Vending Machine Industry Installs Micro-Markets

YOUNGSTOWN, Ohio – The vending business has come a long way since 1888 when the Thomas Adams Gum Co. installed the first vending machine in the United States to sell its Tutti-Frutti gum on train platforms in New York City.

While residents of the Mahoning Valley might not buy a 12-inch pepperoni-and-cheese pizza from a machine just yet, other trends have found their way here. More machines allow customers to pay with credit cards and mobile payment such as Apple Pay and Android Pay. And some local companies are finding success with micro markets, that is, self-serve convenience kiosks tailored to a client’s needs.

AVI Foodsystems Inc. in Warren has installed micro markets for some of its long-standing clients, such as VXI Global Solutions in downtown Youngstown, where it opened two last year. The branded Market C kiosks replace traditional vending machines and offer the consumer three times as many selections, says AVI’s director of business operations, Erin Rancher.

“It’s a whole new guest experience, with more technology, enhanced aesthetics and interactivity,” Rancher says. “They have the opportunity to touch, feel and view nutritional and ingredient information before they make a purchase.”

Customers can shop the kiosk 24/7 and pay with cash, a credit or debit card, Market C account card, or access a personal account with their fingerprint. At most locations, consumers can buy a sandwich, drink and snack for under $5.

Market C offers a variety of fresh foods that include salads, entrées, sandwiches and wraps as well as the sweet and salty snacks usually found in vending machines. The machines offer healthful items, frozen foods, cold beverages – even a hot brewing system capable of serving beverages sold in coffeehouses such as lattes and mochas.

AVI looks to add more offerings in 2018, reports its director of strategic marketing and branding, Pasquale LaRocca. “We’re all about being responsive and understanding our customers,” he says. “Today’s customers snack more often and seek high-protein offerings.”

AVI works with each client in determining where to set the machines, install the technology and stock and rotate the products. The company operates Market C’s in 12 states and plans to have as many as 1,000 kiosks active by mid-2018, LaRocca says. He adds that AVI has seen the most success at companies and organizations that have several hundred employees, such as call centers, college campuses and health-care facilities.

Pictured: Customers can shop the kiosks 24/7 and pay with cash, a credit or debit card.

“Some of our most successful markets are with companies that hire people [and pay them] an hourly wage,” he says, “Those employees are on the go with short break times and they want a quick snack.”

Micro markets can be customized for installation nearly anywhere, but they do best with customers that have at least 150 employees, affirms Tim Russell, vice president of sales for Boardman-based Canteen Service of Steel Valley Inc. Canteen offers micro markets along with traditional vending and office coffee services.

While the kiosks can hold many more products – up to 300, compared to the 50 in a typical vending machine – that variety makes them more costly to maintain, Russell says, although technology helps with that.

Most vending machines, whether standard or part of a micro market, include vending management software that allows companies to remotely monitor sales in real time. This helps streamline the maintenance, which once required the driver to go to the location, determine what each machine needed, go back to the truck to get the products and return inside to refill the machine, Russell says.

“The driver now knows exactly what he needs before he even leaves,” he says.

Since installing vending management software in its machines about four month ago, Canteen has seen the benefits, Russell says. Drivers take less time refilling each machine, reducing man-hours to 40 per week, down from about 55. Because drivers work on commission, they can make the same money in less time.

Trucks require less merchandise for each trip, so there is less wear and tear on the vehicles. Vending management software also benefits the customer because Canteen Service can determine what to stock based on what consumers choose.

“If the machine is selling more Doritos than anything else, I can double up on the supply of Doritos,” he says. “That makes the customer happy because they’re getting the products they want.”

The new system also helps drivers plan when to fill a machine based on earnings and how long products have been on the shelf. Ideally, a machine should generate about $100 per week in profits, although that isn’t always the case, Russell says. When a machine is making only $35 in a month, “It’s kind of hard to send someone there to service it,” he says.

The price the machine charges also determine what sells, says Greg Beight, co-owner of Masternick-Courtney Vending in Girard. Beight strives to be competitive in his prices and give customers a value on the products. Once consumers paid a premium for the convenience of a vending machine. Now, he says, vending machines can be less expensive than convenience stores.

“Customers tend to buy multiple items from a store and pay with a credit card, so they don’t pay as much attention to price,” he says. “At the vending machine, you’re making a single transaction. So, you’re more conscious of what you’re spending.”

But price doesn’t deter people from buying certain products. The booming interest in energy drinks has led to many varieties added to vending machines at $2.50 to $3 apiece. While the price may seem high, Beight says people pay it.

“And the people I know who drink energy drinks drink three, four, or five of them a day,” he says.

Overall, the local vending industry is good, according to Beight. “The economy has done much better over the last year, year-and-a-half,” he says. Vending companies are positioned to recognize trends in other industries before anyone else because they are dealing with front-line employees. Beight uses that insight to scout new business.

“When companies have overtime and people are working full workweeks, we do much better,” he says.

Getting to know businesses here helps vendors take calculated risks, he says. While some companies might not seem a good fit to host a vending machine – perhaps they have too few employees – Beight says he can get a good sense of where those companies are headed after he meets with them and reviews their operations.

“You take a gamble with some locations,” he says. “You say, ‘This is fascinating what they’re doing and they could have 75 employees in two years.’ So we jump in and take a shot.”

The size of a company workforce matters, and vending companies have difficulty serving customers with fewer than 50 employees. Most new local businesses tend to have 15 or fewer employees, Beight says. And while that kind of new business in the area is good for the overall economy, “It’s not good for us,” he says.

“Their needs are less than a larger operation, but we still have to go in and service them well,” he says. “That’s a trend that’s going to stay.”

One way to help maintain profits is to use vendor management software data to get a good balance between what customers say they want and what actually sells, he says. There’s been an increase in requests for more healthful options, such as granola bars and noncarbonated drinks, especially bottled water. And while Masternick-Courtney offers and stocks those products, “The core of our business is still pop, candy and nuts,” he says.

“There is a lot of talk about healthier options,” he says. “But more often than not, the people who talk like that have candy wrappers and Mountain Dew bottles in their trashcans.”

The same software allows Masternick-Courtney to offer alternative forms of payment on its machines, including all major credit and debit cards, as well as mobile payments, such as Apple Pay and Android Pay. Of the company’s 800-plus machines, about 160 offer mobile payment. It’s a trend that Beight expects to continue as people carry less cash.

“The next step from there is to use your phone for everything,” he says.

Copyright 2024 The Business Journal, Youngstown, Ohio.