers year-round, and especially in the warm-weather months. The company produces six varieties a day, and reduces the selection to its three top sellers -- grilled chicken, chef and garden salad -- in the fall.

Convenience foods from Pierre, White Castle, Landshire and Ruiz, to name a few, and select items from two local fresh food suppliers account for 25% of Complete Food Services' sales.

"As much as we are able to produce fresh, it's all about variety," said Kahn. "Our customers love our fresh foods, but they also enjoy many of the branded sandwiches and the variety they add."

He likened the appeal of adding prepackaged convenience foods to the refrigerated food vending mix to the "80-20 rule" for merchandising a snack machine. "You need your 'core four' in a snack machine, but you still need others," he said. "If all we had was fresh food, our customers would ask for a wider selection, rounded out by some of the leading brands they're used to in the grocery aisles. Even if 80% of what we sell are the top fresh items, 20% are the others, which demonstrates the need for that variety." He added that prepackaged items that ship frozen keep food waste more manageable.

Kahn said his company has only been able to continue operating its own kitchen despite rising food costs and vending's low price ceiling because its services are diversified. "Our advantage is that we also do mobile catering and some corporate catering and school lunches, which allows us to operate efficiently and profitably," said Kahn. "At the end of the day, we look at food as a solid sales opportunity and not as a loss leader because of the competitive advantage it gives us."

He reported that Complete Food Services prides itself on its 80% to 90% close rate on new vending business when prospects agree to sample its foods. "We show them our packaged lasagna for vending and a pan of it, from the same batch, for corporate catering, so they taste that it's as good as it would be at a catered event and see how appealing it will look in the machine," he told VT.

The vending company uses Crane 432 Shoppers, which Kahn considers to be reliable, aesthetically pleasing and flexible. "We can have six entrées per row or 24 small burritos, which makes it very easy to merchandise depending on each account's needs," Kahn commented.

Micromarkets are a new self-serve retail model that the company has just begun to pursue. A key advantage Kahn sees is the ability to offer a greater variety of higher-quality fresh food. "You can get your price for it, closer to a c-store, because that's really what it is," he explained.

Illustrating his point, Kahn told VT that he recently considered new upscale sandwiches from AdvancePierre Foods that would cost $1.80 to $2 wholesale and vend for $3.50 or more. "In vending, that wouldn't work, but I think it would work in a micromarket because it looks and tastes good enough to command the price, and people are willing to pay more when it's not in a machine," he said.

Additionally, self-checkout stores promise to draw customers who typically don't patronize vending machines. "We really find that white-collar front-office people generally don't buy out of the vending machine, which is another reason we're excited about micromarkets," Kahn told VT. "Operators I've spoken with say the office person at a micromarket will pick up an item, read the ingredients and put it back, and pick up another item. White-collar people like to read the label before they purchase, and micromarkets allow for that."

Despite Kahn's confidence in the unattended self-checkout model, he is predicting clients in his area will be slow to sign on. "There is only one micromarket within a 45-minute drive," he told VT. "The Inland Empire is slow to adopt, but we would love to get started and it's something we're pitching. People in Orange County will get used to it and come here, and then it will take off. We're probably 12 to 24 months away."

Jay Moulton

Jay Moulton of World Dining Services in Tucson, AZ, has built his business on cafeteria management and fresh food vending, but, going forward, he is convinced micromarkets will play a big role in attracting more customers and boosting sales by improving the shopping experience and product range. He envisions replacing all of his company's vending banks with micromarkets, and installing them in some sites with cafeterias where reduced employee populations can not support manual foodservice.

photo | SELF-CHECKOUT FAN: Jay Moulton is moving to replace World Dining Services' vending banks with micromarkets. He believes the self-checkout stores better convey food's freshness, expand the menu and command more competitive prices.

The former restaurant owner entered the vending industry in 1997 by purchasing a foodservice management company that operated an onsite cafeteria and vending machines for a single Fortune "50" company in Tucson. As World Dining's reputation for its quality food and service spread, Moulton was selective in taking on new accounts.

"From the beginning, we chose to stick with only large accounts," he told VT. "Our smallest employee count is 400 people, and that's only because that account was downsized from 1,000 people."

World Dining Services currently operates three cafeterias and 20 vending locations in the Tucson area. Its relationships with its local clients also led to foodservice and vending contracts at other offices in Arizona, Chicago and on the East Coast. In all, World Dining manages 25 manual foodservice accounts and some 240 vending machines, 70 of which are carousel food venders.

The firm runs a central commissary at its home base in Tucson. In other parts of the country, chefs at the onsite kitchens the company operates fill orders for the vending areas in each building. Moulton said the key to operating across a wide geographical area has been to hire good people who share a standard of excellence, and giving them autonomy.

"Every account has fresh food, whether it's a manual cafeteria, vending machines, or a combination of both," Moulton said. "We're a foodservice company first, which separates us from other full-service providers. We drive business through our food."

The company tailors its menus to each demographic it serves by regularly sampling its offerings and soliciting customers' feedback. Moulton and his team of chef managers also keep close tabs on sales reports to ensure that they offer a mix of products customers have proven they want, with ample variety.

World Dining's Buffalo chicken ranch wrap outsells all menu items across all accounts, and is part of a broad and ever-changing menu of sandwich selections. Entrée salads, ranging daily from Cobb to fajita, are also in high demand.

The company's made-from-scratch entrées, including baked ziti, teriyaki chicken with rice and meatloaf with scalloped potatoes and vegetables, also have a following, but in smaller volumes; it's more the lighter lunchtime fare that the majority of today's white-collar, 9-to-5 workforce seeks.

Like Complete Food Service, World Dining Services merchandises a select number of branded, prepackaged convenience foods like White Castle hamburgers to round out its menu and satisfy customer requests.

Moulton placed his first "Market Now"-branded Revive Self-Checkout Café in June, has two lined up for installation this month, and is planning an aggressive market blitz with the micromarkets.

World Dining - Buffalo Chicken Wrap, Ravioli
photo | THE PRICE IS RIGHT: World Dining's Buffalo chicken wrap and ravioli (l.) sell for only $3 in its refrigerated food venders, but command $3.99 and $4.99, respectively, at its micromarket because of the superior quality and freshness customers perceive. Entrée salads that never fit the logistics of World Dining's vending program sell swiftly in its micromarket for the same price range.

"We're trying to go to the 'open market' model everywhere we can; long-term, that's our goal," he said. "It's an investment, so we have to watch the numbers, but I hope to transition almost every vending account that we can to a micromarket within the next three years."

The operator said he was skeptical about micromarkets at first, but is sold on their potential now that he has seen an instant 60% to 70% lift in sales over the vending bank that his first installation replaced.

"I love it; I think it's the future of vending. It's the best way to deliver fresh food, as long as it's in a controlled environment," he said. "At new accounts, we now come right in with the micromarket concept. The selection and variety it offers customers is so much more, and it eliminates the stigma of how long it's been in a machine."

Back-office reporting from the kiosk helps the company accurately plan its fresh-food preparation and track sales of each item.

An onsite cafeteria employee services the location every day to rotate and stock fresh food, and at future accounts, a dedicated route driver will do the same at locations where the company does not operate a cafeteria. "Customers see that we change the variety every day which helps them believe and understand the food is fresh," said Moulton.

Another plus to self-checkout stores is that they command more competitive prices for foods than vending machines do, according to Moulton. World Dining Services' highest-priced vend items cost $3, while customers have proven their willingness to pay as high as $4.99 in micromarkets for the same selections. And Moulton is certain he will be able to raise that price ceiling as he adds new items down the road.

"The price point can be competitive with Subway and local delis," he said. "With a micromarket, we can make food a revenue stream and not just break even, or approach it as a loss leader, as is often the case with vending machines."

World Dining Services' first micromarket has also helped it better compete with c-store beverage variety by replacing two 10-select drink machines with three coolers that accommodate more than 100 SKUs. "It's a smaller investment to put in a market than a bank of machines, and there's a ton more variety, from the food and drinks to the snacks -- and other items we haven't even gotten into yet," he said.

One exception to Moulton's plans to replace his vending machine with micromarkets is in the few factories World Dining Services serves. "These types of location may be better served by vending. Even though it's somewhat of a closed environment, there's more free access and outside contractors and vendors in those types of accounts, and more concern about security," he observed.

Paul Pfister of Alco Vending has been serving the greater Cleveland and Akron, OH, markets for 30 years and says food is a small but important component of his vending service, because his approach is to never say no if he can find a way to satisfy a customer's request.

In light of the downsizing trend in the workplace, Pfister told VT that the range of machines available today helps him continue to cost-effectively cater to the needs of his clients, many of which are still concentrated in the manufacturing sector. "I can use the smallest machines for smaller sites on up to the largest, which allows me to provide a nice mix of products and manage inventory and waste," he said.

Several of Alco's clients subsidize their food machines, paying 25% to 50% of the vended price, to lower the cost for their employees, encouraging them to spend their breaks in house and so maximizing productivity.

Convenience Foods Composite

In contrast to Kahn and Moulton, the Ohio operator has found the ever-expanding variety and quality of convenience foods packaged under well-respected brands is more than adequate to satisfy his customers without the need for the complexity of getting into the fresh food business.

"We have a list of over 100 food items, from Pierre burgers to Landshire sandwiches, to yogurts that meet healthier demand," said the operator. "There's a perfect variety of packaged foods out there to meet every taste, without the need to run a commissary. The great thing about a vending machine is that it's self-sufficient. If people see popular food, or snacks or drinks, that they trust and know, and the machine is clean, working and stocked with a good variety, they will buy it."

Pfister emphasized that providing food as part of the vending mix should be regarded as no more "optional" than offering vendible candy, snacks or drinks, just because of the logistics of handling a perishable product.

"It's all about giving the end users what they want, and if it's food, there are ways to deliver it to them, even if that means the client has to help subsidize it," he said. "If you don't take care of customers, they go somewhere else. It's not just about placing machines. It's about keeping customers by giving workers what they want at the price they're willing to pay. Whether locations have 25, 50 or 100 workers, we are there to meet their needs. And if you don't listen to them, they are not going to buy; and sometimes I think operators forget that."