Freshness And Quality Perception Outweigh Price In Vending And Micromarket Food Selections

U.S.A. -- Consumers today crave fresher, more wholesome, restaurant-inspired foods when grabbing meals on the go. If such items are readily available, patrons are willing to pay a premium for them. The trend is evident across all retail channels, and vending and micromarket operators are stepping up their games to enjoy their piece of the pie.

Fast-casual restaurants, like Chipotle Mexican Grill and Panera Bread, have had a big impact on expanding quick, convenient access to higher-quality made-to-order food at prices most people can afford. Vying for their share, the fast-food giants are fancying up their menus with premium burgers, artisan breads, yogurt parfaits and caramel lattes. Made-to-order wraps and sandwiches and restaurant-quality salads are edging out rollergrill hotdogs and ham-and-cheese-on-white as standard fare at many c-stores.

Contemporary customers are becoming conditioned to want more in terms of freshness, perceived healthfulness and variety in the food they purchase, and vending operators who are rising to the occasion to meet their demands say it's worth the effort.

GREGORY McCALL is senior vice-president of sales and marketing at Five Star Foodservice (Chattanooga, TN). He says increased fresh food demand has been a catalyst for rapid micromarket expansion and inspired Five Star to reinvent its approach in vending.

Given the upmarket trend in convenient food, Five Star is on a mission to bring a new level of excitement to its food vending machines. Calling attention to the upgrades are new graphics to jazz up the standard black machine fronts of its refrigerated combo food/snack/beverage Crane 431 and 432 machines, and the addition of LED product display lighting.

Sales Analysis

The operation is creating planograms to make sure the top-selling foods are in all machines, just as they are in the snack and beverage categories. "Product selection in the food category at our company -- and others -- tends to be an afterthought," McCall observed, "and often, drivers just order what they want. When we got involved in micromarkets and visibility to sales data was greater, we moved into planograms for food, just as we do with drinks and snacks.

"We are now 'reverse-engineering' that back to vending," he explained. "We know what sells in micromarkets and are taking those learnings back to vending in food machines."

Five Star has also installed credit card readers on all its food machines. This has facilitated the shift toward selections of higher perceived value by enabling prices higher than the traditional $3 price ceiling for cash purchases and thus paving the way for the company to merchandise more of the premium-quality selections its customers desire.

LUNCHTIME DESTINATION:Route driver William Pangle (center) and senior marketing manager C.J. Recher (right) work to accomplish Five Star Food Service's mission to "reverse engineer" what it's learned from micromarkets to drive new excitement at food vending machines. Here, they make the rounds at the Amazon Distribution Center in Chattanooga, TN.

"Another challenge with vending machines is that consumers can't touch and view the food," McCall noted. "More and more, people want to see the freshness and 'nutritionals' up close, especially in white-collar locations, and that's difficult to get around in vending. In micromarkets, we see food representing over 20% of sales because consumers can see it and feel it and read the label, which makes the sale much easier."

McCall attributes Five Star's responsiveness, adaptability and success in the evolving food category largely to operating its own HACCP-certified commissary. With a production capacity as high as six million pieces of fresh food annually, the company has become adept at controlling the quality, variety and cost of the items it produces to meet market demands while minimizing waste and maintaining margins.

Five Star packages its fresh foods under three brands: its value $1.50 to $3 Fresh To You line; upscale Avenue C brand, which ranges in price from $3.50 to $5; and "better-for-you" Choice Plus offerings.

Combatting Staleage

While fresh food is a big selling tool for Five Star, managing waste remains a challenge, with most items carrying a seven-day shelf life at best. "We need to be real careful to put out the right items," the Five Star executive emphasized. "Only 8% of our vending sales are from food; it's pretty low in the mix. We have to throw away 10% of it, and that's if we manage it well. Food has always presented challenges, and it's still tough."

BIG THINGS IN STORE:Five Star runs 425 micromarkets and says fresh food's appeal has been a key driver in its rapid expansion of the self-checkout stores. Vending, however, is expected to represent 50% of the company's food business moving forward, prompting a transformation to its decades-long approach.

"In vending, fresh food is a huge point of differentiation for us; 80% of foods sales are fresh offerings we produce," McCall said. "In micromarkets, we have a much larger variety of fresh selections, and manufactured foods represent about half of the mix."

Micro Marketing

In its micromarkets, Five Star merchandises food in single- and double-door refrigerated coolers, which generally display 50 or more SKUs of salads, sandwiches wraps and lighter snacks. The No.1 seller in the food category is Kraft's Cracker Barrel-brand sharp cheddar mini cheese block, followed by its string cheese. Also in high demand are fresh snacks like hummus, yogurt and pickles. Branded prepackaged handheld foods round out the options.

Five Star created its own line of sandwiches and wraps that meet the calorie, sodium and fat criteria specified by Canteen's Choice Plus brand, and offers them daily in its micromarkets and machines.

"Customers recognize these items and know that they're considered 'better for you' than some other items," said McCall. "Our chicken salad sandwich has moved to the top 10 of total food sales, reflecting the trend toward 'better for you.' It's increasingly important to make sure you're vending the right product and taste profile to meet consumers' tastes and nutritional concerns."

Clear, tamperproof packaging and custom-made labels give Five Star's food a high-quality, upscale look that McCall compared to Starbucks or Panera's presentation. "You have to position upscale food in that way to get $5 per ring," he emphasized.

BROAD SPECTRUM:Five Star Food Service leverages its commissary to cater to budget-conscious consumers with its value Fresh To Go brand (upper left), and rival deli and restaurant quality with its upscale Avenue C brand in clear, tamperproof packaging. Its wellness-focused Choice Plus brand rounds out the offerings.

Despite Five Star's success with micromarkets and its push to continue expanding deployment of the self-checkout stores, McCall emphasized that they are not a fit everywhere. He said that the company expects at least 50% of its food business will be done in vending, going forward.

"This is why it's so important to refresh our food machines and take advantage of a sales opportunity that we've ignored in the past," said McCall. Substantiating that opportunity is the fact that Five Star has seen an upswing in demand for higher-priced, more premium fresh food in vending, even before its program upgrade, particularly at white-collar locations.

"People are willing to pay for quality food in vending and micromarkets, especially when it eliminates the need to get in the car, lose their spot and burn 30 to 35 minutes getting lunch," said McCall. "The trend has been somewhat more downward at blue-collar, lower-wage accounts, where employees are struggling, and more price-conscious and sensitive to value; we also see more brown bagging in many of those locations."

Frozen Foray

RDS Vending (Norristown, PA), a 40-route company that's served the Philadelphia market for more than a quarter of a century, recently expanded into the food category with a single line of frozen meals in branded, dedicated machines.

RDS vice-president of business development Greg Arbiz was introduced to the Luvo brand when the manufacturer, which has a growing presence in supermarket aisles, entered vending distribution about a year ago. It proved to be a door-opener at a hospital where a sampling session of the meals, which include chile chicken verde and tandoori-inspired chicken and rice helped his company land the account.

"Luvo stands out from other frozen meals; it's great tasting, with bold flavors; and it's nutrient-dense and presents very well, Arbiz said. "Also, many of the entrees are organic, vegetarian and vegan. The brand has a growing, recognizable retail presence and helps get us in the door. When we take people to the website and reference that it's in retail, it starts to click."

The company is now operating several dedicated Luvo-branded frozen machines and has more lined up for deployment. Price-points range from $3 to $5 and all of the machines are credit-card equipped.

"It's been a good way to enter the food category with something different, and samplings are very effective," said Arbiz. "While our success so far has been in healthcare, where visitors and staff purchase the meals, we are actively pitching Luvo to B&I as well."

Food is an important offering for Reading Vending & Coffee (Woburn, MA), which has nine routes serving New Hampshire, Maine, Massachusetts and Rhode Island.

The company operates refrigerated food vending machines, and has some frozen venders in larger accounts; but it is concentrating its growth efforts on micromarkets, according to vice-president Jonathan Hanlon.

The Massachusetts operation purchases fresh food from a local USDA-inspected caterer and complements it with brand-name packaged standbys like Advance­Pierre's and White Castle's hamburgers, Nathan's hot dogs, Ruiz Foods' El Monterey burritos and Schwan's Tony's pizza.

Something For Everyone

"We try not to buy off-brand, and we cater to everyone," said Hanlon. "We offer higher perceived quality, higher-price choices as well as items for those focused on price more than on ingredients."

Reading Vending customers traditionally look to spend $1 to $2 per vend, while $3 to $4 is the average micromarket purchase price.

"We have been adding more premium choices to satisfy demand, and it's been driving the average price higher and higher," Hanlon said. "We also offer choices in micromarkets that compete with the 99¢ or $1.49 'value menus' at Taco bell or Burger King, so we do not lose that business to the fast-food establishment down the street."

Like RDS Vending, Reading has begun complementing its fresh vending and micromarket offerings with Luvo's frozen line, priced at about $4.79 for entrees and $2.99 for burritos. "It's still a new product, but it's upscale, wholesome, great-tasting and geared to today's consumers -- and it's selling well," Hanlon said. "Onsite samplings definitely drive interest and sales."

Luvo provides branded coolers, including "half-size" ones for smaller micromarkets. RDS has also placed some branded, dedicated vending machines featuring the frozen food line. "Many of the items are vegetarian, and we're asked for more vegetarian options every day," Hanlon said.

He reported that RDS has seen workplace populations growing across the board as the economy improves, opening doors for micromarkets, which have raised the bar on the quality and breadth of products its customers desire. "Most of my time is spent expanding micromarkets," Hanlon said. "We have three to four going in over the next four weeks."

Striking Balance

Josh Leuchter, who founded Snackworks (Bradenton, FL) 23 years ago with his wife Lisa, said traditional packaged convenience foods like burgers, chicken sandwiches and pizza still have a prominent place in vending and in micromarkets, but demand for fresh food is on the upswing.

"Our micromarket experience tells us there is more demand for premium gourmet-style salads, sandwiches and wraps in our grey- and white-collar locations, but not necessarily in our blue-collar stops," Leuchter said.

He emphasized that while fresh food continues to be important to decision-makers, snacks and beverages still dominate sales. He has been impressed with the way micromarkets have expanded the opportunity to sell a more varied selection of fresh food, as well as snacks and beverages.

"This is a very positive development for our industry as we try to compete with the fast-casual dining options -- restaurants, c-stores and coffee shops -- that are easily accessible to our customers," Leuchter summed up.

UPSCALE CONVENIENCE:Discussing new Luvo vendible entrees at the National Automatic Merchandising Association's OneShow are (from left) Mark Veyveris, Luvo; Josh and Lisa Leuchter, Snackworks (Bradenton, FL), who is admiring a Luvo frozen Farmer's Market Frittata; and Luvo's David Smaltz and Frank Graves. Luvo reports that it has obtained vending distribution through 14 Vistar warehouses, which has piqued operator interest nationwide.