Commentary

UK perspective: Resilience amidst a challenging environment

The positive stats revealed by the AVA census provide assurance that convenience services will continue to weather the tough climate and also yield further growth.

Image: Adobe Stock.

June 19, 2023 | by David Lewellyn, Vending & Automated Retail Association

The general business environment over the last few years has been arguably more hostile and unpredictable than we've ever experienced. Economic and environmental uncertainty has caused a range of challenges for every sector to navigate, however, whilst it is wise to err on the side of caution, there are still plenty of growth opportunities.

The vending industry has seen a major increase in growth since the pandemic, highlighted by the findings of the recent AVA census.

According to the census, the vending industry generated a total turnover of £3.01 billion ($3.85 billion), marking a significant increase of 15.7% compared to the previous year. Its growth can be attributed to its resilience and flexibility in a tough economic climate.

The outlook for the industry is promising, as operators anticipate 11% growth in 2023. Revenue has already increased by 10%, which highlights the industry's success and ongoing potential for continued expansion and profitability, even during times of uncertainty.

Game changers in cashless payments, connectivity

Within the sector we've seen multiple new trends appear and other ongoing trends continue to advance. One of which is the increasing prevalence of cashless transactions, which has been a game changer for the industry, with 65% of all machines now equipped with cashless facilities.

This represents a substantial 20% increase compared to the previous year. As a result, 72% of all transactions are now conducted without cash, demonstrating the growing preference for convenient and contactless payment options among consumers.

Data suggests that 58% of in-store shoppers pay via contactless card, a 94% increase year-over-year, so we can expect the next AVA census to show more growth in cashless and digital transactions.

Furthermore, the industry has embraced the power of connectivity, with over 60% of machines now connected through a network system that allows them to share data with various operators.

This connectivity enables operators to promptly respond to faults, efficiently plan and manage stock and eliminate the issue of empty machines. Beyond operational benefits, the use of connected machines also contributes towards efforts to be more sustainable by reducing visits, optimizing planning and routing, and minimizing fuel consumption and carbon emissions.

Health is wealth

One of the most notable aspects of the industry's growth is the focus on healthier offerings. As canteens reduce in popularity, smart fridges and vending machines have become a channel for offering fresh and nutritious food options. The industry has made significant progress in this regard, with 80% of pre-packaged cold drinks in vending machines now containing less than 5 grams of added sugar per 100 millileters, up from 44% in 2017.

Similarly, 79% of confectionery and sweet lines now have less than 250 kilocalories, compared to just 35% in 2017. Savory snacks have also seen improvements, with 38% of them now weighing less than 30 grams, a significant increase from 22% in 2017. Additionally, 17% of sandwiches and other pre-packaged ready meals now contain less than 400 kilocalories and 5 grams of saturated fat per 100 grams, reflecting a rise from 10% in 2018. These statistics demonstrate the industry's commitment to promoting healthier choices and meeting consumer demands for more balanced options.

Costa has the coffee market, but on-the-go makes progress

The coffee on-the-go segment remains dominated by Costa, but other operators are gradually gaining a larger market share. This diversification is positive for operators since the average transaction value in automated retail is £2.70 ($3.45), compared to just 43 pence (54.38 cents) in traditional vending machines.

With consumers seeking quality and variety, this shift opens up new opportunities for operators to cater to evolving preferences and capitalize on the higher revenue potential of this segment.

Whilst it's likely that the big brands will always hold the power in the coffee market, it is still encouraging to see operators claim back a small portion of the of the sector and capitalize on the opportunities.

Micro markets play major role

Another area of substantial growth within the industry is the micro-market sector, which has expanded by a staggering 500% over the past five years, a 17% increase on 2021. Micro markets offer a wider range of products and services than traditional vending machines, providing consumers with a more comprehensive retail experience.

This growth underscores the industry's ability to adapt to the ever-changing workplace settings, and still be able to meet the demands of businesses across the country.

There are several reasons for the growth, however one of the biggest contributions comes from the number of offices implementing flexible and hybrid work polices. With these policies in place the need for full-time traditional catering has steadily diminished. Micro markets are an excellent alternative for businesses to continue to feed their staff, without the additional costs that come from a staffed canteen.

What's next for vending?

The rest of 2023 will certainly be an interesting one for vending. The positive stats revealed by the census definitely provide a sense of assurance, confidence and belief that vending will continue to weather the tough climate and also yield yet further growth going forward.

However, whilst encouraged, the vending industry should also stay ahead of macro environmental factors that can possibly impact the industry. The continuation of economic uncertainty, workplace behaviors and government legislation can all play a major role in delivering both opportunities and limitations for operators.

David Lewellyn is chief executive of the AVA which represents owners, operators, buying groups and manufacturers in the vending and coffee dispensary services. .